You buy disability insurance to protect you and your family in the event that you cannot work because of an injury or illness. You pay the insurance premiums faithfully and in return get (you think) the protection and "peace of mind" that the insurance offers. Everything is fine until you get hurt or sick and the insurance company denies your claim.
Unfortunately, your situation is not unique. It also may be more complicated than you think. Many disability insurance policies are offered through employment -- your employer offers you the opportunity to purchase insurance for a reasonable periodic premium which is deducted from your paycheck. If you file a claim and receive benefits, the benefit amount is generally based on a percentage of your salary at the time of disability (usually between 50-70%).
The employer may pay the benefits itself, or they may be paid by an insurance company. Often, Short Term Disability (STD) benefits that cover the first six months of disability are paid by the employer. Long Term Disability (LTD) benefits are often paid by an insurance company, and can continue until you reach your retirement age.
Whether the payments are for STD or LTD, the company paying the benefits may have the right to deduct from what they owe you certain other benefits that you receive. For example, if you are hurt on the job and are getting workers' compensation benefits, the disability insurer may be able to reduce the amount of your monthly benefit check by the amount of your workers' compensation benefits.
If you are getting social security disability payments, those payments can also be used to reduce the amount of your monthly disability insurance benefit. That's why the insurance company may be quite eager to "assist" you in getting your social security benefits.
Lastly, in most Long-Term Disability plans, the definition of "disability" usually changes two years after you become unable to work. In the beginning, you may be considered disabled if you cannot perform your regular occupation. After two years, though, the insurance company may consider you disabled only if you cannot perform "any occupation." This means you must not be able to perform any work whatsoever (similar to social security's standard of disability).
While the above information generalizes the way STD and LTD policies work, and every policy is different, you can see why we call disability insurance claims "complicated."
When your claim is denied the complexity only grows. Most insurance plans that you get through your job are governed by a federal law called the Employee Retirement Income Security Act (ERISA). ERISA covers all types of employee benefits, including health insurance, pension, and disability insurance benefits. Although ERISA was originally intended by congress to protect employees, many lawyers believe that it has been turned against employees and is used by insurers to avoid payment of claims.
ERISA allows insurers to set up an internal appeals process -- that you must follow exactly -- before you can sue for your benefits. If you do not follow the process, you can lose your case. Most ERISA cases that are filed as lawsuits end up in federal court, which has special requirements for handling ERISA cases that may be very different from the way other cases are handled.
In short, while ERISA allows the opportunity to have your case for benefits heard by a judge, having a competent attorney assist you -- as early in the process as possible --- is critical. We provide experienced representation in ERISA claims. Let us help you with yours.
Of course, you may have purchased your disability insurance policy on your own and not through your employer. Many people do. Claims made under private, individual insurance policies are generally not covered by ERISA. Instead, they are seen as private contracts between you and your insurance company. If your insurance company breaches that contract -- by not paying on a just claim -- you can sue.
In South Carolina, you can sue to recover not only what the insurer owed you in the first place, but punitive damages and attorney's fees if the insurance company acts in bad faith. Under South Carolina law, an insurer owes the insured a duty of good faith -- that is, a duty to you not to commit improper claim practices. That means, among other things, that your insurance company:
-cannot not unduly delay the handling of your claim or refuse to make a reasonable settlement offer
-cannot make unreasonable interpretations of the insurance policy
-must make an adequate investigation
-cannot make threats against you
Bad faith applies to all kinds of insurance policies besides disability insurance -- fire and homeowners insurance, car insurance, and life insurance (including credit life insurance ). And, with respect to individual life insurance, there are many additional prohibitions on the insurer.
When (as in the case of homeowners insurance or car insurance) part of the policy insures you against liability to others, the insurer cannot refuse to defend you in a lawsuit, or refuse to settle the claim against you reasonably (particularly where a judgment above the amount of the policy limits may result).
Trotter & Maxfield, Attorneys has a wealth of experience litigating insurance claims of all types -- including ERISA claims. We publish articles on the handling of these claims. Contact us today. We can help you.