Seattle Insurance and ERISA Blog

How Do I Know Whether To Make A Disability Insurance Claim?

Many people understand that they have disability insurance coverage, but aren’t sure whether, when, or how to make a claim. This confusion often results in people delaying in submitting a claim, which can potentially jeopardize their right to coverage. Below is a guide to some of the issues you might consider in determining whether to make a disability insurance claim.

First, remember that the specific insurance policy language will determine whether you have a claim for disability benefits. Always be sure to double check the actual insurance policy language – or have a lawyer do so for you – before making any decisions. Also be mindful that the insurance policy may be comprised of many separate documents. For instance, there may be an insurance policy contract, declarations pages, riders, amendments, and endorsements, all contained in what might appear to be separate documents. And if your disability coverage is subject to ERISA, other employee benefit plan documents such as a Summary Plan Description may also affect your rights.

In particular, you will want to be familiar with how the policy defines “disability.” Most disability insurance policies define “disability” to mean, basically, you can’t work because you are ill or injured. But the devil is often in the details. For example, does the policy require you to be unable to do your current job, or any job within your skillset, or any job at all? Is a software engineer with cognitive impairment from a brain injury disabled if they can still flip burgers? Slight differences in the definition of “disability” can be critical.

Second, have a clear understanding of the medical basis for your disability – i.e., the injuries, illnesses, or other conditions that affect your life and prevent you from working. You don’t need to be a doctor to make a disability claim, but having a clear picture of the diagnoses and limitations relevant to your disability will help you submit your claim clearly. Absent clarity, some unscrupulous insurance adjuster may try to take advantage of the confusion to mischaracterize your claim as falling within one of the policy’s exclusions.

Third, be mindful of whether you have discussed with your employer any potential accommodations that could help you perform your job despite your disability. Most of the time, employers are legally obligated to make minor changes to your job to enable you to continue working despite your disability. If you can keep working with a reasonable accommodation, you may not be entitled to disability insurance benefits – and may not need them in the first place!

Fourth, be mindful of any applicable time limits to make a claim. Be sure you are submitting your claim to the right people, using the right documentation, and meeting the right deadlines. Don’t put yourself in a position of losing out on coverage through technicalities.

These are just a few of the many things you may want to consider when deciding whether to claim disability insurance benefits. Please keep in mind that many other issues can come into play – and the best way to protect your legal rights is to talk to a lawyer!

Court Emphasizes Importance of Making Insurance Claims Promptly in ERISA Disability Dispute

A recent decision from our neighbors in the Portland, Oregon federal courts emphasizes that insurance policyholders should always strive to submit claims as soon as possible – especially where the insurance policy is covered by ERISA.

Often, it’s not practical to submit insurance claims as soon as the loss occurs. When your house burns down, you’re critically injured, or have to stop working due to a disability, you’re often overwhelmed as it is without worrying about submitting insurance claims. For this reason, many legal rules apply that can entitle an insured to benefits under an insurance policy even if the insured delays in submitting their claim. These rules protect insureds from the otherwise-draconian result of losing insurance benefits they paid for due to a technicality.

However, the Oregon federal court’s recent decision in Gary v. Unum Life Insurance Company of America emphasizes that, sometimes, a delay in submitting insurance claims can completely eliminate the policyholder’s right to benefits, especially under ERISA.

Ms. Gary applied for Long-Term Disability benefits under an ERISA-governed disability insurance policy issued by Unum. Plaintiff, an attorney, had become disabled and been ordered by her doctor to stop practicing law as of December 1, 2013. But Ms. Gary waited until September 1, 2016 to make a claim for disability insurance benefits from Unum.

Unum ultimately determined Ms. Gary was disabled, but only from November 27, 2013 through April 6, 2015. Ms. Gary filed a lawsuit under ERISA, seeking disability benefits post-April 6, 2015. The dispute focused on Unum’s conclusion that Ms. Gary was essentially recovered from her disability following surgery in 2014.

The court upheld Unum’s denial of benefits after April 6, 2015. The court focused on the absence of medical information regarding Ms. Gary’s condition as of April 6, 2015. Critically, the court noted that it was impossible for a doctor to examine Ms. Gary in person and give an opinion about her medical condition that would be retroactive to April 6, 2015. The court emphasized:

because Plaintiff’s claim was not filed until September 1, 2016, there was no opportunity for an [examination] or other evaluation of [Ms. Gary] by [Unum] in the nearly three years from the date of alleged disability. And while the Supplemental Record submitted by [Ms. Gary] provided some new medical evidence, it did not clarify [Ms Gary]’s limitations in the months following her surgery and around April 6, 2015.

Of course, there’s no way to tell if the court would have reached a different result had Ms. Gary applied for benefits immediately after becoming disabled. But allowing a prompt medical evaluation following her surgery that could have armed her with additional medical information supporting her disability.

The Gary decision is an important reminder that it is always in the insured’s best interest to claim benefits promptly following a loss.

Insurer’s Misreading of Policy Terms Results In Win For Policyholder

A cardinal principle of insurance law is that the fine print in an insurance policy must be interpreted consistent with the reasonable expectations of an ordinary person purchasing insurance. The Washington Court of Appeals recently emphasized that rule in its April 8, 2019 decision in Feenix Parkside LLC v. Berkley Nort Pacific. In the Feenix the Court of Appeals threw out a trial court’s judgment in favor of the insurance company on a dispute over property insurance coverage, ruling in favor of the policyholder.

Feenix Parkside, LLC (“Feenix”) filed an insurance claim after the roof of its commercial building collapsed, seeking coverage under the policy’s provision covering “decay” of the roof. The insurance company, Berkley North Pacific (“Berkley”) denied coverage. The insurer’s engineer determined the roof collapsed because the bearing walls had inadequate strength and that higher than normal temperatures further weakened the structure. Based on that report, the insurer denied Feenix’s claim because it found the roof collapse was caused by “defective” construction and “excessive temperatures” rather than “decay.”

Feenix hired its own engineer to conduct an independent investigation of the cause of the roof collapse. Feenix’s engineer concluded the roof collapsed after water became trapped between roofing layers, causing hidden decay which resulted in the roof collapse. Fennix requested Berkley re-open the claim based on these new findings, but the insurer continued to deny coverage based on its own engineer’s report.

The trial court found in favor of the insurer, believing that the policy’s coverage for “decay” required some kind of organic rot, not merely degradation to an old building over time. But the Court of Appeals reversed in favor of Feenix. The Court of Appeals emphasized the general principle of insurance law that ambiguous terms in insurance policies are interpreted in favor of the policyholder. Feenix claimed the policies coverage for losses resulting from “decay” was ambiguous because the policy did not define “decay,” and asked the court to interpret “decay” as covering the roof collapse. Feenix relied on cases similarly holding the collapse of old buildings due to exposure to water and the elements constituted “decay” under insurance policies.

Emphasizing that insurance policy terms are construed to provide coverage that a reasonable person purchasing the policy would expect, the Court of Appeals agreed with Feenix. The court noted the insurance policy specifically excluded “rot” and “fungus”, suggesting that the coverage for “decay” was broader than organic rot and could cover gradual degradation of old buildings.

Does ERISA Apply to COBRA Coverage?

ERISA applies to most insurance obtained through an employer. “COBRA” coverage is insurance coverage you get after your employment ends. So it’s understandable if you assume that COBRA coverage isn’t ERISA-governed.

Surprisingly, many courts have held that ERISA governs COBRA coverage after all.

ERISA generally applies to any insurance procured by an employer for the purpose of providing insurance benefits for its employees. When an employee’s employment ends under the right circumstances, the employee is eligible to purchase COBRA coverage to replace the lost employer-sponsored coverage. Congress enacted COBRA (the “Consolidated Omnibus Budget Reconciliation Act”) in 1986 to make sure people changing jobs don’t have a gap in their insurance coverage. COBRA requires that certain employer-sponsored insurance benefits plan allow employees changing jobs to continue coverage under the right circumstances. COBRA coverage must generally be identical to the coverage the former employer provides. And if the employer modifies coverage, the modifications must generally apply to the former employee’s COBRA coverage.

Thus, even though COBRA coverage would appear to be distinct from the employer’s ERISA plan, a former employee with COBRA coverage is effectively continuing to participate in their former employer’s ERISA plan by paying the premiums themselves.

For that reason, courts typically treat COBRA coverage as ERISA-governed – a result that might be counterintuitive for many employees.