Private disability insurance policies vary significantly from policy-to-policy, and so too do the coverage exclusions that apply to insureds.
Whether certain coverage exclusions apply to your policy — and the limitations imposed by those exclusions — is often heavily dependent on how “premium” the disability insurance policy is. More expensive policies tend to feature fewer limitations and more generous benefits.
Despite these variations, there are certain exclusions that are more commonly encountered than others in the disability insurance context. These include, but are not necessarily limited, to exclusions that disqualify coverage to those who have been:
Yes, absolutely. Not only is it likely that you will receive regular requests for updated information relating to your disabling condition (and its progression) from your insurer, but insurers will expect you to keep them apprised of any material changes to your medical condition(s). You must provide updated information as you bear the burden of the proof of loss as the insured under most disability insurance policies.
It’s critical that you do not forgo such notification, or you could not only lose your benefits, but you could also be held liable for damages.
Whether or not an insurer is entitled to rescind coverage and deny benefits if you have made a material misrepresentation on your original insurance application is a matter of state law.
Generally, whether a misrepresentation is “material” depends on the total circumstances surrounding such misrepresentation. If the misrepresentation would have reasonably caused the insurer to alter or refuse coverage, then it will likely be considered “material.”
For example, mistaken administrative information (i.e., use of an older address, or incorrect spellings of names or conditions) are unlikely to be considered material, while the failure to disclose serious medical history concerns is likely to be considered material.
Whether you are entitled to receive partial benefits — generally referred to as residual benefits — is dependent on the coverage that you purchased. Residual benefits are not always automatically included in private disability insurance policies and tend to be offered as a supplementary rider. If you do not purchase supplementary “residual benefits” coverage, then you may not be eligible for residual benefits.
In any case, if your plan does include some provision for residual benefits, then you may be entitled to receive a portion of your total disability benefits in circumstances where you have not been rendered “fully disabled” but have still had your ability to work and earn impacted by your condition.
How does it work?
It should be noted, however, that most insurers require that the impact of your partial disability meet a baseline percentage amount before you are entitled to receive residual benefits. If the impact of your partial disability on income is just five percent, for example, then you would likely be ineligible to receive any benefits.
Generally speaking, you are entitled to receive disability benefits, even if your disability is caused primarily by a mental health condition (such as depression, anxiety, panic disorder, PTSD, etc.), though there may be associated limitations.
It’s worth noting that some plans are extremely strict and actually exclude all mental health conditions from qualification for benefits altogether, but this is quite uncommon — most plans have a basic provision known as the “mental or nervous condition” limitation. This limitation entitles you to disability benefits for a 24-month period, after which you will no longer be entitled to receive further benefits.
Every insurance policy is different, so there is no universal answer in this regard — whether you are entitled to disability benefits for a “partial” or “residual” disability depends on the specific terms and conditions of your plan.
Disability insurance plans that include partial or residual disability benefit coverage allow for the receipt of a reduced amount of benefits when the policyholder has not necessarily been rendered totally disabled but still has a loss of earnings. The conditions for partial disability qualification may be quite specific.
For example, if you can only work part-time, the insurer may require that you show that (due to your disability) your performance has been reduced by a particular percentage, or that your scheduled hours have been reduced. If you meet the requirements (i.e., 25 percent fewer hours worked per week) then you will qualify for a partial disability benefit.
Insurers owe their policyholders a number of duties. Among these is the general duty of good faith. Insurers must act in good faith towards their policyholders when handling their insurance claims — this duty is imposed on insurers because they have specialized knowledge that gives them an unfair advantage in the claim evaluation and payout context. Bad faith, however, does not exist and apply to insureds in every state. Some states have either common law or statutory bad faith law, which gives insureds the right to file a lawsuit against an insurer based on that legal theory.
If an insurer violates their duty of good faith, you are encouraged to seek legal help from one of our Chicago disability claim attorneys. If you purchased your policy in a state where there is bad faith law, the insurer may be liable for significant compensatory damages. In particularly egregious cases, you may be able to bring a separate fraud claim and the court may award punitive damages.
Bad faith conduct includes, but is not necessarily limited to:
Generally speaking, the court will find bad faith if the insurer has conducted themselves in a vexatious, unreasonable, or outrageous manner. They will make this determination on the basis of the total circumstances — for example, if the insurer failed to payout your benefits, but an investigation reveals that they simply had the wrong address and contact information in their system, it is unlikely that the court will find the insurer liable for bad faith (though they will almost certainly order the insurer to make the necessary payments).
Definitions of disability vary quite a bit from plan to plan. Most standard short-term disability and individually purchased disability policies require only that the claimant demonstrate that their injury/condition render them unable to perform the duties of their “own occupation.”
For example, suppose that you are a dentist and you severely injure your neck. Though you might be perfectly capable of performing a different job — assuming your disability coverage is based on an “own occupation” definition of disability — you would likely be entitled to receive disability benefits.
Most long-term disability plans provide for 24-months of benefits, after expiration of the elimination period, under an “own-occupation” definition of disability and then requires that you be disabled from “any occupation” in order to be eligible for benefits.
Some stricter plans only have an “any occupation” definition of disability. If your plan is based on an any-occupation definition of disability, you cannot secure benefits unless you demonstrate that you are unable to perform any alternative job (that you would otherwise be qualified for given your age, training, experience, etc.).
Short-term disability coverage and long-term disability coverage are related, though it’s not necessarily the case that policyholders have access to both forms of coverage.
Short-term disability insurance and long-term disability insurance are often packaged together, in which case the short-term disability insurance coverage will transition naturally into long-term disability insurance coverage, assuming that you still qualify as disabled at the time. It’s worth noting, however, that the conditions for qualification (i.e., own occupation vs. any occupation standard) may change.
Perhaps — but it depends on the details of your insurance plan.
Many plans exclude all disabilities caused by pre-existing conditions if the claim is filed within a specific period of time running from when coverage became effective (i.e., a pre-existing condition exclusion may apply to claims filed due to a pre-existing condition within the first two years following coverage).
If you are beyond that time period and are filing due to a pre-existing condition, it is important to consult with our Chicago disability claim attorneys because the insurer may still try to conduct a pre-existing condition review and deny your claim.
You can — and likely should — challenge the insurer’s denial of your disability claim, so long as the claim is otherwise legitimate.
In Illinois (and in other jurisdictions), whenever there is genuine ambiguity in the language of an insurance exclusion clause, the courts are required to strictly construe that ambiguity in favor of the policyholder. Given the fact that courts strictly construe ambiguity in favor of the policyholder and against the interests of the insurer, your insurer is likely to argue that there is no ambiguity.
That being the case, it’s important to work with one of our Chicago disability claim lawyers who has experience handling such disputes — he or she will have to gather and introduce outside evidence that can be used to support your “ambiguity” argument.
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