Frequently Asked Questions
Find answers to common questions about disability insurance claims, ERISA benefits, and the legal process.
Long-term disability is a form of insurance that is supposed to pay you a set percentage of your pre-disability income (up to a maximum monthly limit) if you are disabled and unable to work.
In most cases, long-term disability coverage activates once short-term disability coverage ends. Depending on the terms and conditions of your policy, LTD benefits may continue for a set number of years or until you reach Social Security normal retirement age, provided you remain unable to work.
There are two main types of long-term disability plans:
- Group disability insurance may be provided by your employer, like other types of employee benefits such as health or dental insurance. These plans almost always are governed by a federal law known as ERISA.
- Individual disability insurance can be purchased directly from an insurance company if you are self-employed, an independent contractor, or have simply chosen to purchase additional coverage beyond employer-sponsored plans. Because individual plans are not covered by ERISA, the procedures and regulations for filing and appealing claims may be quite different from group policies.
Please note that long-term disability insurance is not the same as Social Security Disability Insurance. Bryant Legal Group does not handle standalone Social Security Disability claims.
Claims related to most physical and mental conditions are covered by long-term disability insurance policies, including substance abuse. However, your LTD plan may limit or exclude coverage for certain conditions.
Generally speaking, you should be entitled to benefits under your long-term disability plan if the following conditions are satisfied:
- You can show that you have a medical condition that prevents you from working, under your insurance policy’s definition of disability.
- That condition is not explicitly excluded by your policy.
Our Chicago disability attorneys can help you determine how and whether your specific condition is covered.
Related: Types of Disabilities Covered
Private disability insurance policies vary significantly from policy to policy, as 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 more commonly encountered than others in the long-term disability insurance. These include, but are not necessarily limited, to exclusions that disqualify coverage to those who have been:
- Disabled through intentional or self-inflicted injuries
- Disabled pursuant to military service
- Disabled in an “extreme” and “risky” scenario, as defined by the insurance policy (e.g., skydiving, bungee jumping)
- Disabled during the commission of a criminal offense
- Disabled due to some specific condition (the insurance policy may define a range of conditions that will not qualify)
- Disabled due to a mental health condition (though most disability insurance policies simply limit the time period of eligibility for such conditions)
Related Article: How to Talk to Insurance Claims Adjusters About Your Long-Term Disability Case
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 — 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?
- Residual benefits qualification can vary greatly, but generally, it is measured by a percentage reduction in income or hours.
- For example, if your total income has been reduced by 40 percent in the wake of your disabling injury, then you may be entitled to receive 40 percent of your total disability benefit (monthly) as a partial income replacement.
- Thus, if you would have been entitled to $5,000 monthly disability benefits (for a fully disabling condition), you would be entitled to receive $2,000 per month in partial benefits.
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, you might be ineligible to receive any benefits.
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.
Related Article: How Long can You Be on Long-Term Disability? It Depends
Insurers must provide some justification for denying your long-term disability benefits claim. If their justification has no reasonable basis, then you should appeal the denial or pursue a lawsuit to recover your benefits.
Common justifications for a claim denial include:
- Lapse of coverage
- Material misrepresentations in the original insurance application
- Insufficient evidence of disability
- Application of a coverage exclusion
- Disability tied to a pre-existing condition
- Failure to seek ongoing medical treatment
Most employer-sponsored disability plans — except for those sponsored by public employers and religious organizations — come under the Employee Retirement Income Security Act (ERISA), which creates an exclusive federal regulatory scheme for benefits claims and subsequent challenges.
ERISA was created with the intention of protecting plan participants from the abuses of plan administrators, but over time, ERISA has actually developed into something of a headache for the plan participants it was originally meant to protect. If your plan is ERISA-governed, for example, then you must fully exhaust your administrative remedies before pursuing civil action against the plan administrator or insurer — this can extend the timeline of the dispute and keep you in a vulnerable position for longer.
Additionally, ERISA preempts bad faith actions against insurers, thus eliminating a significant recovery option for insured plan participants whose insurers have mishandled their disability claims.
In long-term disability situations, private disability carriers can make offers to buy out coverage to avoid having to pay out benefits for the lifetime of the policy.
When you accept a lump sum buyout, you must agree to forgo legal claims against the insurer for the benefits at-issue (and any related issues, such as a bad faith claim you might have against that insurer for how they mishandled the processing of your benefits). The benefits owed over the lifetime of the policy are negotiated and repackaged as a lump sum payment. If you accept the lump sum buyout, then you will not be entitled to receive monthly benefits payments.
Now, is it worth it? Although it might seem like an unsatisfactory answer, the truth is that the attractiveness of a lump sum buyout depends on the circumstances of your disability claim and your own preferences.
Let’s clarify.
A lump sum offer for a buyout is less than the total present value of your maximum future benefits under your disability insurance policy. Whether the offer is reasonable or “worth it” for you requires deeper analysis.
For one thing, long-term disability insurance benefits are not static in nature. The insurer may conduct surveillance over time and will expect you to update them on changes in your medical condition(s), your continued medical treatment, and any efforts to return to work.
It is in the insurer’s best interest for you to improve and therefore to no longer be “disabled” under their policy, thus terminating the receipt of benefits. By negotiating a lump sum buyout, you don’t have to worry about whether the insurer will terminate your benefits at some later date. You can focus on recovery.
Related Article: When Should I Take a Disability Insurance Settlement or Buyout?
Though in the past, federal circuit courts — when reviewing denial of benefits cases governed by ERISA — used to defer to the decisions made by the plan administrator (pursuant to the “abuse of discretion” standard), the law in many states has since changed significantly.
Many states have prohibited the use of discretionary provisions (transferring responsibility for claims handling and determinations from plan administrators to insurers).
In these states, ERISA jurisprudence now requires that the court review the denial of benefits decision in accordance with the “de novo” standard, which requires that the court review the denial of benefits as if no prior decision had been made (pertaining to the facts at-issue).
By reviewing denial of benefits claims de novo, the court empowers ERISA beneficiaries to a significant degree — you must present the facts that support your claim, and the court will evaluate whether you should have received benefits in accordance with the language/terms of the applicable plan.
Yes, absolutely — in fact, concern over plan mismanagement by fiduciaries is what led to the enactment of ERISA in the first place. ERISA fiduciaries have strict duties to act in the best interest of plan participants. Failure to do so could expose them to substantial civil liability under ERISA.
- When such a situation occurs, the plan participants have a right to sue and recover damages for their losses.
- Typically, this is accomplished through a class action, as there are many others in the “class” of plaintiffs who are similarly affected by the fiduciary violation.
- For example, suppose that the administrator of your ERISA-covered retirement fund mismanages the funds through extremely risky investments. The losses are so substantial that the plan can no longer pay out the benefits to which you’re entitled. You would almost certainly have a claim against the fiduciary.
Unfortunately, bad faith claims are not actionable under ERISA.
ERISA is a federal law that pre-empts state bad faith laws, including those of Illinois. If your disability benefits claim has been mishandled by the insurer, and ERISA applies, then you will not be entitled to bring a claim for bad faith. This can undercut your ability to obtain maximum damages in extreme cases, as bad faith claims often lead to significant damages (and sometimes, courts award punitive damages, which can further multiply the amount received).
In some limited cases, however, you may be able to bring a separate fraud claim against certain defendants. You’ll want to consult a qualified ERISA disability attorney in Chicago for an evaluation of your bad faith claims and how you might be able to strategize around the pre-emption issue.
Many common law fraud claims are pre-empted by ERISA as well — such a claim might only avoid pre-emption if you can show that the defendant owed you (and violated) a duty independent of the ERISA-covered plan.
- The administrative appeal process is a pre-litigation, internal (directly with the insurance company) review procedure that is imposed on benefits claimants under ERISA.
- It is not necessarily a simple, efficient or quick process — in fact, in some cases the administrative appeal can take from six months to a year to complete.
- You have just 180 days to submit a request for review pursuant to the administrative appeal process.
- If you are dealing with a denied ERISA disability claim, contact a qualified Chicago attorney for help with the administrative appeal process. Attorney guidance is critical, even at this stage, as a favorable resolution to the dispute may be possible.
Every plan is different and may impose different procedures. For example, some plans may extend or contract the typical deadlines. Others may have different factors for determining the person who will be reviewing the claim denial.
During the administrative appeal process, you will send comments and evidence that supports your argument that the claim should have been accepted and benefits awarded. In doing so, you will have to evaluate the plan documents, as well as other relevant documentation — such as medical records, file physician review reports, and vocational opinions. Once a decision has been made (regarding your appeal), you will receive a written decision that describes the specific reasoning on which the denial (or acceptance) is based.
At this point, if the administrative appeal process has led to a denial (in whole or in part), you will have exhausted all available remedies and will be entitled to bring a civil action against the defendants.
Generally speaking, no.
Although ERISA benefits claims can be brought in many courts against both the insurer and the plan administrator (your employer)
- By pursuing an ERISA benefits claim, you are not jeopardizing your employment.
- In fact, ERISA regulations prohibit employers from retaliating against their employees for attempting to pursue a claim under ERISA, or for otherwise exercising their ERISA-based rights.
- For example, if you appeal the denial of your disability benefits and then later bring an action against the insurer for damages, your employer cannot take an adverse employment action against you (i.e., termination, refusing to give a promotion or a raise, etc.) on that basis.
You are entitled to litigate your ERISA disability benefits claim, but you must first exhaust all the administrative remedies that are available to you.
In the context of ERISA, this generally requires that you challenge the adverse decision of your insurer through the administrative appeals process. The administrative appeals process — and its mechanisms — can vary quite significantly from plan-to-plan, but if you do not go through the applicable administrative appeals process, you will not have the right to sue for benefits/compensation pursuant to litigation.
ERISA does not contain a specific time limit for the filing of a claim under your ERISA-based benefits plan. However, the plan itself will include a specific time limit to notify the insurer or claims administrator of your intention to file a claim.
- For short term disability benefits, we have seen periods as short as 7 days from the start of disability and, for long term disability benefits, we frequently see time limits of 30 days.
- After your claim has been denied, ERISA regulation gives you 180 days to file an appeal. If the appeal is denied in whole or in part, you have a right to bring an action against the insurer and pursue the claim in a court of law. There are deadlines for this, too, however.
- ERISA statute of limitations rules are somewhat complicated. As a general rule, most ERISA-covered plans simply use the applicable state jurisdiction’s statute of limitations for written contracts — for example, in Illinois, most ERISA-covered plans will give you a 10-year deadline that runs from the date of formal denial (of benefits).
- Importantly, however, alternative deadlines may be set by each plan, and as such, the deadlines can vary substantially. ERISA only requires that the deadline be reasonable, given the circumstances.
For example, a 90-day deadline for bringing an action against the insurer would likely be considered unreasonable, whereas a two-year deadline would likely be considered reasonable.
Given the variable nature of such deadlines under ERISA and the fact that your claim may be abandoned if you do not bring an action in a timely manner, it’s critical that you consult with an attorney at an experienced Chicago ERISA law firm for guidance — your attorney will ensure that your claims are brought in a timely manner.
Your benefit plan is governed by ERISA if it can be reasonably defined as an “employee welfare benefit plan,” which means that the plan is employer-sponsored and provides employee benefits that may include health, disability, retirement or life insurance benefits.
If your employer purchased group disability insurance through an insurer, for example, and you are provided coverage through that plan, then in all likelihood, ERISA governs those benefits.
Two prominent exceptions exist:
- Religious employment (i.e., benefits provided through a church)
- Public employment. If you work for a government agency, for example, your benefits claim will not be subject to ERISA regulation.
The Employee Retirement Income Security Act (ERISA) was enacted in 1974 with the intention of protecting the assets and rights of plan participants in employer-sponsored benefit plans.
- It is a federal law and therefore applies to covered plans in Illinois and throughout the country at-large.
- The enactment of ERISA established a set of minimum standards for benefit plans in the private employer-employee context.
- New rules were imposed with regard to information on plan policies and funding, as well as the vesting of participant benefits.
- Requirements relating to formal grievance and appeals processes were also imposed, and plan fiduciaries were held to stricter duties — those who violate such duties are potentially exposed to significant liability.
Since its enactment, ERISA protections have been expanded.
All insurance claimants—including long-term disability claimants—have a duty to mitigate their various losses. The duty to mitigate generally entails the exertion of “reasonable effort” towards the minimization of your losses.
In layman’s terms, this means attending your rehabilitation sessions, following through with treatment (by attending appointments), consistently taking your medication, and more. The insurer is not required to pay full benefits for a disability that was exacerbated by the claimant’s own failure to act reasonably. If you fail to mitigate, then the insurer may have a reasonable basis to either deny your claim or undercut your benefits significantly.
Additionally, most disability insurance policies specifically require that you receive appropriate ongoing medical care; failing to do so, may be a separate reason for an insurer to deny your claim.
The consequences of lying or otherwise misrepresenting details reported in your original application for disability insurance coverage vary depending on the nature of the misrepresentation.
In Illinois, you may still be entitled to receive disability benefits, even if you misrepresented certain facts on your original application, so long as those facts were not: 1) intended to deceive the insurer, and 2) material to the disability coverage.
For example, if you simply forgot to write about some minor health condition, the insurer cannot use that as justification for a denial (or rescinded coverage). Further, if the health condition is unrelated to the disability coverage — in other words, if they would have still extended coverage to you had you no misrepresented the facts — then the insurer is required to pay out benefits for a legitimate disability claim.
It’s worth noting, however, that the insurer may be entitled to payments to cover any difference that there would have been to the insurance premium.
Our Chicago disability attorneys can help you navigate this situation.
Related Article: Denied Because You “Hid” a Condition From the Insurance Company? You Can Fight Back
Generally speaking, you are entitled to receive long-term disability benefits, even if your disability is caused primarily by a mental health condition such as depression, anxiety, panic disorder, or PTSD. However, there may be associated limitations.
Some disability plans are extremely strict and 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.
Related Article: How Long Can You Be on Disability Insurance for Depression and Other Mental Health Conditions?
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 several 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. However, different states take different approaches to bad faith claims. 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 should 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:
- Fraud and other knowing misrepresentations
- Unreasonable delays in claim processing
- Intentional interference with claim processing
- Wrongfully denying a legitimate claim in order to force the policyholder to expend additional effort through litigation
- Refusing or failing to payout benefits (for an accepted claim)
- Failing to adequately investigate the submitted claim
- Failing to maintain consistent communication with the policyholder
- And more
Generally speaking, courts will find bad faith when the insurer has conducted themselves in a vexatious, unreasonable, or outrageous manner. 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).
The Employee Retirement Income Security Act (ERISA) was established in the 1970s with the intention for providing additional protections to benefits plan participants from the misconduct of Plan Administrators, among others. In the context of today’s insurance disputes, however, ERISA coverage may ultimately give policyholders fewer protections than non-ERISA plans.
- ERISA regulation covers employer-sponsored insurance plans that are specifically related to employee benefits, such as employer-sponsored disability and health insurance coverage.
- If you have an insurance dispute that arises out of an ERISA-covered plan, your claims will be subject to federal law — not Illinois state law.
- Federal ERISA rules limit your ability to secure damages for bad faith, special damages, emotional distress, and more.
ERISA application may not always be a negative, however. ERISA plan participants in some circuit courts can have the denial of their benefits claims evaluated under the de novo standard, which means that the court will not defer to the factual determinations of the Plan Administrator. Instead, the denial of benefits will be considered with a “blank slate,” given the evidence.
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 coverage is a temporary wage replacement that usually lasts for 26 weeks or 180 days after the occurrence of a disability.
- Waiting periods tend to be short (in some cases, 7 days).
- By contrast, long-term disability insurance usually has a minimum period of coverage that lasts for 24 months, and in some cases, may last until full retirement age.
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.
Yes. You can receive private disability benefits, even if you are receiving funds through supplemental income sources, or other wage replacement benefits, such as Social Security Disability Income (SSDI) or workers’ compensation. However, there may be an offset for certain benefits.
- When it comes to supplemental income sources, such as passive income, inheritance, personal gifts, etc., your private disability benefits are generally entirely unaffected.
- Private disability benefits are a form of wage replacement, they are not income-variable.
- Whether you are rich or poor, you are entitled to the full disability benefit that was bargained for through the insurance contract.
When it comes to Social Security Disability Insurance benefits, most ERISA long-term disability plans have an offset that requires you to apply for SSDI benefits. However, private disability policies usually do not have the same application and offset requirements. This is policy specific, and our Chicago disability attorneys are available for consultation to help you understand your policy.
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.