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Article – Denied Claim

It’s a fact that disability income insurance claims submitted by Doctors, Dentists and other professionals have increased dramatically over the last several years, along with a disproportionate number of inappropriate denials.  The claims departments of too many insurance companies have been told to “tighten-up”.  Claims that once would have been paid, are routinely being denied due to industry trends, misunderstandings and consumer lack of knowledge and inability to contest.

Since 1972, as a disability income specialist and expert witness / consultant, I have been called upon by attorneys in too many cases, to ether testify, or submit written opinions.

In this article, I am going to discuss those claims that have been inappropriately denied and comment on those which can or should have justifiably been denied, due to the claim being invalid or fraudulent.


  1. elimination period not satisfied due to an inadequate number of days of disability; or days of disability not being consecutive;
  2. benefit period expired;
  3. definitions, terms, conditions for benefits to be paid not satisfied, e.g.  a) total disability, b) residual disability;
  4. renewability.

From these, is there a common denominator or one major reason for claims denial?  Yes there is.  It’s apparent that one of the biggest reasons for claims denial, has to do with satisfying the definition of Total Disability, some of which are  (the easiest one to satisfy has been listed first):

    • Own occupation – This definition allows payment to be made,  as long as the claimant can’t do the substantial and material duties of their occupation even if the insured is working elsewhere (so long as it is another occupation).  This is the most desirable of all definitions.  Note:  Some carriers even offer an own-occ specialty letter for this definition (e.g. can’t do surgery, but can still practice as a doctor).
    • Own occupation, not gainfully employed elsewhere – A policy with this definition,  pays benefits if the insured can’t do the substantial and material duties of his or her occupation and is not working elsewhere.  Working or not, then becomes the choice of the claimant.  If they do decide to work in another occupation, or is not totally disabled and working in their occupation, and have a residual benefit option, the claimant is considered residually disabled and will be paid as if it was a loss of income policy (see loss of earnings below).
    • Own occupation (for a period of time) – thereafter, unable/or not working elsewhere – This is an example of a split definition that gives own-occ (see the first definition above) for a period of time, usually two to five years, then the definition changes to not working or unable to work elsewhere (given education, training, experience, and sometimes prior economic status).  This is one of the least desirable to the claimant and gives the carrier some control in minimizing the impact of the claim.  Same is true for not gainfully employed elsewhere.
  • Loss of earnings – This “definition”, or type of policy, has been around for a long time in lieu of any of the own-occupation definitions.  Loss of earnings is the same as a residual benefit.  For example, if a claimant has a 30% loss of income while disabled, and under the care of a physician, he/she will be paid 30% of the monthly benefit (proportionately).  While this type of a policy does pay proportionately, please note that a claimant will start off with an initial “income” loss of 50%-40%.  This is so since participation tables only allow approximately 50-60% of pre-disability income (depending on the income level of the insured, their occupation/duties, and when the policy was issued) to be covered.  These benefits are then tax free of paid by the insured.   Higher issue limits are available if the premium is employer paid, however, these benefits will be taxable.  Yes, a 1099 will be sent to the IRS by the insurance company!

Another major reason for claims denial (besides definitions), has to do with misstatements and/or omissions made on the application by the claimant.  In some cases, they have been unintentional due to the poor wording of the questions.  It has been said many times “that the claim starts with the application”.  When this happens who then is at fault?  Is it the carrier, for poorly constructing the questions, or is it the fault of the applicant/or the agent who intentionally withholds information that could negatively impact the underwriter’s decision as to whether or not to issue a policy is or issue one without exclusions for pre-existing conditions?

What about those claims which have been inappropriately denied?  since the 70’s, I have either testified or have prepared written opinions on  claims which were initially denied by the carrier.  Some of these denials were based on what seemed to be straightforward and uncomplicated reasons. Others, because of the contract’s language and integrating benefits/riders/exclusions/etc., were  more  convoluted.  One claim that comes to mind, which incidentally was straightforward and was governed by clear contract language, was submitted by a doctor of internal medicine and whose attorney asked me to evaluate the denied claim for damages.  The policyholder was unaware that the policy had lapsed and consequently the claims department denied the claim due to the policy not being in force.  This then seems straightforward enough.  What then was the basis for the appeal?  Upon closer scrutiny, the contract clearly stated that any policy change must be submitted in writing.  In this case the claimant’s agent had verbally made the change and the submitted change accepted by the carrier was incorrect.  Why then did the carrier continue to deny?  That was for their attorney to justify.  However, in my opinion, the carrier had no basis (except wanting to escape the liability of a very “rich” contract).  Ultimately the policy was reinstated and the claimant was fully paid.

Another case that I worked on, had to do with definitions and as previously mentioned, the one that most often causes  a denial has to do with the definition of total disability.  In this particular case, the agent’s client was a cardiologist who did some invasive procedures as part of his duties.  He had “purchased” a policy after reading the agent’s brochure, which had printed on it, “your own-occupation/specialty”.  After the policy was issued, the insured asked the carrier to issue a specialty letter based on the fact that he wanted his sub-specialty (as an invasive procedure cardiologist) to become part of the own-occ definition for total disability.  This “sub-specialty” request was, according to the plaintiff, clearly stipulated to the agent at the time of policy delivery.  A specialty letter finally was issued, however only made mention of cardiology.  When the cardiologist complained to the agent that “invasive cardiology” was not addressed, he was told not to worry.  To further compound the problem, the policy only had total disability benefits, i.e. was missing some important options such as residual etc.

A year later a claim was submitted and was paid even though the doctor was back to work (but not doing invasive procedures).  The doctor finally went off claim.  Time went by and a new claim for disability benefits was submitted.  This time it was denied!  On what basis?  The carrier stated that his claim did not satisfy the definition for total disability, (remember the sub-specialty was not mentioned in their letter).  So far they are correct; however, my report pointed out that since such a big issue of sub-specialty was made, the carrier had an obligation to mention in their specialty letter reply that the sub-specialty had to be one that was recognized by the AMA (invasive procedures are not)!  This case is still pending.

One other interesting example had to do with a doctor of internal medicine who submitted a claim based on her group LTD certificate.  She was paid $6000/month, and after 24 months these benefits stopped, even though the policy’s benefit period was to age 65.  Why did the benefits stop?  Again, definitions!  In this case, the carrier invoked the split definition for total disability.  (see own-occupation – thereafter unable  to work elsewhere).  The claim was rejected because of the carrier’s inability to fully comprehend their own split definition for total disability which included  prior  economic status.  The claimant found it “difficult” to find work elsewhere, in view of the fact she was making over $200,000 a year prior to her claim!  She sued and won!

After the claim is reviewed for completeness, the file is pulled and the initial application is compared to the information on the claim form for possible inconsistencies.  To further verify the claim, APS’ will be ordered.  Other documentation to support the claim such as tax returns will also be ordered.  Underwriting once again takes place to determine if the claim is valid and to assist with this determination the carrier will use CPA’s, psychiatrists, IME’s, etc.  If it is valid, payment will follow.  If it is not due to the terms of the policy, e.g. elimination period, etc., correspondence will address those issues.  If the claim is invalid due to major omissions on the application, etc., and it is within the contestability period, the policy will usually be rescinded and all premiums from the policy’s inception will be refunded.  If the claim is invalid and it is past the incontestability period, it might be paid unless the carrier strongly feels there was intent to commit fraud, then rescission/denial will also take place.  Fraud is hard to prove, but the courts have recently begun to become more lenient in favor of the carrier.  In any event, if it is a valid long-term claim or a short term claim with a high monthly benefit, expect surveillance and or a possible buyout of the claim.  Many carriers have “developed” a “system” to wear down the claimant by overwhelming them with paperwork and a hierarchy that would even frustrate a saint.

Obviously (based on the aforementioned), one of the features is to have the best definition for total disability!  Not all carriers use the same definition given a particular occupation.  Shop around!  Some other features to look for fall into the policy’s terms, conditions, and other definitions, such as the elimination period.  Try to get a policy that states the days of disability need not be consecutive.  By doing so, the disability can be one that is a “stop and go” type, which is better than one that states the days of disability must be consecutive (in order to count towards the elimination period).  Another good feature will state that both residual and/or total disability days will count towards satisfying the elimination period.  Most carriers allow this, but some require that in order for them to count, a period of total disability must first precede a residual benefit.  There are other features too numerous to mention that will also help get a claim paid faster.  Policies that have many of  these features are referred to as claims driven policies vs. contract driven policies.

Some critical areas of the application which affect a claim and could be inadvertently answered incorrectly, or dishonestly, have to do with 1) occupation/duties, 2) health, 3) income, 4) and other pertinent facts such as; avocation, etc.  Incidentally, some of the “honest” mistakes made by the applicant might be “overlooked” after two years as previously mentioned in the contract’s incontestability clause.  What is not “overlooked” however, are fraudulent misstatements or omissions regarding health or income.  Come on, can someone honestly say that they “forgot” that they had a back operation or a heart attack two years ago?!  With the same view in mind, let’s not forget the agent’s role in completing the application.  Did the agent record all answers exactly as they were answered, or was there some hidden agenda or motive for writing them down in such a way so that the policy would be issued as “applied for” (without a rating or an exclusion)?  Did the agent really do the proposed insured a favor, or were these omissions for the agent’s own gain?  So what can the agent/proposed insured do to minimize problems?

  1. Answer all questions honestly and completely.
  2. Observe the applicant’s face for a reaction to a question inconsistent with the answer.
  3. Restate the question if the answer appears shaky.
  4. Explain the penalty for fraud.
  5. Have the applicant verify all of the answers and information on the application      before signing it!

Over the years, the ratio of subjective claims such as: mental/nervous, soft tissue (e.g back), chronic fatigue syndrome, etc. vs. non-subjective claims (broken arm, heart attack, etc.) have dramatically increased.  To deal with this, they have taken a number of steps both for the long  term and in this connection, some carriers have redesigned their policies to limit the benefit period of subjective claims, changed occupation classifications and revised rates especially for females.


  1. Cooperate fully with all requests made by the claims adjuster.
  2. Request a full explanation of all negative responses and the basis for such a response.
  3. Request that a review be made by his/her supervisor to verify that inexperience or bias didn’t affect the adjuster’s decision.
  4. Ascertain whether or not the carrier is acting in bad faith.
  5. Ascertain that the investigation was proper; An improper investigation or one that results in bad faith can be explained as:
  6. Flawed or Incomplete investigation, treating physician, etc.
    • must investigate to support insured’s claim
    • Failure to objectively evaluate claim
    • ignore evidence in file or make file bias
    • Unduly restrictive policy interpretation
    • Purposeful delay or dilatory claim handling
    • Unreasonable investigation (deceptive investigating and harassment) which can result in a (counter sue with a tort-invasion of privacy)


  1. Review all policies and associated correspondence including but not limited to the application.
  2. Review all medical reports.
  3. Assist in completion of the claim form especially the section which has to do with pre-disability duties and related issues.
  4. Determination of benefits (e.g. is it a residual or a total disability claim and if total, how to interpret the definition, especially if it is a split “own-occ”).
  5. Guidance on what to expect during an IME or some other type of visit (CPA, etc.).
  6. Provide explanation on policy limitations, exclusions, definitions, terms and conditions.

If all else fails, seek professional assistance from either an attorney or from an expert witness/consultant who specializes in these matters and perhaps punitive damages will also be awarded.  Punitive damages might be awarded based on the following criteria:

  • Punitive damages addresses egregious conduct
  • Requirements find:
    • intentional wrong doing
    • circumstance of aggravation

Note:  Proof of bad faith is not in one of itself course for punitive damages.

I for one, strongly believe that these inappropriate denials have got to stop, so that litigation is only for acts of bad faith on the part of the carrier and fraud on the part of the claimant.  If the current method of disputing inappropriately denied claims continues, then in most cases the insurance company, with it’s deep pockets, will surely win!  It has been my experience that there are carriers who habitually take this approach and, who excessively deny legitimate claims.

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