What can you do if your disability insurer disclaims coverage for your long term disability claim?
Well, as one policy holder found, you can sue, and win. In this case, the insured sued because the infamous Unum Provident disclaimed coverage for his long term disability claim. Unfortunately for the insurance company, the claimant happened to have read his policy (he was an attorney), and took issue with their disclaimer all the way to the Second Circuit (federal appeals court).
In a scathing decision, the appeals court reversed the lower court and found that the administrator of the Plan (Unum) had a conflict of interest because it had both the discretionary authority to determine the validity of the disability claim, and paid the benefits under the policy; found that a reasonable person would conclude that the insurer’s denial of long-term disability was arbitrary and capricious; and granted benefits and interest running from September 18, 1995, the date on which defendant-insurer rejected plaintiff’s appeal.
Some of the Court’s findings are interesting: For example, the Court found the reasons given for rejecting the information was unreasonable and deceptive because other evidence of the claim submitted by the doctors would have revealed a plethora of details about why this poor man could not work as a tax attorney for Sotheby’s. Essentially, the nurse’s rejection of the medical evidence “mischaracterizes the quality and detail of the evidence . . .submitted on appeal.”
Indeed, First Unum never told the insured that they had rejected the application because one portion of the appeal did not have the physician’s signature. Citing Juliano v. Health Maint. Org. of N.J., Inc., 221 F.3d 279, 289 (2d Cir. 2000) (finding an insurer’s failure to communicate the reason for denying coverage sufficient evidence to warrant de novo review of the administrator’s decision under our old standard). The Court criticized the insurance company for implying that it would have been pointless to undertake any efforts to sort out the obvious and facial discrepancies in his record by “hiding behind a terse initial response to a set of questions it posed three months earlier. Essentially, they ignored the evidence they didn’t like and relied heavily upon evidence that was inconclusive of his disability.
Had he been told what their problem was, the insured would have “had no trouble addressing First Unum’s undisclosed and uninvestigated concerns.” Moreover, First Unum never explained how he could continue to perform the material duties of a tax lawyer despite these restrictions, and compounded its “deception” by representing that the records reviewed by their physician, when, in fact, no records were reviewed by a physician.
Apparently, this was not the first time that this insurance company was slapped on the wrist by a federal court. The opinion refers to at least 30 other cases).
The bottom line– don’t always believe what the insurance company says, and call your New York insurance lawyer.