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Birmingham Bar Associations Bulletin Summer 2015

Insurance Law For example, some employers allow individuals receiving LTD benefits to receive continued coverage under the company’s health insurance plan. Meanwhile, other employers may provide those individuals with continued pension accruals even though the individual is no longer working. Other forms of ancillary benefits, however, may require the individual to take action to obtain them that goes beyond applying just for his or her LTD benefit because the benefit pertains to a separate insurance coverage. A common example of separate coverage of this sort is life insurance where the policy may allow the employee to continue that coverage without any premium obligation for as long as that person remains disabled. This is generally known as a “waiver of premium” benefit. Typically, this benefit must be obtained through an application separate from the LTD application. If the application is not timely submitted, or if that benefit is otherwise not separately pursued through its own administrative process, that employee may have forfeited forever valuable and important coverage. 2. Delay in Filing for LTD Benefits Because of a Policy Offset for Social Security Disability, Workers’ Compensation or Similar Incomes – or Vice Versa. When a person becomes disabled, he or she may have access to several different income streams depending on the circumstances. If the disability is caused by a workplace injury, for example, workers’ compensation benefits may be available. Sometimes, someone who is disabled may be able to draw a special “early retirement” income. But in almost every case, that person will at least be able to apply for Social Security disability insurance. Two versions of the same mistake often get made at this juncture as the individual or the handling attorney try to navigate through the LTD insurance plan’s offset provision, a near-universal provision found in LTD plans, especially when the plan involves an insurance policy. Because an offset provision provides for a reduction of the LTD benefit on a dollar-for-dollar basis equal to the amount of other forms of disability income received, some individuals and their attorneys may decide the LTD benefit is not worth pursuing. Or for a benefit like workers’ compensation where the other benefit payment may expire after a certain time, they may decide not to apply for the LTD benefit until after that other benefit ends. Even if this impacts the workers’ compensation benefit in some way, this can be risky where the LTD benefit is concerned. ERISA LTD insurance, like other forms of insurance, typically requires a claim to be submitted within a specified amount of time after the disability occurs. If the claim is not submitted within that amount of time, the insurer likely will seize upon that delayed submission as a basis for denying the claim. If your client is inclined to delay filing an LTD claim for any reason, it is important to explain the possible implications that delay may have on his or her ability to pursue this LTD benefit later. The converse of this occurs where an individual may be inclined to delay filing for Social Security or for some other form of disability benefit thinking that doing so will avoid reduction of their LTD benefit under its offset provision. This is not advisable either. The concern that arises is that Social Security benefits generally are more accessible to claimants than ERISAgoverned LTD benefits. At the very least, Social Security gives that person a second and usually substantial chance at an income stream while he or she remains disabled. It also has the secondary benefit of lending support to that person’s LTD claim, because courts generally require insurance companies to give meaningful consideration to favorable Social Security decisions.5 Thus, pursuing both Social Security and LTD is in that person’s best interests. An additional reason it is important is that many LTD policies allow the insurance company to reduce the LTD benefit by the amount that person would have received in Social Security benefits if they had applied. Accordingly, choosing not to apply for Social Security to avoid the reduction caused by an offset provision ultimately may serve no purpose at all. 3. Failing to Obtain Important Evidence Supporting the Claim During the Administrative Appeal Attorneys not accustomed to ERISA litigation are surprised to learn that courts often suspend the normal rules of civil procedure, especially in the realm of discovery, when ERISA is invoked. Under ERISA, a claimant typically must present all of his or her evidence to the insurance company before filing suit. The claimant may also be required to pursue internal appeals with the insurance company and “exhaust” administrative remedies before a court will entertain suit. Once suit is filed, in the vast majority of cases the court will prohibit all merits-related discovery, limit the scope of review to the materials before Birmingham Bar Bulletin/ Summer 2015 23


Birmingham Bar Associations Bulletin Summer 2015
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