Articles Posted in Disability Policies

For lawyers who handle claims related to the denial of disability policies, there is some law that they have to know to effectively represent their clients.

Probably 90 percent of disability policies involve payments spread out over a period of time.  When a claim for disability benefits is denied it can be anticipated that all future benefits are denied also.

When a insurance company who is obligated by contract to make monthly payments of money to another absolutely repudiates the obligation without just excuse, the obligee is “entitled to maintain his action in damages at once for the entire breach, and is entitled in one suit to receive in damages the present value of all that he would have received if the contract had been performed, and he is not compelled to resort to repeated suits to recover the monthly payments.  This was discussed as early as the 1937, Texas Supreme Court opinion styled, Universal Life & Accident Insurance Company v. Sanders.  As seen in the 1981, Dallas Court of Appeals opinion, Group Life and Health Insurance Company v. Turner, Repudiation is conduct that shows a fixed intention to abandon, renounce, and refuse to perform the contract.

Insurance lawyers who handle disability cases need to know these coverage issues.

Disability policies normally require that any claimed disability occur while the policy is in effect or within a specified time after any claimed accident or injury.  As an example, the policy may provide coverage for an illness or injury that “totally and continuously disables the insured within 30 days of the date of the accident so as to prevent him from performing each and every duty pertaining to his occupation.”

Disability insurance policies usually distinguish between disabilities caused by illness and those resulting from accidental injury.  This is seen in the 1978, Beaumont Court of Appeals opinion, Lone Star Life Ins. Co. v. Griffin.  In this case the policy provided that the insurer would pay the insured $1,000 per month for 60 months for an accidental injury resulting in total disability and that it would pay $1,000 per month for 24 months for total disability resulting from sickness.

According to the 28 Texas Administrative Code, Section 3.3012(b), in a definition of “total disability” in an individual accident and sickness policy or hospital, medical, and dental service corporation subscriber contract, the inability to perform duties may not be based solely on an individual’s inability to perform “any occupational duty,” but the insurer may specify the requirement of the inability of the insured to perform all of the substantial and material duties pertaining to his or her regular occupation, or words of similar import.

A policy may further provide coverage for “partial disability,” which is typically defined as the insured’s inability to perform one or more but not all of the essential duties of his or her employment or occupation.

Disability policies normally require that any claimed disability occur while the policy is in effect or within a specified time after any claimed accident or injury.

Here are a few examples of cases that have been litigated regarding disability policies and how the courts look at these cases.

In a 2003, Texas Supreme Court opinion, Provident Life and Ac. Ins. Co. v. Knott, the Court read the policies in question defining the term “total disability” to mean that the insured must, in order to be considered totally disabled under the policies, be unable to “perform all of the important daily duties of his occupation.”  The court then held that the trial court’s granting of summary judgment in favor of the insurer was appropriate given that the insured, a gynecologist seeking benefits for total disability under those policies was able to see patients, perform surgery, consult with other physicians and perform administrative duties.

In a 2002, United States 5th Circuit opinion, Lain v. UNUM Life Ins. Co. of America, a long-term disability policy that denied disability in part as the inability to perform “each of the material duties” of the insured’s regular occupation required only that the insured be unable to perform any single material duty of her occupation in order to be considered disabled, not that she be unable to perform all duties of that occupation.  In the case, no concrete evidence disability insurer’s determination of nondisability for insured who suffered recurring severe chest pains, while overwhelming evidence supported disability claim, warranting benefit award under ERISA civil enforcement provision: the insured’s time at home doing research on her medical condition did not equate to ability to practice law, as insurer contended; insurer focused on certain “normal” test results to support its finding, but test results were primarily abnormal and also could not clinically measure insured’s pain; and insurer’s reliance on insured’s failure to seek psychiatric care prior to ceasing employment was misguided since her disability was physical.

Insurance lawyers who handle disability income policies will see two types of policies.

One is the policy purchased through employment of provided by the employer.  The other type is the type purchased independent of employment, usually through an independent agent or in response to advertisements.

Those purchased through employment by the employee will often times be ERISA policies.  ERISA stands for Employee Retirement Income Security Act.  ERISA policies are governed by Federal law.  All other types of disability income policies are governed by State law.  ERISA policies are in a classification all their own.  This blog is not discussing ERISA policies and a person needs to know which type is at issue.

The language in a disability policy is important to read and understand.  The Courts will do so very closely.

This is illustrated in a 2017, opinion from the U.S. 5th Circuit.  It is styled, David M. Cox v. Provident Life & Accident Insurance Company.  It is a summary judgement case that was decided by the lower court in favor of Provident.  This Court reversed the lower court finding.

Cox had a disability policy with Provident.  The Policies provided coverage for disability caused by injury or sickness and contain provisions tying the period of benefit payments to the cause of the insured’s disability.  If the insured is rendered disabled at the age of 60 as a result of an accident or injury, the Policies provide for lifetime benefit payments.  By contrast, if the insured is rendered disabled at the age of 60 as a result of sickness, the Policies provide that benefit payments will be paid only until age 65.  The greater of the two applicable benefits periods applies when the disability results from a combination of the two.