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Long Term Disability and Impoverishment

By Scott B. Elkind, Esq.

Very few persons expect to become disabled or receive much advanced warning. Therefore, claimants have precious little time to prepare for the economic ramifications that come with their newly disabled status. As hope springs eternal, most people keep trying to get better, often to no avail as their economic status becomes increasingly imperiled in the process.

The persons who purchased private, individual long term disability policies tend to be wealthier (as these policies are expensive), but still will be subject to waiting periods of 90 to 180 days before payment is made. Often, disability insurers delay the review process even longer and then pay back benefits accordingly should the claim be approved. There are no short term disability plans to fill the waiting period gap in private long term disability policies to ease period of benefit withholding.

Most persons become insured for disability benefits through a group insurance policy issued through their employer. Most of these plans are governed under federal ERISA (Employee Retirement Income Security Act of 1974) law. These policies also have 90 to 180 day waiting periods prior to payment of benefits being made. Many employers also purchase short term disability plans to pay benefits to employees during the waiting period. Until recently, short term disability benefits were payable with relatively little opposition. Those days have changed with many disability insurers now denying short term disability claims. It is common for the disability insurer to not allow or commence long term disability applications thereafter so as to limit exposure in an ensuing lawsuit.

The time limits associated with ERISA make living difficult from the outset. A claimant has 180 days to file an administrative appeal. To assemble a poorly supported appeal will result in a denial of benefits. As no new evidence will be permitted in court afterwards, the claimant then loses the benefits forever. This firm as well as many others will not litigate a case that it has not undertaken the administrative appeal.

After the appeal is submitted, it is common for disability insurers to request an additional 45 day review period following the initial 45 day period allotted under ERISA. There is no specific grounds for refusal of this extension which is taken by mandate rather than by a request.
If a second administrative appeal is required under the plan, then the entire cycle starts again. Therefore, it is common for a single appeal cycle to take nearly a year until a claimant is paid back benefits.

Claimants always want an explanation for this. Attorneys will always recite the adage that “delay favors the defense.” It gives the insurer more time to find a way to deny the claim and/or hold on to its money longer. There are no compensatory or punitive damages, so the insurer only has to pay what it owes and no more.

During this time of economic deprivation, it becomes necessary for claimants to file for bankruptcy. This would seem sensible, but needs to be handled with care. The underlying ERISA claim is considered an asset and, if it is not listed as such on the bankruptcy application, will result in a claimant being prevented from making any future claim for back disability benefits.

As for applying for Social Security disability, a claimant’s average wait is also greater than a year (and up to two years) to receive benefits. Therefore, there is no quicker economic relief in this arena.

Given the many perils associated with making a disability claim, it is incumbent on the claimant to seek knowledgeable and experienced counsel. Further, disaster planning needs to be undertaken as soon as disability strikes due to the timing factors involved.

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