Author: Janet Thoman Green

Most victims of trauma recover sufficiently from their injuries to return to work. For some, however, traumatic injury leaves them unable to work in the long-term or permanently. Those in this situation may have two safety nets:

1. Social Security Disability Insurance (SSDI) and/or Supplemental Security Income (SSI);
2. Private disability insurance policies

We previously addressed the basics of Social Security claims in our April 2007 article, “Trauma and Disability, Part I: Social Security Disability Insurance” is available here.

This article will focus on understanding the basics of private disability insurance policies.

Many employers provide Short and/or Long-Term Disability coverage in addition to regular sick-leave pay. Many individuals, particularly those who are self-employed, purchase individual disability policies to meet their specific needs. Though generally providing similar coverage, disability policies vary widely in specifics.

There are two general types of private disability policies:

• Short-Term Disability (STD) and
• Long-Term Disability (LTD)

These policies are often purchased together and are intended to dove-tail to provide continuity of benefits. Most Short Term Disability (STD) policies have a waiting period before benefits begin, usually a maximum of 14 days after onset of a disability. These policies then cover a portion of the wage earner’s income for a specified period, from several months but not longer than two years. Usually this period is only until the policyholder becomes eligible for benefits under a Long-Term Disability (LTD) policy. LTD policies usually have a waiting period of a few weeks to several months. This is called the “elimination period.” A common elimination period is 90 days.

Disability policies generally provide for payment of 40-70 percent of the policyholder’s income, tax-free. Providing less than 100% benefit is thought to give the policyholder incentive to return to work, if possible.

To qualify for benefits under a disability policy, the claimant/policyholder must meet the contract definition of “disability.” There are three general categories of policy definitions; the differences are significant:

Own Occupation: This is the highest level of coverage provided under disability policies and is becoming increasingly rare in the industry. Disability under this type of contract is generally defined as:

The inability to perform the material and substantial duties of your regular occupation. The insurance company will consider your occupation to be the occupation you were engaged in at the time you became disabled and will pay the claim even if you are working in some other capacity.

Income Replacement: This has become the most common policy definition. Most disability insurers have stopped offering Own Occupation coverage and have replaced the definition with Income Replacement, which usually states:

Because of sickness or injury you are unable to perform the material and substantial duties of your occupation and are not engaged in any other occupation.

Gainful Occupation Coverage: This definition gives the insurer the broadest discretion in determining disability and is a very common definition in employer-sponsored policies. This definition provides:

Because of sickness or injury you are unable to perform the material and substantial duties of your occupation, or any occupation for which you are deemed reasonably qualified by education, training and experience.

Since there is a substantial difference between the insurer’s potential pay-out under each of these definitions, there is also a difference in the premiums charged for each. When purchasing a disability policy, the least costly policies will invariably use the Gainful Occupation definition, effectively rendering the policy nearly useless unless the policyholder is completely unable to do any work of any type or pay level.

Coordination of claims arising out of a traumatic injury is an important aspect of legal representation of a person with a disability. The majority of conflict and litigation under disability policies arises from these contract definitions. Employer-provided disability policies are subject to the Employee Retirement Income Security Act (ERISA). This is a federal law that sets standards for employer-based health and pension plans. ERISA is a complex law which, in part, governs how litigation around disability policy disputes must be handled. When a conflict arises between a claimant and a disability insurer, the claimant should consult with an attorney versed in ERISA requirements promptly.

Disability and insurance laws are complex and frequently changing. Patients who have been injured and potentially disabled should seek consultation with an attorney knowledgeable about long-term injuries, insurance claims and personal injury and disability laws in order to protect their access to health care and income benefits.

Most health care providers will, at some point, encounter a patient who is disabled from work. It is also true that healthcare providers are not immune from their own trauma and disability. As a result, it is useful to consider the following:

1. Re-evaluate your own private disability policy to make sure you understand the actual definition of disability used by your insurer. If disability strikes, make sure that you and your practice are protected. Too often, healthcare professionals are sold a “hollow” disability policy such as “gainful occupation coverage.” This allows the disability insurer to claim no disability unless you are unable to do any type of work, regardless of pay.
2. Ensure that patients’ chart notes clearly reflect any work restrictions and/or disabilities.
3. Advise patients with disabilities to seek legal consultation with an attorney focused on personal injury and disability law.