Are Disability Business Overhead Expense Policies Worthless if You Close Your Business?

Most business owners that cease operations due to a disability are stuck with ongoing business related bills that existed prior to the date of disability. The question is whether disability insurance companies pay disability Business Overhead Expenses to an insured that becomes disabled and has either closed their company or sold their business assets?

The answer depends on a lot of factors and the disability insurance company that sold the policy. Business overhead policies (“BOE”) are sold by numerous disability insurance companies as an insurance policy that is suppose to cover the expenses of a business that existed at the time an insured becomes disabled. All BOE policies require the insured to meet several criteria in order to be eligible for benefits. The first criteria is that an insured must be “totally disabled”, which is often defined as unable to perform the duties of your occupation. The second criteria is that the insured must be totally disabled for at least 30-90 days in order to be eligible for benefits. The third criteria and most challenging in most BOE claims is complying with the policies definition of “Covered Overhead Expenses” or Business Overhead Expenses.

Since the early 1990’s, there have been multiple lawsuits in courts nationwide in which the interpretation of the meaning of “Covered/Business Overhead Expenses” has been extensively litigated. Unfortunately, in many cases the insured has been on the losing side, and there is a disturbing body of case law which suggest that Business Overhead Expenses are not payable once an insured either closes or sells their business. But, what about expenses that continue after the sale or closure of a business? The key factor that drives the outcome of each of these cases is the actual definition of “Covered/Business Overhead Expense” within the business overhead policy that you purchased. In most of the cases in which the court agreed with an insurance company’s denial of business overhead expenses, the definition of Covered Overhead Expenses applied only to those expenses incurred in either the ongoing or continued conduct of a business. The ambiguous keyword here is “ongoing” or “continuing”.

Let’s assume you are the only doctor or dentist in a professional practice and you are unable to perform the duties of your occupation. How will the practice financially continue without you generating revenue? In the short term, you could hire another professional to come in and perform your duties, which the BOE policy may cover these expenses for a limited period. However, the reality is that there is often no one available to treat all of your patients and still generate enough revenue to keep your practice profitable. So what usually happens is that a doctor or dentist is forced to either close the practice or look to sell the practice. In most situations the practice is closed down and the doctor still has expenses such an office lease, equipment lease or loan, bank loan used to finance the practice and employee expenses to help wind down the practice.

The $250,000 question at this point is whether the BOE policy continues to cover the remaining pre-disability business expenses once a doctor or dentist is no longer treating any patients? Can a doctor or dentist argue that the practice is ongoing because there are still receivables that need to be collected, patient files that must be maintained and most importantly financial debts of the practice that still must be paid? It seems like BOE coverage is worthless if an insured must be unable to work in their occupation, but then is not eligible for coverage if they cannot manage to keep the doors of their business open.

As scary as this situation may seem, we have been able to help hundreds of medical professionals and business owners to collect under their BOE disability policies. It takes careful planning and analysis of your BOE policy in order to maximize the available benefits. Contact any of our disability insurance attorneys for a free consultation to discuss your claim.

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Since we represent disability insurance claimants at different stages of a disability insurance claim we offer a variety of different fee options. We understand that claimants living on disability insurance benefits have a limited source of income; therefore we always try to work with the claimant to make our attorney fees as affordable as possible.

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Dell & Schaefer Client Reviews   *****

Michael F.

Having had several lung surgeries including a wedge resection, lobe removal and pleurodesis as well as MAC lung disease, I was diagnosed with stage vi (end stage) COPD in October 2012. With my lung function at 23% it was becoming very difficult to manage my daily life let alone continue working in my management role at a large healthcare company. After meeting with my primary physician and my pulmonologist, it was agreed that I should stop working and submit a claim for disability. I was 52 at the time. My short term disability plan with Mutual of Omaha paid my claim for 3 months at which time it was converted to my long term disability plan with no issues. I continued to collect my LTD benefit from February 2013 until November 20th 2014 when I received a letter saying I could return to my previous position and there was nothing in my medical records to indicate disability. I was shocked to say the least, as my condition is chronic and progressive and in fact my condition had continued to decline. I didn’t know what to do and knew I did not have the knowledge or experience to appeal their decision. I was very afraid as we depended on this income to pay our bills, that’s why I held the policy for many years, to protect my family. I want to add that I applied for and was approved for Social Security disability benefits shortly after diagnosis.

I immediately started to search for attorneys that handle disability claims and found literally hundreds that handled SSDI claims, but few that handled employer/private policies. I found Dell & Schaefer and filled out their quick online form and almost immediately received a reply from Gregory Dell (yes, an actual person responded!) who let me know that he asked Rachel Alters to call me. I don’t think it was more than a half hour before I received a call from her. I immediately felt a sense of relief as she explained the process and what she would be doing for me.

From that day forward, I have been met with OUTSTANDING customer service from Rachel Alters and Kathleen Bordes. Any time I reached out with questions or concerns they were very responsive and always left me feeling satisfied that I had the best in my corner. The process took many months and a lot of leg work on Rachel and Kathleen’s part. When I was finally sent a draft of the appeal, I completely understood why it takes so long. The level of detail was unbelievable. I actually feel like I better understand my disease after reading it! The appeal was filed timely and my denial was overturned very quickly. When I learned it was overturned, I have to admit I had tears in my eyes. I want to add, that even if the appeal didn’t have the positive outcome that it did, I would feel exactly the same about the exceptional job done on my case. I’m not sure I can ever truly express how grateful I am, and how blessed I feel to have found Dell & Schaefer and especially Rachel and Kathleen!

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