More than sixteen years ago, shortly after starting his dental practice, Dr. Johnson (name has been changed for privacy purposes) bought a disability insurance policy to protect his income in case of an illness or injury that prevented him from completely or partially working in his chosen profession. Over the years, Dr. Johnson’s practice grew substantially and so did his annual income. As such, Dr. Johnson’s insurance carrier made several offers to increase his monthly disability benefit in case of total disability. Each time, Dr. Johnson gladly accepted the increase in premium payments for the added protection.
Dr. Johnson’s dental practice consisted mainly of bridge and crown work, root canals, extractions, and general dentistry. Unfortunately, several years ago, Dr. Johnson began to experience stiffness and pain that radiated through his right arm and shoulder. At first, he dismissed the pain as overuse and applied home remedies. However, over time the pain became more severe, more frequent, and lingering longer. Dr. Johnson sought treatment from a rheumatologist and was subsequently diagnosed with osteoarthritis. Dr. Johnson continued to treat patients. However, his pain, now excruciating after only two hours of use, forced him to change his practice significantly. He had to forego crown and bridge work, root canals, and more difficult extractions.
After almost a year of cutting back, Dr. Johnson read the long-term disability income policy he bought so many years earlier. Dr. Johnson’s policy read:
You are considered Totally Disabled, if due to injury or illness, you are unable to perform the Substantial and Material Duties of your Regular Occupation and are under the Regular care of a Physician… You are considered Residually (Partially) Disabled if due to injury or illness, you are unable to perform one of the material and substantial duties of your regular occupation, have at least a 20% loss of earned income, and are under the regular care of a physician.
Dr. Johnson decided to apply for disability income benefits. Shortly after he mailed his application for disability benefits to his disability insurance company, Dr. Johnson received a telephone call from the disability company. The claims analyst asked Dr. Johnson several questions regarding his condition and his continued treatment of patients. The insurance company requested additional documentation and indicated that their investigation might take several weeks. However, after only two and a half weeks, the insurance carrier sent Dr. Johnson a correspondence that read “We conducted a thorough investigation into your claim for disability income benefits and we are pleased to inform you that you are eligible to receive benefits under the terms of your disability income contract. As you are still working in your profession, you will receive partial disability benefits as long as you remain disabled and continue to suffer at least a 20% loss of earned monthly income.” Dr. Johnson was pleased by this news. Many of his colleagues had difficult experiences with their disability insurance companies when attempting to collect from their disability income policies.
Dr. Johnson was required to provide the disability insurance company with monthly profit and loss statements. During several months he received no benefit, as in those months he did not sustain at least a 20% loss of earned income. Dr. Johnson subsequently hired another dentist to perform procedures that he could no longer safely perform. This resulted in fewer and fewer months in which Dr. Johnson was “eligible” to collect his disability income benefit. After two years of qualifying for disability benefits, Dr. Johnson’s disability insurance company approached him to request a buy-out of his disability income policy. The disability company offered him $100,000.00 for the surrender of his disability policy. Dr. Johnson found this offer fair as in most months he was collecting little or nothing in partial disability benefits. However, before signing the agreement, Dr. Johnson wanted an attorney to review the disability buyout agreement and advise him of his rights. That is when Dr. Johnson contacted Attorneys Dell & Schaefer.
After speaking with Dr. Johnson and reading his contract it became clear to Attorneys Dell & Schaefer that not only was the offer unconscionably low but that Dr. Johnson had fallen victim to what seems to be a common practice among many insurance carriers – advising an individual that he is partially disabled when under the terms of his contract he is totally disabled. When we explained our concerns to Dr. Johnson he was hesitant and stated, “I am still working. I’m not totally disabled.” Like so many others, Dr. Johnson was convinced that total disability meant the complete inability to engage in his occupation. This erroneous assumption was given credence by the insurance carrier’s simple statement, “As you are still working in your profession you will receive partial disbility benefits…” Dr. Johnson’s incorrect interpretation of his disability policy was created by two years of similar statements from his disability insurance company and eventually a seemingly gracious offer to buyout an all but useless policy for the sum of $100,000.00.
It was reasonable for Dr. Johnson to arrive at such a conclusion. Social Security provides disability benefits to individuals for the complete inability to engage in any gainful occupation, not to mention the fact that Dr. Johnson’s policy does provide for partial disability benefits. However, this was not a Social Security claim, but rather a long-term disability policy. As we explained to Dr. Johnson, under the terms of his disability policy, total disability means the inability to perform the “substantial and material” duties of his occupation as they were just prior to his illness. Dr. Johnson’s substantial and material duties as a dentist prior to his disability consisted of root canals, extractions, simple and complex, consultations, and many cosmetic procedures. However, Dr. Johnson’s post-disability duties consisted mainly of some simple extractions and consultations. He was simply unable to perform all of the substantial and material duties of his occupation and thus was totally disabled under the terms of his long-term disability policy. Most significantly, Dr. Johnson had been paying premiums for over a decade for this protection.
After our initial consultation, Dr. Johnson turned down the disability insurance company’s offer to buy out his policy and retained Attorney’s Dell & Schaefer to assert his rights to total disability income benefits under the terms of his contract. Attorney’s Dell & Schaefer were able to secure Dr. Johnson total disability benefits, un-paid back benefits totaling almost $200,000.00, interest on his back benefits, and attorney fees. Ultimately, we negotiated a lump-sum buyout of Dr. Johnson’s long-term disability policy, one well in excess of the meager $100,000.00 the disability insurance company once attempted to settle his claim for.
Unfortunately, Dr. Johnson’s story is not uncommon. Many disability policies provide that an individual with a partial disability will only be paid through the age of 65, while an individual on total disability benefits will be paid for the duration of the individual’s life. Moreover, partial disability benefits are based on the percentage of earned income lost. Thus, unlike total disability benefits, if the individual does not suffer a loss, benefits are not paid. Finally, in the event of a buyout of a long-term disability policy, an individual would be more apt to surrender his or her contract for less if the individual’s disability were deemed partial rather than total. Insurance companies save themselves millions of dollars each year by such practices. They lead claimants to believe that because they are working, they are only entitled to partial disability benefits and then entice them to surrender their contracts and all rights to their claim, for an unreasonably low price. Fortunately, for Dr. Johnson, he was able to realize the disability insurance company’s deception prior to surrendering his rights.