What is Complete Disablity?

Knowing the difference between “partially” and “totally disabled” can save you millions.

Why does it matter whether you are considered totally or partially disabled by your disability insurance carrier? Most disability insurance policies provide that a person with a partial disability will be paid through age 65, while someone on total disability benefits will be paid for the duration of his or her life.

Partial disability benefits are based on the percentage of earned income lost. Unlike total disability benefits, if a person does not suffer a loss of earned income, benefits are not paid.

If a person’s disability insurance carrier buys out his or her contract resulting in a lump sum settlement in lieu of periodic payments, the person would be more apt to surrender the contract for less money if his or her disability were deemed partial rather than total.

Insurance companies save themselves hundreds of millions of dollars each year by paying out partial rather than total disability benefits to their claimants. This is what happened to my client, Dr. Brown.

Fourteen years ago – shortly after starting his dental practice – Dr. Brown bought an insurance policy to protect his income in case he suffered an illness or injury that prevented him from completely or partially ­working. During the years, Dr. Brown’s practice grew substantially, and so did his annual income. As such, Dr. Brown’s insurance carrier made several offers to increase his monthly disability benefit in case of total disability. Each time, Dr. Brown gladly accepted the increase in premium payments for the added protection.

Dr. Brown’s practice consisted mainly of bridge and crown work, root canals, extractions, and general dentistry. Four years ago, Dr. Brown 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. Nevertheless, the pain became more severe, more frequent, and lingered longer. Dr. Brown sought treatment from a rheumatologist and subsequently was diagnosed with osteoarthritis. He continued to treat patients. His pain, now excruciating after two hours of use, forced him to change his practice significantly. He had to forego bridge and crown work, root canals, and more difficult extractions.

After almost a year of cutting back, Dr. Brown read the disability income policy he bought years earlier. His policy provided:

• “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 or more of the material and substantial duties of your regular occupation, have at least a 20 percent loss of earned income, and are under the regular care of a physician.”

Dr. Brown applied for disability benefits. Shortly after he mailed his application, he received a call from his carrier. The claims analyst asked many questions regarding his condition and his continued treatment of patients. The analyst requested additional documentation and said that the carrier’s investigation might take several weeks. Five and a half weeks later, the insurance carrier sent Dr. Brown 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 partially disabled and continue to suffer at least a 20 percent loss of earned monthly income.”

The news pleased Dr. Brown. Many of his colleagues had received negative responses from their insurance carriers when attempting to collect their disability income policies.

Dr. Brown had to provide his carrier with monthly profit-and-loss statements. For several months he received no benefits because he did not sustain at least a 20 percent loss of earned income. Dr. Brown hired another dentist to perform procedures that he could no longer perform safely. After paying the salary of the replacement dentist, Dr. Brown’s practice still made a substantial profit. This resulted in fewer months in which Dr. Brown was eligible to collect his disability income benefit. After two years, Dr. Brown’s carrier approached him to request a buyout of his disability income contract. The carrier offered him $100,000 for the surrender of his contract. Dr. Brown found this fair because most months he collected little or nothing in partial disability benefits. Nevertheless, before signing the agreement, Dr. Brown wanted an attorney to review the buyout agreement and advise him of his rights. Dr. Brown contacted my office.

After speaking with Dr. Brown and reading his contract, I realized the offer was unreasonably low and that Dr. Brown was actually totally rather than partially disabled and had been eligible to receive his full benefit for the two years prior and possibly for the rest of his life. When I explained my concerns to Dr. Brown, he said, “I am still working; I’m not totally disabled.”

Like so many others, Dr. Brown thought “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 disability benefits… “. It was perpetuated by two years of similar statements by the carrier and eventually a seemingly gracious offer to buy out an all but useless policy for $100,000.

As many disability policies provide that the inability to perform one substantial and material duty renders a claimant partially disabled, many claimants infer that total disability must be the inability to perform every single duty of the claimant’s occupation. Many people do not know that often a claimant’s disability may render him both totally and partially disabled under the terms of the disability insurance contract. In most states, ambiguous contract language is decided in favor of the insured. If there are two reasonable interpretations of the same provision, it is considered an ambiguous term. Many claims analysts continue to misread these provisions and determine that the claimant is partially rather than totally disabled, as he is still working in his dental practice. Claimants unversed in contract interpretation will often look to the writer of the contract, in this case, their insurance carrier, for clarification. When they are informed that because they continue to work they are partially rather than totally disabled, this interpretation seems reasonable to many claimants. The conflict is obvious.

As I explained to Dr. Brown, under the terms of his contract, total disability means the inability to perform the “substantial and material” duties of his occupation as they were just prior to his illness. Dr. Brown’s substantial and material duties prior to his disability consisted of root canals, extractions, bride and crown work, consultations, and many cosmetic procedures. Dr. Brown’s post-disability duties consisted mainly of some simple procedures and consultations. He was unable to perform the substantial and material duties of his occupation and thus was totally disabled under the terms of his contract. Most significantly, Dr. Brown had been paying premiums for more than a decade for this protection.

After our initial consultation, Dr. Brown turned down his carrier’s offer to buy out his contract and retained our firm to assert his rights to total disability income benefits under the terms of his contract. I was able to secure Dr. Brown’s total disability benefits, his back benefits totaling almost $200,000, interest on his back benefits, and attorneys’ fees. Ultimately, we negotiated a buyout of Dr. Brown’s contract, one well in excess of the meager $100,000 the carrier first offered to settle his claim.

Contract interpretation might be difficult for the layman. Insurance claims examiners can make mistakes in interpreting the provisions of your disability insurance contract. Relying on the wrong interpretation could result in the loss of hundreds of thousands of dollars over a claimant’s lifetime. Always seek advice prior to filing a claim, appealing an erroneous decision, or accepting an offer to buy out your disability insurance contract.