I recently handled a Long Term Disability denial claim on behalf of a client (due to a confidentiality clause being signed, the names of the insurer, employer and client cannot be revealed). The case serves as a useful reminder to people who are claiming long term disability benefits, that they should carefully check benefit calculation numbers given to them by insurers against the percentages payable under their policy. Too many potential clients that I meet with, have not checked their policies and many do not even have a copy at all.
This particular case started out as a garden variety denial claim where the long term disability carrier denied entitlement outright (meaning that they never made a payment under the policy at all), maintained the denial through appeals, and after our initial notice letter. We issued a lawsuit against the insurer and took steps to prove our client’s entitlement under the policy.
The night prior to a mediation (which is a fancy term lawyers use that basically means settlement meeting) the insurer advised us that the LTD benefit amount was way below what we had calculated to be owing under the policy. When we asked about it, the insurer advised that they were only required to pay the percentage of the last salary reported to them by the employer and the salary had not been updated in about 12 years. They said that the employer has a duty to let them know about the salary, which figures into how much they charge the employer for insurance premiums.
In my experience, it isn’t unusual for a long term disability carrier to be off (marginally) from the correct salary in their benefit calculations, but I haven’t seen this level of slip up happen as often. The insurance company ultimately agreed to reinstate the particular claimant (meaning that they paid everything owing for past benefits and put the person back on claim), but they were only willing to do that at the much lower rate that they had recorded and not at the correct percentage of the client’s actual salary at the time of disability.
The insurer maintained that any issue with the rate was a problem between my client and her employer and they had no responsibility for it. My client wanted to resolve matters with the insurer (who had taken a fair position at mediation), but we had to find a way to do that without prejudicing her right to come back against the insurer if the employer said that it was in fact the insurer’s fault. The settlement releases that are signed usually have a provision that says that you can’t sue the defendant again no matter what happens in the future and you can’t sue anyone who might sue the insurer.
The insurance lawyer and myself were able to craft out a carefully worded written agreement that permitted the deal to go through on the understanding that we would pursue the employer for the remainder of the money and if the employer said that it was the insurer’s fault, then we could go after the insurer again.
Thereafter, we wrote to the employer and threatened legal action against them unless they topped up my client’s past benefits and did so on a continuing basis into the future. What happened next is somewhat murky and it seems as though there were then discussions between the employer and the insurer that took place behind the scenes. Sometime later, my client received the top up money directly and kept getting paid at the correct amount thereafter.
Steven Polak is a long term disability benefits denial lawyer practicing in Whitby and Toronto and servicing the Durham Region and the GTA