Almost every group long term disability insurance policy contains wording allowing the insurance company to reduce the monthly benefit it pays by any other income the disabled person receives.
The most common other income is social security disability. The practical effect can be seen in the following example:
Annual Income: $60,000
SMDA recently helped a registered nurse obtain a favorable settlement of her claim for long term disability insurance resulting from her significant orthopedic spine problems. Our client had worked as a registered nurse for a local hospital system for more than two decades.
As anyone in the nursing business knows-nursing is hard, physically demanding work. The physical nature of the work takes a toll on your body. Over time that toll can accumulate and result in orthopedic harm. In this case, that meant low back problems leading to surgery with long lasting restrictions and limitations.
Despite this, the LTD insurer decided she was not disabled. SMDA filed a comprehensive administrative appeal of the claims denial decision. When the long term disability insurer upheld the claim denial decision, SMDA filed suit.
ProPublica recently filed a very well sourced article on the lengths health insurers will take to deny coverage in order to preserve profits. https://www.propublica.org/article/priority-health-michigan-cart-insurance-vanpatten-denials
When a claim is denied you as the claimant have certain rights.
https://www.propublica.org/article/find-out-why-health-insurance-claim-denied
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By Darren K. Legato, Serafini, Michalowski, Derkacz & Associates, PC
Michigan Courts have spent an exorbitant amount of time discussing the issue of “Domicile” versus “Residency,” though it seems almost all of it recently has centered around claims for Personal Protection Insurance (“PIP”) benefits and the order of priority for payment of those benefits under the Michigan No-Fault Act, specifically MCL 500.3114. In fact, it was re-visited earlier this year in relation to PIP benefits when the Court of Appeals issued its published decision in Mapp v Progressive Ins Co.[1]
Mapp was of great importance in the No-Fault world for its ultimate proposition:
[A] no-fault insurance policy may provide broader coverage than that mandated by the no-fault act, even with respect to a mandated coverage such as PIP benefits. That is, while a no-fault insurer must provide at least the minimum coverage required by statute (i.e., for relatives domiciled in a named insured’s household), it may provide coverage for a broader group of persons (e.g., for relatives residing in a named insured’s household).[2]
In the non no-fault world, however, is where Mapp’s discussion of domicile versus residency becomes so intriguing. In Grange Ins Co of Michigan v Lawrence,[3] the Michigan Supreme Court made clear that domicile meant something difference than residency. Domicile required an intent to remain, while a residency was a place of abode or dwelling.[4] A person can have only one domicile but may have more than one residence. In Mapp, a question turned as to whether the plaintiff in that case was a “resident” of the same household as the policy’s named insured in order to provide coverage.
The Court in Mapp noted that Black’s Law Dictionary defined “residence” to mean “[t[he act or fact of living in a given place for some time” or “the place where one actually lives.”[5]Likewise noting that Webster’s New World College Dictionary (3d ed) defined the term “reside” to mean “to dwell for a long time; have one’s residence; live (in or at).”[6] This next sentence, though, was the most telling:
One could conceivably reside only in one’s domicile, reside in two households, or reside outside of one’s domicile.[7]
With all of these different potential definitions of “residence” laid out by Michigan Courts, what does this mean for those looking for insurance coverage that is not mandated by statute and for which “residency” is required? For insurance policies that do not happen to provide a definition for “residency” or “resident,” it likely means the battle has only just begun.
Take this hypothetical situation: A person is seeking personal injury liability coverage under a homeowners’ or automobile insurance policy where they are not the named insured. This person sometimes stays overnight in the household of the named insured, may even have their own room, keep some belongings in the household, and have a family relationship to the named insured. Maybe they spend 30-40% of their time at the household of the named insured. But the person’s domicile is clearly in another location.
The insurance policy under which they are seeking coverage indicates it will provide coverage if they are related to the named insured and a “resident” of the named insured’s household. But the term “resident” is not defined. Will this person be provided coverage? The insurance companies surely will try to avoid coverage in this situation, while the person seeking coverage, and likely those injured by their actions, will have a say in this fight as well. There is no easy answer.
The Court in this case has a role to determine the contractual agreement between the insurer and the insured and effectuate the intent of the parties.[8] The rights and duties of parties to a contract are derived from the terms of the agreement.[9] But what happens when a term is argued to mean different things by different parties? A contract provision is considered ambiguous when its words can reasonably be understood in different ways.[10] According to the Court of Appeals recent decision in Mapp, it seems that the term “Resident” or “Residency,” if undefined in an insurance policy, could lead the courts to hold it as ambiguous. This wouldn’t be the first time, but it has been awhile and is potentially worth revisiting. In Ortman v Miller, the court stated:
“Resident” has no technical meaning, and no fixed meaning applicable to all cases, but rather it has many meanings, and is used in different and various senses, and it has received various interpretations by the courts. Generally, the construction or signification of the term is governed by the connection in which it is used, and depends on the context, the subject matter, and the object, purpose, or result designed to be accomplished by its use, and its meaning is to be determined from the facts and circumstances taken together in each particular case.[11]
If the courts are to find the term “resident” or “residency” to be ambiguous, they are likely to rule whichever way provides coverage under the policy. As a general rule, unless language of an insurance policy unambiguously so requires, a policy should not be construed to defeat coverage.[12] Moreover, exclusionary clauses in insurance policies are strictly construed in favor of the insured.[13] In other words, if finding our hypothetical person a “resident” provides them coverage under the policy, that is how the court is likely to lean. Or, if finding our person a “resident” of the household would trigger an exclusionary clause and negate coverage, the court is likely to find against residency and in favor of coverage.
Truth be told, there are so many different factual scenarios that it is impossible to predict an outcome without knowing the specifics of a situation. What if the person in our hypothetical was a minor of divorced parents with two legal residences but spends a disproportionate amount of time at one home rather than the other? What if the insurance application fails to list the person as a “resident” of the household? Do any of these things matter? Stay tuned, because 2024 may just provide us with some answers.
About the Author
Darren Legato is a Partner at Serafini, Michalowski, Derkacz & Associates, PC. Darren focuses his practice on personal injury, premises liability, first and third party no-fault, and general civil litigation.
SMDA was recently able to help a disabled dentist recover on his individual disability insurance policy after his claim for total disability benefits was denied. The LTD insurer had denied his claim when it discovered that he had opened a small tap room/eatery. SMDA was able to convince the disability carrier that the client’s physical issues precluded him from safely working as a dentist but would allow him to manage this new business venture. Since he had (wisely) purchased a true “own occupation” policy we convinced the carrier that he was entitled to total disability benefits even though he was able to work in a different occupation. The parties resolved their differences in a mutually satisfactory manner.
If your disability carrier has denied your claim after you have been forced to change occupations as a result of your medical condition, please give SMDA a call to discuss your situation.
SMDA was contacted by a physician to evaluate a repayment request by a well known Long Term Disability Insurer. The doctor had been diagnosed with a medical condition which interfered with the surgical aspects of his practice. The disability insurer convinced the doctor that he was only residually disabled and intermittently paid a residual disability benefit whenever he had a qualifying loss of earnings each month. The Disability insurer took this position because the doctor continued performing a portion of the office-based tasks associated with his specialty. This went on for more than 5 years. Eventually the disability insurer requested repayment when it determined that it had mistakenly overpaid benefits for several months.
Upon investigation, counsel determined that the physician actually was totally disabled under the several policies he had in place which were purchased when he completed his residency several decades earlier. (In counsel’s experience, the older the policy the better the language is for the claimant.) SMDA also learned the physician/client actually had multiple disability policies with several different Long Term Disability insurers. Counsel was able to favorably resolve the doctor’s claims with each of the LTD Insurers. All because of the disability insurer’s initial repayment request.
If you are a physician who has been forced to curtail the nature of your practice but your disability insurer has refused to honor your claim for Total Disability benefits please contact SMDA for a free consultation.
NPR radio released a chilling view into the future of Michigan car crash victims.
Click the link above to read the article.
The attorneys at SMDA were recently able to get Cigna (Life Insurance Company of North America) to overturn the claim denial decision for Long Term Disability insurance benefits for a client who had developed significant and progressive cognitive problems.
The client underwent neuropsychiatric testing which confirmed a number of impairments including to his memory, information processing, focus and attention. MRI testing confirmed some non-specific changes in the brain.
SMDA convinced CIGNA to approve and pay the claim including all past due benefits.
SMDA was recently able to get Long Term Disability insurance benefits reinstated for a client who had developed significant orthopedic spine problems. The client had last worked at a sedentary job for an engineering firm. The Disability insurance company (Reliance Standard) had initially approved and paid benefits for more than a year. However, they subsequently reversed course and terminated benefits.
SMDA filed a comprehensive administrative appeal including voluminous medical records as well as a comprehensive analysis of the client’s various medical conditions with supporting documentation from numerous treating physicians. Upon review, the disability insurance company agreed to reinstate the benefit claim.
This is a good example of why a claimant should prepare a comprehensive administrative appeal-Because it may result in the reinstatement of benefits without the need for lengthy and time consuming litigation all while the claimant has no income coming in.
SMDA was recently able to convince a Long Term Disability Insurer to settle a challenging claim brought by a local public school teacher.
Long Term Disability insurance claims for public school teachers (or other public school employees) are somewhat unique because these claims are not governed by the Employee Retirement Income Security Act (ERISA). This is because the ERISA statute does not apply to government plans (or church plans). Accordingly, the normal rules (which apply to the vast majority of LTD claims) regarding ERISA and the Department of Labor regulations do not apply. There is usually no claim appeal or exhaustion requirement. There is no discretionary standard of review. These are just a few of the important differences that apply to Long Term Disability Insurance claims for public school teachers.
Instead of filing a federal court lawsuit for a violation of the ERISA statute a public school teacher’s claim is filed as a breach of contract claim usually in the circuit court for the county where they either work or reside. Unlike ERISA, these cases proceed with discovery, case evaluation and a trial. These are very important differences that impact the claim and the litigation strategy from day 1.
Long Term Disability Insurance Lawyer Blog
