Long Term Disability

What's the Deadline for a Long Term Disability Lawsuit?

In pretty much every other area of the law, figuring out when a lawsuit has to be filed is relatively easy. First, you figure out what the "bad action" that you're suing over was, and when it happened, and then you look up the law that says what the deadline is (called a "statute of limitations"), put the two together, and voila! That's your deadline! So for a personal injury case, you just figure out what your state's statute of limitations is for a personal injury claim (often, it's one year), and make sure you sue within a year of the injury.

Unfortunately, it's not nearly that easy in the world of ERISA long term disability claims. First of all, there is no statute of limitations - not one written into the ERISA law for a benefits claim, anyway. You might ask, then, "does that mean there's no deadline, and I can sue anytime?" Of course not! 

First of all, if an ERISA benefits claim has only been denied once, you probably can't sue yet. The courts have decided that since ERISA requires plans to offer you an appeal, you're required to "exhaust" those appeals before going to court. If you sue after a first denial, and never even try to appeal, you'll usually be thrown out of court. If you're lucky, they'll send you back to do the appeal, but many times they'll just dismiss your case, and you have no way to go back and pursue the appeal. So that's the first thing - making sure you exhaust all of the necessary* appeals. (*Note: There can also be optional appeals, that you can skip, but it's sometimes hard to tell which is which.) I'm not going to discuss the pre-lawsuit appeal process in this article, but just know that you do have the right to hire an attorney for help with those appeals, and it is a very, very good idea to do so. If you do the appeal without an attorney's help, there could irreparable holes in your case later on.

But say you have gotten a final denial, and there are no more appeals left - what then? What's the deadline to sue, if there's no statute of limitations in the ERISA law? The courts have decided that if the plan documents don't say anything about a deadline, then they will use the state law deadline for similar types of cases. It's not always easy to figure out which state law deadline is "most similar," but that's not usually a problem, because almost always, the employee benefit plan will have it's own deadline written into it. Sometimes, attorneys will call that deadline the "contractual period of limitations," since the employee benefit plan document works like a contract.

Unfortunately, for reasons that are too complicated to get into here, most benefit plans say the deadline is something like this:

"You can start legal action regarding your claim 60 days after proof of claim has been given and up to 3 years from the time proof of claim is required, unless otherwise provided under federal law."

That's a real example from an LTD policy in a case I've worked on recently, and is typical of hundreds of other plans I've reviewed over the years. What does it mean? Can you really sue 60 days after your claim is filed? Do you have 3 years from a claim denial to sue?

No and No! As we discussed above, first you have to exhaust the appeals (sometimes called "administrative remedies") before you can sue, so if you did what the quoted provision said, and sued 60 days after you gave proof of your claim, you'd likely be thrown out of court. You don't necessarily have 3 years from a denial to sue, either, because that deadline is measured "from the time proof of claim is required." So how long do you have?

Most of these policies say that "proof of claim" or "proof of loss" is required 90 days after the end of the benefits waiting period (which is usually called an "elimination period"). For most long term disability policies, that waiting period is 180 days, or roughly 6 months. So if you stop working on January 1st, the waiting period goes through around the end of June, and then you have to provide proof by around the end of September. Add 3 more years, and the deadline to file a lawsuit, according to the policy, is around the end of September 3 years later, about 3 years and 9 months after you stopped working. I cannot stress enough - this goes for many policies, but NOT ALL! Some policies have wildly different language, and it's the language of YOUR particular policy that determines your deadline.

For someone who's claim is denied from the very beginning, this usually isn't a hard deadline to meet. If someone stops working January 1st, as in the example above, files their claim for LTD benefits in the summer, it gets denied in the fall, they hire me to work on the appeal, and all the appeals are denied by the end of the next year, that still leaves roughly 2 years to file the case in court, and there's no reason it should take that long. 

Where it gets really tricky is with people who aren't denied in the beginning. What happens if you get paid LTD for a few years, then you get denied? Often, LTD carriers will pay someone for 2 years because they're disabled from their "own occupation," then deny them after that because they are not disabled from "any occupation." This is allowed under the terms of most LTD policies, but what's the lawsuit deadline then? 3 years from that denial?

Well, that would be the fair and rational thing to do, but that's not what the Supreme Court says. In 2013, the Supreme Court said in case called Heimeshoff v. Hartford Life & Accident Insurance Company that you just do what it says in the policy, even if the "lawsuit clock" is running before someone's claim is even denied! So under the example policy language above, you could have this timeline:

  • Stop working due to a disability on January 1st, 2014
  • Claim approved by LTD carrier, start getting paid July 1, 2014
  • Get paid for disability from your "own occupation" from July 1, 2014 - June 30, 2016
  • Claim denied June 30, 2016 because they say you could do other work
  • You appeal within the statutory 6 month deadline, on December 20, 2016
  • Your LTD carrier takes 90 days to decide your appeal, denying you again on March 20, 2017

What's your deadline to sue? You probably only have about 6 months from the "final denial" to get into court, under this scenario. That's a lot less than the 3 years you might think you have if you look at the policy! And this example is when everything goes relatively smoothly, and no one receives any extra extensions beyond the norm. Quite often, the process takes longer than that, meaning you could find yourself with even less time after a final denial to get into court.

Sometimes, the court deadline can come and go before you're even done with the mandatory appeals! What do you do then? If you have an attorney who's experienced in this field, he or she might ask the LTD carrier to enter into a "tolling agreement," as I have in a few cases. A tolling agreement is just a short contract between you and the LTD company that says that even if the deadline to sue technically passes while you're working on the appeals, the LTD carrier will let you take the case to court after the appeals are done. The LTD companies will usually consent to these agreements, in my experience. That's good, because aside from it being required by the courts, you generally don't want to short-circuit the appeals process in these cases, because it's usually your only opportunity to submit evidence of your disability.

Long story short - when people ask me what the "statute of limitations" or "SOL" is on an ERISA benefits claim, I have to give them a lawyer's favorite answer: "It depends!"

--Jeremy Bordelon

What Do You Mean, “My Disability Policy Doesn’t Cover That?”

As complex as it can be, there's one simple thing about Social Security claims - they all follow the same rules.  Someone can come to me to talk about Social Security benefits, and I'll know the rules that apply because the same rules apply to everyone. The same is not true for private disability insurance policies – these often have sneaky little exceptions and exclusions that nobody told you about when you signed up for long term disability (LTD) coverage at work, or purchased a disability policy from an agent. Knowing about these exceptions ahead of time may help you avoid a nasty surprise later.

One of the most common differences between Social Security’s disability program and employee LTD plans is the “pre-existing conditions" exclusion. Most LTD policies contain a clause that says that if you leave work with a disability less than one year after you signed up for LTD coverage, then any medical conditions you received treatment for in the months before your coverage took effect are excluded. Most of the time, this hits new employees, but sometimes strange circumstances cause it to affect long-time employees, too. Recently, I reviewed the case of a woman who had worked in the same place, and had LTD coverage there for years. However, in the last year she worked before becoming disabled, her office became a division of a larger company. Along with that change, everyone got enrolled into the new company’s benefit plans. Because they were new enrollees, they were subject to the new company’s pre-existing conditions clause, and there was no way around it. This was something the woman’s employer could have avoided, if the company had been thinking about it and asked for the right exceptions to be put into the policy, but because they didn’t, this woman had to abandon a benefit she’d been paying for for years.

Pre-existing conditions exclusions hit any kind of condition, as long as it falls within the timeline described in the policy. One other type of exclusion that’s becoming more and more common in LTD policies is a specific exclusion for so-called “hard to prove" conditions. For years, most LTD plans have limited “mental and nervous conditions" to two years of benefits – i.e., if you’re disabled because of a bad back, you may be able to receive benefits until you turn 65, but if you’re disabled because of depression, or bipolar disorder, or schizophrenia, you can only get two years of benefits. Some people ask me how this can be legal when it’s so unfair. The answer, unfortunately, is that fairness has nothing to do with it. Except for a few key terms having to do with appeal rights, the law doesn’t regulate the terms of these plans.

Many LTD policies now also have duration limits or complete exclusions for “subjective symptoms," which, when interpreted the way some companies do, would exclude just about everything short of an amputated limb. A “subjective symptom" is anything you tell your doctor about that he can’t definitely prove with a test or procedure. Pain is the prime example of a subjective symptom – if you have a herniated disc in your back, your doctor can see the disc on an MRI, and he knows that such a condition is likely to cause pain, but the pain itself can’t be measured or proven. The same goes for pain due to other conditions, like migraines or fibromyalgia.

One recent court case from Georgia had an employee challenging a limit on “neuromusculoskeletal or soft tissue disorders" (which probably encompasses the majority of disability claims). The challenge was based on the fact that the employee had no opportunity to negotiate or change the terms of the LTD plan (that’s called an “adhesion contract"), and that the coverage was not what a “reasonable employee" would expect to get when he signed up for LTD coverage. The court recognized the truth of those arguments, but held that it didn’t change the terms of the plan. “The fact that the Plan is a contract of adhesion or that … employees would be surprised to learn that their disability coverage is not what a reasonable employee would think, is of no consequence. [The Employer] is the master of its plan and no … provision [of the law] bars it from excluding coverage for neuro-musculoskeletal disorders."In other words, these policies can contain all sorts of exclusions that may be unfair or surprising to employees, but the courts will enforce them as they're written in most cases.

Insurance companies are getting more creative with these exclusions, and employers don’t seem to care what they’re offering to their employees, so it falls on the employees themselves to make sure they’re being adequately protected. Anyone who has disability insurance, whether through work or purchased from a private insurance agent, should carefully review the exclusions and limits in those policies. In certain cases, it may be best not to count on the coverage you got from work and get your own, better, policy from a private agent. Other people may be able to avoid the application of certain terms, like pre-existing condition exclusions, by hanging on and staying at work a few months longer before filing a disability claim. In any case, forewarned is forearmed. Everyone should know what his or her policy does and does not cover before they need to file a claim.

--Jeremy Bordelon

What does "disabled" really mean?

People often do not realize that in the legal world, “disability" is a term of art, with a very specific meaning. In fact, it has several different specific meanings, depending on the context. “Disabled" has one meaning for the purposes of the Americans with Disabilities Act, another for the purposes of worker’s compensation, still another when talking about things like exemptions from jury duty or from testifying in court, and there are probably a dozen others. Not surprisingly, “disabled" has a very specific meaning in the context of a Social Security Disability or Long Term Disability benefits claim. In most circumstances, though, in order to be considered “disabled," and entitled to disability benefits, a person need not be comatose, or bed-ridden, or entirely unable to care for themselves. A disabled person, for the purposes of disability benefits, may be able to live a relatively normal life – he is just unable to work – sometimes not at all, sometimes just at his or her last job.

In some cases, the question of just “how disabled" someone needs to be gets even narrower. What about part time work? Some jobs are available part time, others aren’t. Even if a disabled person could, theoretically, do his old job on a part time basis, could he keep it up for the long term? Could he live on what he earns part time? How many hours per week do you need to be able to do before you are “not disabled?" These are often questions that come up in disability benefits cases, especially for people who are right on the cusp – they aren’t able to work enough to support themselves, but they aren’t completely incapable of work, either.

The Social Security Administration has its own definition of disability and its own set of regulations detailing the disability process, which I won’t discuss in this post. But many people have purchased short-term and long-term disability insurance, either through an employer or through a private insurance broker, in an attempt to protect their income from disability even more. That is what insurance is designed to do, after all. Insurance protects something. If the insured thing ever fails, the insurance pays you money. If you get in a car crash, auto insurance pays. If your house burns down or is damaged in a storm, homeowner’s insurance pays. If something happens to your body, medical insurance pays. And if something happens to your ability to earn a livelihood, and your working income disappears or significantly drops, then disability insurance should pay.

Most group disability insurance policies (the ones people typically sign up for at work) will pay 60% of a disabled person’s pre-disability income if they are unable to work. Most policies contain a definition of disability that states that, at some point during the claim (either in the beginning or after a few years of benefits) the claimant must be disabled from “any occupation." I.e., you must be “unable to perform any occupation" to receive your disability benefits. If that is the case, and the claimant is theoretically capable of some part-time work, then what happens? Should someone be denied all of their 60% LTD benefit because they could still theoretically earn 10% of their pre-disability income? No, of course not. That would be contrary to the purpose of the insurance plan, which was designed to protect 60% of the person’s income. It would be similar to your car insurance carrier refusing to pay for any repairs to your car after an accident if it is “still driveable."

The disability insurers themselves do not always agree with this. Many times, a person will be denied benefits in just the manner I described above – e.g., a former lawyer who suffers a traumatic brain injury is no longer able to work as a lawyer, but might be able to work as a parking lot attendant. Since he can still do something, the insurer might say that he is not disabled from “any occupation," and might refuse to pay anything. Similarly, consider the example of an airplane mechanic who can still do his job, but can only do it for a few hours per week. He might also be denied by his disability insurer because he can still do something. Both denials would be wrong, because they are contrary to the purpose behind the insurance plan – protecting a certain amount of income.

When faced with these types of cases, the courts have intuited that “any occupation" is not a literal term. For example, in one court case, the disability plan language stated that a person is disabled when she “is prevented from engaging in any occupation or employment for remuneration or profit." Analyzing this language, the court said that the “any occupation" standard should not be interpreted in an excessively literal manner, but must mean an occupation that allows the claimant to earn a reasonable income:

Analogous insurance cases consistently agree that the term “total disability" does not mean absolute helplessness on the part of the insured. The insured can recover benefits if he is unable to perform all the substantial and material acts necessary to the prosecution of some gainful business or occupation. Gainful has been defined by these courts as profitable, advantageous or lucrative. Therefore, the remuneration must be something reasonably substantial rather than a mere nominal profit.

Helms v. Monsanto Co., Inc., 728 F.2d 1416, 1420 (11th Cir. 1984). This holding has been expressly adopted by other courts, as well. In another case, the disability plan defined total disability as the inability “to be gainfully employed anywhere." Following Helms, the court held this required a “reasonably substantial income":

We now further adopt the holding in Helms that gainful employment is that employment from which a claimant may earn a reasonably substantial income rising to the dignity of an income or livelihood, even though the income is not as much as he earned before the disability.

Tracyv. Pharmacia & Upjohn Absence Payment Plan, 195 Fed. App’x 511, 519 (6th Cir. 2006). See also Demirovic v. Building Service 32 B J Pension Fund, 467 F.3d 208, 215 (2nd Cir. 2006) (“any gainful employment" means employment allowing a claimant to earn a reasonably substantial income from it, rising to the dignity of an income or livelihood, though not necessarily as much as she earned before the disability"); Torix v. Ball Corp., 862 F.2d 1428 (10th Cir. 1988) (similar finding).

One court pointed out that a disability benefit plan should be construed "with a view toward effectuating its general purpose." Wulf v. Quantum Chemical Corp., 26 F.3d 1368, 1374 (6th Cir. 1994). As an example of how this should work, assume a plan is designed to replace 60% of a worker’s pre-disability income if she is no longer able to work. She files a claim under that plan, and her doctor says that she might be able to work up to two hours per day at her old job, but could not sustain full-time work. Two hours per day is one quarter of a full eight hour work day, so the worker might be able to earn up to 25% of her pre-disability income, assuming her doctor is correct about her abilities, and assuming she could actually find a job that would allow her to work that schedule for the same hourly wage she used to earn. The LTD policy requires her to be disabled from “any occupation," and the terms of the policy do not delve deeper into nuances of partial disability and part-time work. Nevertheless, it would be wrong for the insurer to deny her the 60% disability benefit under the policy just because she has a theoretical capability to earn 25% of her pre-disability income. That would make no sense, and would defeat the purpose of the insurance.

“Any occupation," in the context of a disability benefits plan, is not literal, but implies an occupation providing a reasonably substantial income under the circumstances. An employee benefit plans,in particular, should be construed with a view toward effectuating its general purpose. So when a long-term disability insurance plan is designed to protect, for example, 60% of a worker’s pre-disability income, it is contrary to the purpose of the plan to deny benefits because the worker could earn 10%, 20%, or even 50% of her pre-disability income. The insured interest – the thing the insurance was designed to protect – was 60% of the worker’s income. If she is unable to earn that much, then an ability to engage in part-time work should be insufficient to render her “not disabled" under the LTD plan. Just “how disabled" does she need to be? Look to the terms of the plan to find out.

--Jeremy Bordelon