Is Your Disability Insurer Allowed to Stop Paying Benefits?

When you’re unable to work due to a disabling condition, benefits provided through your disability insurance policy provide a critical lifeline to cover expenses. Professionals who have substantial obligations often build their business plans around expectations that include disability benefits.

For this reason, it is essential to understand when a disability insurance provider is legally permitted to discontinue or reduce benefits. Sometimes, companies are acting within their contractual rights when they do so, but other times, their actions constitute bad faith or other wrongful actions that can be challenged through legal efforts. An experienced insurance attorney can review the details of your policy and explain the conditions that allow your insurer to reduce or discontinue paying benefits legally under your disability policy. Here are some factors that may influence the determination.

What are the Limits in the Policy?

While insurance companies must follow state and federal laws, most of the terms that outline their obligations to policyholders are spelled out within the policy itself. Those terms are often written in ponderous language with meanings specific to the insurance industry. Many policyholders never even make an attempt to understand the terms, and those that do can find that their understanding does not match the interpretation put forth by the insurer—the company that wrote the policy.

Most disability insurance policies contain some type of limitation. The limits may be based on time or the fulfillment of certain conditions.

Time Limits

Limits on the duration of benefits are extremely common. For instance, short-term disability policies, by definition, only pay benefits for a brief period, typically six months. Long-term disability policies may be viewed as “permanent” by many people, but these policies often include limits on the duration of benefits, particularly for certain conditions. For instance, the policy might specify that benefits for mental health conditions such as anxiety will only continue for a maximum of 24 months.

Coverage Changes

Many disability policies are structured so that the terms change after a specified period of time or if a certain condition is met. This is particularly true for policies that pay benefits when a policyholder is unable to continue working in their “own profession.” A policyholder may be entitled to benefits for a specified period or until a certain milestone is achieved. Then the policy coverage will shift to specify that the policyholder is only entitled to benefits if they can prove they are unable to work “any profession” and not just the profession they worked in at the onset of the disability.

Other Limitations

Some policies may include a limit on the total benefit amount that will be paid, and when that limit is reached, benefits will terminate. Other policies might specify that benefits cease when the policyholder reaches retirement age. Since the definition of retirement age can vary, it is important to review precisely how the policy is worded and how that wording is interpreted by local courts to determine if an insurer is acting within its contractual rights.  

Is the Policyholder Following Through on Policy Obligations?

Insurance policies are contracts, and contracts impose obligations on both parties. When one party fails to live up to an obligation, that often gives the other the ability to consider their obligations to be at an end.

Disability insurance policies typically require policyholders receiving benefits to submit records and other documentation demonstrating that they are continuing to receive medical care and that their condition still meets the disability requirements outlined in the policy’s terms. If a policyholder fails to submit paperwork in a timely fashion, the insurance company may use that as grounds to discontinue paying benefits. Even if the required forms are submitted, if a policyholder hasn’t followed particular instructions or undergone examinations or treatment as required, that could be used as justification for terminating benefits.  

Insurance Company Investigators May Decide You No Longer Qualify

Insurance companies are always looking for ways to reduce costs, so they will often investigate policyholders who are applying for disability benefits or currently receiving payments to see whether they are “really” disabled as they claim. They may monitor social media and other online activity, searching with a policyholder’s name or facial recognition software to see whether they find “evidence” that the policyholder is saying or doing something that indicates they’re in better health than they claim.

While there are those stories about workers out on disability claims who foolishly post photos of themselves skydiving, much of the time, when investigators find “evidence” that a policyholder is not disabled, that evidence is based on old or incomplete information. But insurance companies often will not reveal their evidence unless pressured to do so. If your insurance company claims you no longer meet the definition to qualify for benefits under your policy, it is worthwhile to investigate why. When an insurance company receives an inquiry or demand letter from an attorney, that puts them on notice that they need solid legal justification for canceling benefits, and they are often more willing to reopen the investigation at the very least.  

In some cases, insurance companies will require a policyholder to undergo an examination by doctors who are on their payroll, and those doctors often determine that the policyholder’s condition has improved to the point that they’re no longer eligible for disability benefits. It is often worthwhile to obtain an independent examination to refute those findings and then appeal the termination of benefits. Depending on the terms of the policy, it may be necessary to file an internal appeal before taking further legal action, such as filing a lawsuit.  

Find Out Whether Your Insurance Benefits Have Wrongfully Been Terminated

If you’ve been denied benefits under a disability insurance policy or the insurance company is discontinuing your benefits while you are still unable to work, it is important to determine whether the insurance company was acting lawfully or whether they are wrongfully denying benefits. At Ver Ploeg & Marino, we know how frequently policyholders have to use legal strategies to fight for the benefits they should receive under their policies—that’s why we have dedicated our practice to helping policyholders overcome the challenges to get full amounts under their policies.

For a confidential consultation to learn how we may be able to assist in recovering benefits in your case, we invite you to call us at 305-577-3996 or contact us online now.

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