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Contributed by Disability Insurance Bad Faith Attorney, Eric Ratinoff

So you’ve become disabled.  You’ve paid premiums all these years. You’ve done everything you’re supposed to do. You made your claim, you provided documentation and information to the insurance company. You filled out their forms, you gave them permission to get your medical records, including permission to talk with your doctor, if they want to.

Now what does your insurance company have the obligation to do?

First and foremost, they have the obligation to promptly and thoroughly investigate your claim. That doesn’t mean just look at what’s convenient for them. They have to affirmatively look at the records and get any records that they don’t have that they think may support your claim. And that’s an important point – an insurance company in California cannot just look at information that supports their position that you’re not disabled or that there isn’t coverage in your policy. Every insurance company in California has an affirmative obligation to seek out evidence of coverage, not simply seek out evidence that helps them deny coverage.

Insurance policy holders have a very important right to hold their insurance company to the standard that they have to put policy holders’ interests on at least a high a standing as they put their own. And that’s a powerful tool.  Insurance companies have to investigate, and they have to do it quickly. They have to pay you timely. They have to seek out information that supports your claim. And they have to communicate.

Insurance companies are not allowed to be dishonest with you. They are not allowed to tell you that there’s no coverage when in fact there is. They are not allowed to undercut your claim because it’s convenient or profitable for them.

In so much of the world and the way that we see big business doing business, companies put profits over people. An insurance company, in handling your claim, absolutely is not allowed to put profits over you. It’s people over profits. They have got to do their job, and they’ve got to do it well. They’ve got to do it quickly. And they have to seek out information that supports you.

Let’s talk about the medical review doctor for the insurance company. This is somebody who earns his or her living from the insurance company that makes money by collecting insurance premiums but not paying claims. So this doctor will look at the records and say, “gee whiz, I disagree with the treating doctor,” the one who’s treated the insurance policy holder for 15 years, who knows the record inside out, who’s visited with the patient many many times over the years. He’s actually drawn the blood and had the conversations and done the physical examinations and all the work that doctors do when they’re doctors who treat people and understand people and know their patients. But the insurance company has someone there in house on their payroll who will look at the records and say, “well, I disagree with the doctor who actually knows what he’s talking about.”

There’s no misunderstanding why that happens. The question is what do we do about it? And what’s an insurance company’s obligation? It’s certainly to do more than that.

Now, has that doctor gotten on the phone with the treating doctor? Has he inquired about what the doctor wrote in his records about the patient? They don’t do that, but they certainly should if they’re going to disagree with that doctor.

And why doesn’t the insurance company doctor perform a physical exam? If there’s additional testing that needs to be done, why not get that done? They have an affirmative obligation to do it if they’re going to deny a claim. Where there’s medical support, they can’t simply disregard your good medical evidence. It doesn’t work that way in a private disability insurance policy in the state of California.

If your insurance company’s playing those kinds of games, you don’t have to put up with that. Get somebody – an attorney or another representative – to step forward and help you make your best case.

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Contributed by Insurance Bad Faith Attorney and KCR Partner, Eric J. Ratinoff

Most people who purchased disability insurance policies did it because for decades insurance companies were engaged in a huge marketing effort, and they were making a lot of promises.  Essentially, they said that if you paid your premiums month after month and year after year – and these were expensive premiums – they would protect you, your family, your earnings and your lifestyle.  For example, doctors go to school for years, investing hundreds of thousands of dollars of time, money and energy into their education.  It makes sense that they would turn to insurance companies to protect them in the event that they can no longer practice medicine.

In the early 1970’s through the mid 1990’s there was intense competition among the insurance companies, where they started offering what is known as “own-occupation policies.”  Now the concept of offering an own-occupation benefit within a long term disability policy has been around since disability insurance’s inception.  But as a marketing tool in the 1970’s and 80’s, insurance companies figured out that they could charge huge premiums and go after the highest earning individuals – doctors, lawyers, stock brokers, and other professionals – offering to protect the livelihoods from their high earning jobs.

But there was a targeted effort to get doctors to buy these policies, and in the competition among insurance companies to sell the most policies, they ended up overselling and making promises that they could not fulfill.  The heaviest promise they made to California doctors was basically that in the event they could no longer practice their own occupation – regardless if they obtained a new occupation earning money elsewhere – they would still receive the full benefit from their policy.

So jump ahead several decades, and a number of physicians who paid tens of thousands of dollars in premiums over the years have become disabled.  And now the insurance companies’ promises have come back to haunt them.

But their promises really shouldn’t haunt them, because they’d been paid millions of dollars in premiums over thirty or more years.  But with the fall in investment returns, poor investment decisions made by these companies and the fall in the economy, insurance companies figured the easiest way to save money would be to find ways to reject claims.

Meanwhile, as the insurance companies were finding ways to cheat the claims of honest, hard working people, they created a new animal to sell.  It’s called the “residual income” disability policy.  And the brokers went out selling these policies, saying, “this is an own-occupation policy; if you can’t do your own occupation you’re covered.”  But what they didn’t make clear is that almost every new own-occupation disability policy contains a residual income clause, stating that if you are “gainfully employed” anywhere else, the benefit you receive from your policy will be reduced.  This is a big difference from the policies they’d been selling all those years that promised full benefits to age 65 (and sometimes beyond), no matter what the employment or earning situation was, as long as the policyholder could no longer practice his or her own occupation.

If you are shopping for a disability insurance policy, be on the lookout for terms like “gainfully employed” or “residual income.” It may be worth a look at your current policy to make sure you know what you purchased.

In part two of this four-part series, Eric Ratinoff will discuss what should be done when a disability claim needs to be filed.