Contributed by Disability Insurance Bad Faith Attorney, Eric Ratinoff

We’ve spent quite a bit of time now in this series talking about disability insurance claims, what the insurance policy is about,  what the insurance company’s duties are and how to put your best foot forward when making a claim.  But what does it mean to be totally disabled under an insurance policy?

Well, most private insurance policies that have been sold in the last 20 years have two major provisions.  One is a total disability provision involving “own occupation,” and then there is a conversion to “any occupation.”

Let’s talk about “own occupation.”  Most insurance policies will state that in the first 24 months of disability, if a person is unable to do the substantial and material duties of their own occupation, that’s total disability.  Now, an “own occupation” policy is a kind that I talked about in an earlier post where insurance companies were selling these policies in the 1970’s through the early 1990’s, and they were policies that never converted.  They were pure “own occupation” policies all the way to age 65 sometime and beyond.  That meant that if you were unable to do the substantial and material duties of your own occupation, then even if you began another career, you would still collect the full benefits of your policy.  Most policies that are sold now contain a provision stating that after 24 months of disability from  being unable to do the material and substantial duties of your own occupation, the policy will convert to “any occupation.”  This means if you are able to do the substantial and material duties of any occupation, your benefits will be reduced based on the level of income you are able to produce in any occupation you choose.

Now, the insurance policy doesn’t tell you what the courts have interpreted “any occupation” to mean here in California.

“Any occupation” does not mean that if you used to work as a technician in a lab that you can now become a ticket taker at your local movie theatre or a greeter at Walmart.  That’s not what “any occupation” is.  In order to understand what the meaning of “any occupation” is in California, you have to look to the case law.

What the case law tells us is that you must consider what the substantial and material duties are for the policyholder’s occupation.  What that means is what is necessary to the prosecution of an occupation in the usual and customary way.  Now what it also means is that you also have to be able to do a job with reasonable continuity.  You can’t be considered as able to work if you can only work a couple hours here and a couple hours there.  If you could work eight hours a day, but in two hour increments throughout a 20 hour period with naps in between.  That’s not realistic, and that’s not reasonable continuity.  So you must be able to work with reasonable continuity in your own or another occupation.

The next important point is that an occupation would have to be in your own field, or another occupation in which you could reasonably be expected to engage in.   It has to be another occupation that you can do with reasonable continuity,  that you could reasonably be expected to perform satisfactorily in light of certain very specific things that have been recognized and ruled on by the California courts.  Your age, your station in life, your education, your training, your experience, your physical and mental capacity are all the type of criteria that determines whether the so called “any occupation” component of the disability policy applies to you.

Again, using the example of the ticket taker, if you had worked in a lab before, if you were a court reporter, or if you were a lawyer, if you were a veterinarian, or if you were a vet tech — you can’t be expected, having done that type of work, to then have to become a ticket taker or a greeter at Walmart.  It’s not the way the law works in California and it’s not what you purchased when you purchased your disability insurance, and you paid those premiums over all these years.  You bought protection.  You bought piece of mind, and your insurance company owes it to you to hold up their end of the bargain.  You have held up your end, so don’t let the insurance company get away without holding up their end of the bargain. They are holding to the promises that they made to you and your family.

To download this series via Podcast, visit the KCRLegal Personal Injury Podcast!


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.