Long-Term Disability Denial Letters and the Appeals Process

Video Transcript:

Welcome to the Four Minute Long-Term Disability Lawyer. A channel where you get straight forward, common sense disability insurance help in more or less four minutes. 

In this video, I’m going to explain some key issues regarding denial letters, and also, talk about the different steps in the administrative appeals process. If you have received a denial letter from your insurance company, here are some basic things that you need to know before you call a lawyer for a free initial consultation.  

First and foremost, you should know that you have 180 days to file an appeal and, that you should not wait very long to contact a long-term disability lawyer.

Ideally, when you call a lawyer, you should know at what stage in the process your case is at.  This will help you in obtaining a better free initial consultation.  You should also be ready email or fax the denial letter to the lawyer relatively quickly.  

Typically, there are only two types of denial letters in long-term disability cases: the initial denial letter and the final denial letter.  The Initial Denial Letter is the first notification to an insured by insurance company, that benefits are being stopped or, that a claim has been denied.   The Final Denial Letter is a second letter that only comes if, and after, the insured has filed an administrative appeal.  

However, changes in the regulations from 2018 have made the clear distinction that once existed, between initial denial letters and final denial letters, somewhat murky.  From 2018 on, insurance companies have been required to provide the insured with the opportunity to present additional commentaries prior to the issuance of the final denial letter.  This change, in effect, has created somewhat of an intermediary appeal step between the initial denial and the final denial letter.  In this intermediary step an insured is typically given the opportunity to respond to the opinion or opinions of the medical and vocational experts hired by the insurance company.

A lot going back and forth can occur in this intermediary step.  For example, the insurance company can decide to request additional medical records or, the insured can decide to ask his or her doctor for a new medical opinion.  

This situation can make it difficult for some insureds to understand at what exact step of the process their case is at.  I feel that sometimes, this confusion can make it harder for a lawyer to provide a good Free Initial Consultation.  I hope that this commentary helps clarify the different types of denial letters and the different steps in the appeals process. 

And, more importantly, help you receive a better free initial consultation from a Long-Term Disability Lawyer.

If you have received a denial letter from your long-term disability insurance company, you can request a free initial consultation from my office by going into my website LongTermDisabilityAppeals.Com.

6th Circuit: Deadline to File For LTD Benefits Does Not Apply When Disability Prevents Claimant from Making Claim

I often get calls from claimants who have failed to make timely claims for long term disability benefits.  A recurrent theme in some of these phone inquiries is that the claimant failed to apply for LTD benefits because their overall mental and/or physical health hindered their ability to advocate on their own behalf.  In many cases, the callers tell me that they were fired by their employers before they could file for disability.

Fortunately, just a few days ago the Sixth Circuit Court of Appeals decided a case on point.  In Waskiewicz v. UniCare Life and Health Ins. Co., the Court of Appeals heard the case of Laura Waskiewicz, a Ford Motor Company employee who was absent from her job due to a "debilitating emotional breakdown".  Ms. Waskiewicz did not inform Ford of her absence and was fired from her job.  Since she was no longer an active employee at Ford, her application for LTD benefits under the company's plan was not accepted.  However, Ms. Waskiewicz's doctor had written a letter stating that his patient's inability to work was due to her medical condition and that her disability had begun on the day of her first absence from work.   

Ms. Waskiewicz contested the denial of her long term disability benefits in Federal District Court. After loosing at the District Court level, the case was heard by the 6th Circuit Court of Appeals which decided, in an unanimous decisions, that her failure to file for LTD benefits was excusable because she was unable to comply with the plan's deadline "due to the very disability for which she sought coverage".   Appellate  Judge Alan E. Norris writing for the three judge panel stated: 

“An insurance policy can hardly be said to provide employee disability ‘insurance’ at all if it protects against sudden disability but not if the employer immediately discharges the employee because of the disability before she gets a chance to apply for the benefits,” Judge Norris said. “Common sense convinces us that the denial of benefits in this case runs contrary to the spirit of ERISA, which is designed to protect employee benefits, not subject them to arbitrary termination — in this case retroactive termination — after the benefit has otherwise accrued.”

This case is undoubtedly a legal victory for disabled claimants.  However, it must be pointed out that a successful outcome in a case such as Waskiewicz  depends greatly in the ability of the claimant and his or her lawyer to obtain medical opinions corroborating that their patient was unable to file the claim on a timely basis due to a disabling physical or mental condition.

ERISA Denial Letters Do Not Need to State Time Limit to File Action in Court

It has been clearly established that a claimant has 180 to file an administrative long term disability appeal.  However, once the administrative appeal is denied, there is a great deal of ambiguity as to when a claimant must commence an action in Federal District Court.  In a recent decision,  Wilson v. The Standard Insurance Company, the 11th Circuit Court of Appeals had the opportunity to explain the applicable time limitations in ERISA cases.  

In Wilson, the 11th Circuit noted that “ERISA does not provide a statute of limitations for suits brought under § 502(a)(1)(B) to recover benefits. Thus, courts borrow the most closely analogous state limitations period,” unless the parties have contractually agreed to a different one in the ERISA plan. Northlake Reg’l Med. Ctr. v. Waffle House Sys. Emp. Benefit Plan, 160 F.3d 1301, 1303 (11th Cir. 1998).  In other words, since there is no specific time limit to file an action in court, the statue applied in ERISA cases is whatever statue exists in the forum state.  Therefore, in most long term disability cases, courts borrow the statute of limitations on breach of contract actions of the state where the case is heard.  

However, plan administrator and insurers can specify in the plan or policy document that a different statute of limitations is applicable.  This is in fact what happened in Wilson.  In Wilson, the Standard Insurance Company specified in the disability policy that the time limitation to file an action in Federal Court was 3 years.  However, the applicable statute of limitations for breach of contract cases in that particular forum state (Alabama) was six years.  When the Standard issued its letter denying Ms. Wilson her long term disability benefits, it failed to mentioned that the policy had a three year limitation period. 

Wilson eventually filed an action in Federal Court, 34 months after the three year period had passed. The Standard alleged that the action was time barred because it was outside the three year period contained in the policy.  Wilson contended that the three year period was not applicable because the Standard had failed to point out in the denial letter that there was a three year limitation to bring actions in court.  The 11th Circuit held that the insurance company was not required to inform the claimant of the time limitation to bring action in court.  According to the court, the insurance company is only required to mention in the denial letter the 180 time limitation to file administrative appeals.  Moreover, the Circuit Court of Appeals noted that the plaintiff bears the responsibility of obtaining a copy of the long term disability plan and determining on his or her own what is the applicable time period to file an action in court.

Are Long Term Disability Insurance Benefits Taxable?

Its tax season once again!  One of my least favorite times of the year.  During this time, I am often asked whether LTD benefits are taxable.  The answer to this questions depends greatly on who paid for the disability insurance premiums, you or your employer.  The answer also depends on whether the premiums were paid with pre-tax or after tax income.
If your employer paid for 100% of your disability insurance premiums and did not include the amount paid as your gross income, then your long term disability payments are taxable.  Moreover, if your employer paid you directly while you were disabled, these payments are also taxable.
If your employer paid a percentage of your premium and you were responsible for paying the remaining percentage, then you won't have to pay taxes for the amount of benefits that equals the percentage that you paid.  Here is an example on how you will be taxed under this scenario:
Pete pays $40 dollars a month for his LTD policy and his employer pays another $40 per month for this insurance.  Pete becomes disabled and starts receiving $4,000 a month in LTD benefits.  Since he paid 50% of the premiums he is responsible for paying taxes for half of his monthly payments ($2,000).  The other $2,000 is tax free.
As a general rule, expect short term disability payments paid by a self-funded plan to be taxable.  On the other hand, you can also expect benefits froma non-ERISA policy purchased individually to be tax free.  However, please note that different rules might apply to each particular scenario.  This post is intended for general information purposes and should not be construed as tax advise.  As I have said many times in previous posts, I am a disability benefits attorney, not a tax lawyer.  Moreover, I am not an accountant, CPA or tax preparer.  Please consult a tax professional before filing taxes or making any decisions with respect to your particular case.