Articles Tagged with “Insurance benefits”

The United States Court of Appeals for the Ninth Circuit in Salyers v. Metropolitan Life Insurance Company, ___ F.3d ___, No. 15-56371 (9th Cir. September 20, 2017) recently rejected an attempt by MetLife to avoid paying a $250,000 death benefit to a widow who had purchased $250,000 in life insurance coverage on her husband prior to his death. In what has recently become an increasingly common scenario, Susan Salyers purchased $250,000 in life insurance on her husband Gary Wolk through a MetLife plan offered by her employer and timely paid all of her premiums on the policy, but MetLife refused to pay the full amount of the death benefit after discovering that Ms. Salyers had not provided the required “evidence of insurability” when purchasing the insurance coverage.

According to the fine print in the MetLife policy, Ms. Salyers was required to submit “evidence of insurability” (proof that her husband was in good health) before any life insurance coverage greater than $50,000 would take effect. However, Ms. Salyers had originally applied for only $30,000 in coverage, and through a clerical error, her employer enrolled her in a policy providing $500,000 in coverage, for which she paid the full premium amounts to MetLife via payroll deductions. At the next open enrollment period, Ms. Salyers elected $250,000 in coverage for her husband, but no one ever told her that she needed to provide “evidence of insurability” in order to obtain this coverage. Nonetheless, MetLife happily accepted her premium payments while never insisting on “evidence of insurability.”  Two weeks later, Ms. Salyers’ husband died.

After the death of her husband, Ms. Salyers submitted a claim to MetLife for the life insurance that she had purchased, but MetLife refused to pay the $250,000 benefit, insisting that she had failed to meet the terms of the policy by not submitting “evidence of insurability.” This was the first time Ms. Salyers had ever heard about a requirement for “evidence of insurability.” Neither the employer nor MetLife had notified Ms. Salyers that she needed to complete further paperwork to be eligible for the life insurance coverage. After MetLife denied the claim, Ms. Salyers sued Met Life, asserting that by accepting her premium payments in the amounts requested for the $250,000 coverage and failing to request evidence of insurability, it was bound to pay the $250,000 death benefit. At trial, judgment was entered in favor of MetLife, and Ms. Salyers appealed to the Ninth Circuit.

The process of applying for disability insurance benefits is not easy. After becoming injured or sick, the claimant must then complete stacks of paperwork in order to file a claim for disability insurance benefits. Among the forms that the claimant must complete is an authorization form that allows the insurer to contact medical sources. But what some claimants do not realize is that the insurer may look beyond the claimant’s medical records when making a determination of disability.

The insurance company may utilize a private investigator to surveillance the claimant. This usually means that an investigator will observe the claimant’s house or apartment for hours at a time and wait for the claimant to leave the house. The investigator will then follow the claimant to wherever it is they travel and document the activity. Insurance companies may take this evidence and present it to a peer reviewing physician for comment. If a claimant is observed walking in a store for 45 minutes, a doctor can review the surveillance video and opine that the claimant is capable of returning to work.
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Unfortunately, there is a common surprise for claimants who have been approved for long term disability (“LTD”) benefits through an employee group benefit plan. LTD benefits are usually subject to a list of offsets that will reduce the amount that a claimant receives in disability insurance benefits.

One of the most frequent offsets is when a claimant is approved for Social Security Disability Insurance (“SSDI”) benefits. When a claimant receives both LTD insurance benefits and SSDI benefits, the claimant’s LTD benefits will be reduced by the amount that they receive from the Social Security Administration.

For example: assume a claimant has been approved for LTD benefits and receives $2000 per month. If that claimant has also been approved for SSDI benefits at $1500 per month, then the claimant’s LTD benefits will be reduced to $500 per month. The net effect is that the claimant still receives $2000 per month – the amount they were owed under the long term disability policy – however, the monthly long term disability benefit is now much lower.

The most significant result of this offset occurs when a claimant has been approved long term disability benefits soon after they stop working, but then has to wait for a hearing with the Social Security Administration to determine whether or not they will receive SSDI benefits. In some cases, a claimant can wait two years or longer for a hearing with the Social Security Administration. If a claimant is approved for SSDI benefits at the hearing level, they will likely owe the long term disability insurer for “overpayment” due to the offset provision in their long term disability policy.
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