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Denied Disability Insurance Claims

This is a question that I receive quite often.  You’ve applied for long term disability insurance and your insurer has denied your claim.  Or, you were receiving long term disability insurance and your insurer has terminated your benefits.  Either way, you should have received a letter from the insurer advising you of its decision.  Invariably, the insurer advises you that if you disagree with its decision you may appeal it to their appeal panel.  It often gives you a certain period of time to do so.

The question I receive is, should I appeal that decision to the appeal panel?  Often this seems like an attractive option to my clients for a number of reasons:

  1. You may have been dealing with a pleasant claims representative who seems to be on your side;
  2. You know how sick you are and believe that there must be some mistake that can be easily rectified; and
  3. You want to have this mistake corrected quickly and hiring a lawyer and litigating your claim will be lengthy, intimidating and expensive.

To cut to the chase, I almost always advise clients or potential clients not to appeal the insurance company’s decision internally.  There are a number of considerations that go into that advice.

First, the reason for the denial or termination must be examined.  If it is a technical denial (ie. coverage was not in place or there was a pre-existing condition clause in play), there is no point in appealing internally.  These are questions of law or mixed fact and law and any appeal panel is not likely to see things a different way.  A Judge might.  You are better to file a statement of claim against the insurer.

If the reason for the denial is that the medical information available does not or no longer supports that you are totally disabled, you will be tempted to run out to your doctors and get further information.  Your denial letter may encourage you to do so.  However, almost always, the insurance company has enough supporting medical information on its file to continue paying or to approve your claim.  It has chosen not to and having your medical providers reiterate what they have already told the insurer will not result in an appeal panel over-turning the decision.  

However, if there is truly medical information that is new (ie. from a different doctor or specialist or a new diagnosis) or that the insurer does not have (ie. your doctor did not respond to requests for information from the insurer) then you may want to appeal this decision internally.  In my experience, that is the only time that appeals internally have been successful.

Second, you need to consider who is hearing your appeal.  While it varies from company to company, often the appeal panel consists of three individuals.  Often, one of these is the very claims manager who already denied your claim.  What are the chances that, barring truly new medical information, they are going to change their mind?  Not great.  Other members of the appeal panel may be a supervisor (who used to be a claims manager) and, perhaps, a medical provider who works closely with the insurance company either in its rehabilitative section or in providing medical advice to the insurer.  In other words, your appeal will not be heard by an unbiased and neutral panel.

Third, pragmatically, the result of appealing once or multiple times is often that it delays the inevitable – that is, that you need to sue your insurer.  After going through appeals for several months or a year or more, your financial situation is likely going to be further eroded, meaning that by the time you come to the realization that you need to sue the insurer, you are in desperate financial circumstances.  That is not a good way to begin litigation against a party who has significantly more financial resources than you.

Litigating quickly has some advantages.  It may, in the long run, actually save time. You take the insurance company out of its element (the internal appeal process) and into ours – the Court system.  The insurer may have information it has not shared with you (such as surveillance or a paper review of your medical file by another doctor).  The litigation process provides that the insurer must provide all of this information to you, so you know the case you need to establish to be successful.  Finally, client tell me that it is a relief to be able to offload some of the stress they are feeling onto us.  The appreciate having someone with experience in their corner.

So, in short, except for very limited circumstances, my advice is to retain counsel and ignore the internal review process offered by the insurer.  It will save time in the long run.