Nationwide ERISA Long Term Disability Attorney Nancy L. Cavey talks to you today about "How Much Are You Going To Be Entitled To When You File A Claim For Your Long-Term Disability Benefits?" and much more related to disability claims.
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I'm Nancy Cavey national ERISA and individual disability attorney welcome to winning isn't easy. Before we get started today, I've got to give you a legal disclaimer. This podcast is not legal advice. The Florida bar association says that I've got to say it. So I've said it, nothing is ever going to prevent me from giving you an easy to understand overview of the disability insurance world, the games that disability carriers play and what you need to know to get the disability benefits you deserve. So off we go, how much are you entitled to when you file a claim for your long-term disability benefits, if you're totally disabled, your benefits are going to be based on a fixed amount that you purchased. And perhaps, maybe even bought some additional increases. You may have started with $5,000 per month in coverage, but you've exercised options that let you buy it up. And now have $6,000 worth of coverage. That's pretty easy, but what if you've got a residual disability benefit claim? Now, residual benefits are based on your , um, covered before monthly income. Your policy may say, look, to determine what your before monthly income is going to be. We're going to look at your income tax returns, and we're going to base this on the highest three out of five-year earnings, where the highest one out of two year earnings, or the 12 months before you became disabled, some policies will say that bonuses, commissions, or other designated income isn't included in the BME. And that can be a problem because what you thought you bought in terms of coverage, maybe something completely different. So if you're, self-employed like a doctor, a dentist or a lawyer, some of these policies are going to say, look, calculate your benefits. We want to see your monthly P and L's your billing documentation or other income before we can determine not only your before monthly income, but your monthly income. Now , why is all of this important? Well, because the calculation of your before monthly income is the starting point to calculating your benefits and that calculation is going to be done monthly. So today's episode is all about the wonderful world of before monthly earnings calculations. And the three things that I'm going to be talking about are how pre disability earning language can impact the amount of your disability benefits, what the court says. In other words, the course says just because a carrier or an employer thinks their calculations of pre-disability income earnings is correct, doesn't make it. So, and why discretion can make all the difference in your disability insurance claim benefit calculations. So let's take a break for a moment. Before we get into the day's episode,Promotional Message:
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Welcome back. Let's start with how pre disability earning language can impact the amount of your disability benefits. Now, one of the nastiest surprises, when you stop working and apply for your benefits is to find out that you're not going to re getting the amount of the benefits that you thought you signed up for when you took out the policy, let's get out that disability policy. What is the definition of the policy of pre-disability earnings or before monthly income? That's the same terms for the same kind of concept here. The amount of your benefits is going to be dependent upon that definition. I'm going to talk about one of the most common definitions. So we can kind of use this as a base to explain this concept. You might have a policy that says the amount of your salary or wages that you receive from your employer. On the day before a period of disability benefits started calculated on a monthly basis. If you're paid on an annual contract basis, your monthly salary is one 12th of your annual contract salary. If you're paid on an hourly basis, the calculation of your monthly wages is based on your hourly rate multiplied by the number of hours you're readily scheduled to work per month, but not more than 173 hours per month. Now that's a whole lot of words, isn't it? And we need to kind of parse these words to figure out exactly how to calculate the before monthly income in that definition that I just read the two most important provisions or the day before a period of disability , uh, and also , um, monthly basis. Let me give you an example, cause I think examples are a good way to understand this stuff. This is from a case called Morris versus Aetna life. It's a California case of August of 2021. So Morris took sick leave and had a cancer surgery during the sick leave, including chemotherapy, Aetna paid her long-term disability benefits in the amount of $6,229 and 17 cents per month on the assumption that she was paid biweekly . And on the assumption that she got 26 paychecks per year, but guess what? She was paid semi-monthly , which means she got 24 checks paychecks per year and not 26. And in fact, she was actually on a annual contract. Well, years later, Aetna discovers the error of its calculations and they demand repayment of $56,478 and 17 cents. Aetna wanted his money back. So what did it do? Well, they started withholding her manifests to recoup the overpayment. What did Morris do? What she should've done sued now, unfortunately for Morris, the court started this analysis, looking at the plain language of the policy and went from there. Her salary at the time she was disabled was $115,000 per year or $9,583 and 33 cents per month. She insured 60% of her pre-disability earnings. So her gross monthly benefit will be $5,750. Got the math. Okay. So the court ultimately said based on the math that she was overpaid and she owed the money back. Now, the problem with this of course, is that she had spent the money , um, and had a lifestyle that was based on this higher , uh , benefit that she was , um, she was being paid. Uh, and as a result , um, not only did she have to pay the money back and , and the carrier had the right to recoup that money back, but then she had to deal with the reduced income and or changed circumstances. So you can see that this before monthly calculation is important, not only to determine the amount of your benefits, but the disability carriers can check their math and they can come back and say, oh, we've been overpaid. We want our money back. So this is an example of the double whammy that can happen when the, before monthly income is not calculated properly. And what happens of course , uh, when , uh, that happens to a person's disability insurance benefits, that carrier's ability to recoup the benefits and how it really impacted her lifestyle. So let's take a quick break and we're going to head back into our next section, talking more about before monthly income calculations. Welcome back to winning. Isn't easy. Let's talk about one court that said just because the carrier or the employer thinks that their calculation of pre-disability Ortiz is correct, doesn't make it. So now I want to tell you the story of an obstetrician , uh , by the name of David Schweitzer. Unfortunately, Dr. Schweitzer became disabled because of a vision loss or retinal tear in both of the eyes and a right macular hole in his right eye. He applied for and was granted a short and long-term disability benefits, but guess what? Aetna life didn't want to pay disability benefits based on his employment agreement. And that's the other starting point in this. In other words, we want to look at any employment agreement we're going to want to look at income tax returns and other financial documents. And of course, we're going to look at the policy definition of pre-disability earnings were before monthly income. Now in this particular plan, pre-disability earnings was defined as the amount of the salary or wages you were receiving from an employer participating on the plan on the day before a period of disability started calculated on a monthly basis. So let's work through the facts of his case and see how this actually , um , worked out. He became disabled on February 4th, 2015, and his pre disability earnings should have been calculated based on his salary. As of February three, Dr. Schweitzer had entered into an employment agreement that provided that for the first two years of employment. He had a base salary of $322,689 . And that years three to five were to be calculated in part on this base agreement. So long as he met certain productivity standards, if he didn't meet the productivity standards, his base salary for the deficit quarter was to be recalculated. So you can see a lot of math here. Now, this agreement did not allow his employer to reduce his salary on the first day of the third year. Of course they did. And there was a subsequent written agreement that confirmed that his salary would be maintained at the 322,689 number through February 28th, 2015. And wouldn't be reduced to $156,011, which is what the employer was paying him. So of course, guess what Aetna wanted to do at Awana to pay his benefits based on the $156,000 salary and not based on a $322,689 salary, you can see that's a heck of a difference in benefits. So of course, this ended up in federal court and for federal courts, really what happens is they have the ability to interpret the terms of the , of the policy. And that normally is their starting point. And if there is an employment agreement, they're also going to be looking at that employment agreement. They're not necessarily going to agree with the carriers calculations were the employer's position regarding what the before monthly income is. And in this case of Schweitzer versus Aetna life, judge Blakely noted that Aetna had failed to justify why they use the lower number. Of course, we know why they use the lower number. They didn't want to pay full benefits. They argued that the lower number was right, because the employer said it was right. And the judge basically said, look, what you think is right, what the employer thinks is right, is irrelevant because it's my job as the judge to conduct this analysis by looking at the terms of the policy and the employment agreement. Um, and basically what happened was the judge said too bad. So sad for you guys. I'm going to do my job and found that Schweiss his salary was governed by the terms of his employment agreement and ordered Aetna to calculate the earnings based on the $322,689 . Obviously that was a great result, but you can see that there are cases where the disability carrier will miscalculate the BME in the favor of , of the policy holder. And they will miscalculate the , uh , benefits in their favor. Some of this is intentional, some of it isn't , uh, but in any event, you do need to understand that this is one of the , uh , very contentious area in the world of disability insurance. Um, carriers generally don't want to pay full benefits. And of course you want your benefits to be paid at the correct rate, the rate that you basically contracted for. So that obviously in this case, it was a great result. Um, and that was a great result because we had a judge who was willing to do their job and willing to look at the facts of the case, the employment agreement and the contract, and render their own independent judgment. Let's take a break.Promotional Message:
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Welcome back to winning. Isn't easy. Why discretion makes all the difference in your disability insurance claim. Now, I know you bought a disability insurance policy to provide you with peace of mind. If you became disabled and unable to work, you probably thought that if you became disabled, that the insurance company was going to send you a check. And if it was that easy, I wouldn't have a job. I mean, I know that you know, that your doctor said that you were disabled and unable to work, but that doesn't mean that the disability carriers automatically go to pay your benefits. What are the most important terms in your disability insurance policies? Some they called a discretionary clause and it's normally buried in the back of that policy. That policy term, the discretionary clause says that the disability care has the discretion to interpret the terms of your disability policy and to determine whether or not you're entitled to your benefits, regardless of what you say or what your doctor has to say, how ultimately a court reviews, a disability carrier denial is called the standard of review. Now, generally there are two possible standards of review. There's a discretionary standard of review, which quite frankly means that it's an uphill battle in court. If your claim is denied because the discretionary clause is a policy language that allow them to dissuade carrier to steal your benefits. There are some states like California or Illinois that ban discretionary clauses , just because of that reason. Um, in that case, the judge can only overturn a claim if the carrier's conduct is arbitrary and capricious. Now the alternative and more holder or plan participant friendly is the Denovo standard of review that allows the judge to independently review the claim and make their own independent judgment. The , um , discretionary clause in my view is a golden handcuff. It basically says to the judge that you can disagree with this decision, but because we have the discretion to make the decision, you can only overturn that if there's been an abusive discretion, you, I mean, you can disagree with it, but you can see that there are legitimate reasons in our view that we had to deny the claim and of course, bias, wasn't a factor in our decision. So judge you're bound by our denial. And unfortunately, that's exactly what happens in the discretionary review case. If I had a choice, I would always want the Denovo standard of review because I would rather take the chance and have the judge review the material and make an independent decision. So we've been talking about the concept of pre-disability earnings in some of our earlier segments. Let's talk about how the standard of review will work in the real life in a before monthly income case. And I'm going to tell you the story of mayor versus Ringler associates , uh, which is a case involving the second surrogate mayor was employed at Ringler associates and Ringler associates offers , uh , nuity um, uh , plans to help cases get settled B the workers' comp case settled , uh, personal injury cases, settled , uh, or any other kind of disability litigation. It's a , it's a big company, a big business. Now, Ringler associates offered a disability insurance plan to its employees. It was administered by Hartford and Hartford approved mayor's disability claim, but they fought about how much his pre-disability earnings were. And of course, that ultimately would impact how much he got paid in disability benefits. In this case, the policy had a discretionary clause and the first issue the court had to decide was whether or not the discretionary clause was applicable. This gets as complicated as the, before monthly income calculations. The plan was delivered in California that prohibited discretionary clauses, but mayor lived in New York. And guess what? New York allows discretionary clauses mayor argue, this is the plan was issued in that the discretionary clause was in applicable, and the judge could use the Denovo standard of review. Well, Hartford of course argued that the discretionary provision was applicable. And since it was, he lived in New York, they got to apply the discretionary clause. The court rejected mayor's argument because they said, look, if one plan participant was a resident of California, then the discretionary clause would have to be applicable to all plan participants. And the court held that that would be a logistical nightmare for the disability care. And as a result, the standard of review that the court applied had to be determined based on the policy holders residency , uh, and in this particular case, the court relied on Hartford discretion in calculating the amounts of amounts of the pre-disability earnings. So the standard of review can make all the difference. Now, I think that there should be an argument that may be made in a case like this, that since this, a policy contract interpretation , uh, that the court should apply a legal doctrine called Contra referendum , which means that the terms of the policy should be construed against , uh, the author of the disability policy, if there's any confusion or conflict or lack of clarity about what the terms of the policy mean. So when I'm involved in a dispute, particularly when it's a plan language or policy language interpretation clause, I argue that even if there is a discretionary standard of review, that the court should be applying the doctrine of , uh , entrepreneur for Anthem and interpreting the terms of the policy in favor of my client. But you can see two of the major factors here are going to be , uh , where does the policy holder live? What state law is applicable, and as a result, whether or not there's discretionary review or to Novo review. And I quite frankly think that's important that you understand in your disability insurance claim prior to you filing a claim. But certainly when we get into the area where the claim is being delayed, denied or terminated, because ultimately when we have to file an appeal, it's going to be the standard of review that will govern , uh , how we file the appeal, what we argue in , how the court views, not only the facts of the case, but applies the correct legal standard. If you need help with your disability insurance claim involving before monthly income calculations, you really do owe it to yourself, to consult with an experienced to ERISA disability attorney. We're dealing with contract terms, interpretation , um, employment, agreements, math, and , uh , trying to apply correctly based on the applicable case law, how this calculations go. And it's not quite frankly for the faint of heart. If you've enjoyed this week's episode, please consider liking our page, leaving a review or sharing it with your friends or family. Remember this podcast comes out weekly. So tune in next week for another insightful episode of winning isn't easy.