Pre-Existing Conditions and Cooperation Clauses: The Hidden Minefields in Long-Term Disability Policies

Welcome to Season 6, Episode 8 of Winning Isn't Easy. In this episode, we'll dive into Pre-Existing Conditions and Cooperation Clauses: The Hidden Minefields in Long-Term Disability Policies.

ERISA disability claims are often decided by the fine print most people never notice. Pre-existing condition clauses, cooperation requirements, and requests for financial documentation give insurance carriers multiple ways to delay, deny, or terminate benefits - even when the medical condition itself is clearly disabling. Insurers don’t just evaluate the diagnosis; they examine policy timelines, how well claimants respond to information requests, and whether every requirement in the policy has been followed. Small technical missteps can quietly become the basis for a denial. In this episode, we break down three common pressure points in ERISA disability claims. First, we look at how pre-existing condition provisions can shape outcomes, including situations involving conditions like multiple sclerosis. Next, we explain how cooperation clauses can trap claimants when insurers demand ongoing information or documentation. Finally, we discuss the financial records carriers may request - and how failing to provide them can put benefits at risk. By the end, you’ll understand why success under ERISA often depends not just on proving disability, but on carefully navigating the policy’s fine print.

In this episode, we'll cover the following topics:

One - Pre-Existing Conditions and ERISA Disability Claims

Two - Cooperation Clauses and Claim Denials

Three - Financial Documentation and Cooperation Requirements

Whether you're a claimant, or simply seeking valuable insights into the disability claims landscape, this episode provides essential guidance to help you succeed in your journey. Don't miss it.


Listen to Our Sister Podcast:

We have a sister podcast - Winning Isn't Easy: Navigating Your Social Security Disability Claim. Give it a listen: https://wiessdpodcast.buzzsprout.com/


Resources Mentioned in This Episode:

LINK TO ROBBED OF YOUR PEACE OF MIND: https://mailchi.mp/caveylaw/ltd-robbed-of-your-piece-of-mind

LINK TO THE DISABILITY INSURANCE CLAIM SURVIVAL GUIDE FOR PROFESSIONALS: https://mailchi.mp/caveylaw/professionals-guide-to-ltd-benefits

FREE CONSULT LINK: https://caveylaw.com/contact-us/


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Need help with your Long-Term Disability or ERISA claim? Have questions? Please feel welcome to reach out to use for a FREE consultation. Just mention you listened to our podcast.

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Please remember that the content shared is for informational purposes only, and should not replace personalized legal advice or guidance from qualified professionals.

Transcript

Nancy Cavey [00:00:11]:
 Imagine you finally qualified for your long-term disability benefits, uh, but then you find out that your claim in fact is going to be denied because of a pre-existing condition you thought was long behind you, or a better minefield, and that is you revoke the medical release that you gave to the disability carrier at the beginning of your claim. Now, these two things are two of the many hidden minefields that can destroy an otherwise valid claim, and I want to spend some time with you talking about these things. I'm Nancy Cavey, a national ERISA and individual disability attorney, and I want to welcome you to this episode of Winning Isn't Easy. Now, before we get started, I've got to give you a legal disclaimer. This podcast is not legal advice. The Florida Bar Association says I have to tell you this, but now that I've said it, nothing will ever 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. Now, I will tell you that disability insurance policies or plans are full of fine print that we lawyers have written.
 
 Nancy Cavey [00:01:27]:
 Uh, there are lawyers who do nothing but write insurance contracts, and it's that fine print that can make or break your claim. And there are several problems, if you will, or clauses that can impact a claim that you may not have thought about. The first and foremost is a preexisting condition clause, and the second is going to be a cooperation requirement. And either of those can come into play either individually or in combination and result in a denial or termination even when your medical condition is disabling. So I want to talk about 3 things. First, I want to talk about that blasted preexisting condition clause. Particularly in cases like multiple sclerosis. Next, I want to talk about a cooperation clause that's found in any disability policy.
 
 Nancy Cavey [00:02:23]:
 And then lastly, I want to talk about financial documentation that carriers can demand and how failing to provide it because you revoke releases can result in a termination of your benefits. So the idea here is is that at the end of the episode, you're going to understand why attention to detail, documentation, and compliance is really essential when navigating an ERISA disability claim. So I'm going to talk about 3 things. Number 1, that pre-existing condition clause. Number 2, the cooperation clause. And number 3, financial documentation and specific cooperation requirements when it comes to production of documents. Let's take a quick break before we get back to to our next segment of our episode.
 
 Narrator of Disability Insurance Advertisements [00:03:10]:
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 Nancy Cavey [00:03:35]:
 Welcome back to Winning Isn't Easy. Pre-existing condition clauses and your ERISA disability claim. Now, I will tell you that one of the most common terms in an ERISA disability policy or plan is something called the pre-existing condition clause, and it is one of the carriers' and plans' prime denial or termination tools. Now, what does this mean in English? So the best way is to give you an example. And this is the case of Rutan versus LINA. Now, Ms. Rutan's disability plan included a preexisting condition clause that said no benefits are payable for— now listen closely— any period of disability caused or contributed to by or resulting from a a preexisting condition. That's pretty broad.
 
 Nancy Cavey [00:04:27]:
 A preexisting condition means any injury or sickness for which the employee incurred expenses, received medical treatment, care, or services, including diagnostic procedures, took prescribed drugs and medicines, or the catch-all clause, for which a reasonable person would have consulted a physician within 3 months of their most recent effective date of the insurance. This limitation will not apply to a period of disability that begins after the employee has been in active service for a continuous period of 3 months, during which the employee received no medical treatment, care, or services in connection with a preexisting condition, or— and there's still more— is covered for at least 12 months after their most recent effective date or the effective date of any added or increased benefits. That's complicated, and it is a heck of a mouthful that has to be parsed, because I promise you, if the carriers can raise this as a defense, they will. So how do we go about parsing this? Well, we first figure out what's the effective date of the policy. So we've got that date, and then we have to do what's called a look-back period. So then we have to identify the conditions that are underlying your claim. Then we need to get your medical records and pharmacy records. Next, we have to review them, and then literally we create a timeline to try to figure out if the pre-existing condition clause applies.
 
 Nancy Cavey [00:05:58]:
 And if it applies, then we need to look to see if treatment occurred during the pre-existing or look-back period. And if the treatment occurred, then the claim is going to get denied. I mean, it's as simple as that, unfortunately. Now, this pre-existing condition clause only really deals with situations where you have become newly enrolled in the coverage, or in the case of this policy or, or plan, where you have increased your coverage. So if you're offered an opportunity to increase your coverage and you've been getting treatment for a medical condition, you may want to think twice about doing that. Um, your agent probably won't tell you that, but again, the idea here is that you're listening to this podcast with the idea that you're going to learn how to protect your rights to your benefits. So what happened to Ms. Rutan's case? Maybe you need to get out a piece of paper and a pen because this is going to be date dependent.
 
 Nancy Cavey [00:07:02]:
 So let's start. Her coverage began on March 2, 2020. On November 24, 2020, she stopped working because of MS, and she submitted a claim for short-term disability benefits. Now, the short-term disability policy had no preexisting condition provision, which was great. So she was paid short-term disability benefits from December 1, 2022 through May 22, 2021. But now she's eligible for long-term disability benefits, and guess what? You guessed right, the long-term disability policy or plan had a pre-existing condition clause. So they sent Ms. Rattan a questionnaire and asked her, hey, for the period of time from December 1st, 2019 through March 1st, 2020, um, you know, were you getting any medical treatment? And if so, we want the names of the providers and your pharmacies.
 
 Nancy Cavey [00:07:56]:
 So of course medical records were secured, and the letter and the pre-existing condition clause also required cooperation. And in the letter to Ms. Rattan requesting information, she was reminded that she had to cooperate with the nurse case manager. So what did the records show? You've got your timeline. Let's start filling in the blanks. Records show that she was diagnosed with MS in 2009, had regular doctor's visits, which was taking medication and receiving infusions. She even had a brain MRI on December 26, 2019. Now, based on those records, the carrier concluded she had received treatment within the preexisting condition period, that look-back period, and denied her claim.
 
 Nancy Cavey [00:08:40]:
 Ultimately, this case ends up in federal court, and the court agrees. They looked at the terms of the policy and looked at the carrier's scrutiny of the medical and prescription records. And so again, if you are newly enrolled in a plan, you've got to pay particular attention to when your coverage begins, the treatment that you have gotten, and whether there is a period of time after the effective date you also have to go without treatment. So look-back period and some period forward. Now I will tell you that that's not the only trap because If the treatment history is ambiguous, your claim potentially could be jeopardized by cooperation clauses, and we're going to explain further how this can come back to bite Ms. Rutan. The first problem was preexisting. The second problem was this cooperation clause provision in the terms of the policy of the plan.
 
 Nancy Cavey [00:09:45]:
 So let's take a quick break and we will be back. Welcome back to Winning Isn't Easy. Cooperation clauses and claims denials. Now, there is a common policy or plan term, and it can be called the claimant cooperation clause. And this provides that benefits can be terminated if the claimant does not provide requested documentation. So let me give you an example of the language in Ms. Rutan's plan. The clause stated, failure of the claimant to cooperate in the administration of the claim may result in termination of the claim.
 
 Nancy Cavey [00:10:37]:
 Such cooperation includes providing any information or documents needed to determine whether benefits are payable or the actual amount due. So remember, her coverage began in March of 2020. She submitted a short-term disability claim in November of 2020, and she received short-term disability benefits through May of 2021. Now, when the carrier investigated her rights to her long-term disability benefits, she was asked to complete questionnaires. And to, uh, sign authorized medical releases, and also to speak with the nurse case manager. Now, all seemed fine until she faxed a revocation of all prior medical authorizations, claiming that the carrier had abused its right to access records, and the carrier couldn't determine whether she had a continuous 3-month period of disability without treatment, which was required to override this preexisting condition clause. Ultimately, this case ends up in front of the judge, and I will tell you, the judge was not happy. The court found that her refusal to cooperate clearly violated the cooperation clause and held that the language unambiguously warned her that she had to provide the documentation at the carrier plan's request.
 
 Nancy Cavey [00:12:00]:
 And that the refusal to comply could result in a claims denial. Now, her blanket revocation of the medical release justified the denial. So the key takeaway here is that revoking a medical release isn't inherently prohibited, and there's a big pause here, but doing so without offering an alternative method for the carrier to get the records can destroy the claim. So in this particular instance, I don't know what she thought the abuse was, but clearly they were entitled to her medical records during the look-back period and for the period after the look-back and certainly through the date of her application. That included medical records. That could have included contacts with her physician. It could have included calls and letters. None of that would be unreasonable.
 
 Nancy Cavey [00:12:58]:
 So I'm not sure exactly in this particular instance how she could have offered an alternative. Now, I'm often asked, by the way, can I revoke the medical releases of the disability carrier plan? And I generally say, you know, I don't like these releases any more than you do, but we need to look at the policy of the plan and see what this cooperation clause has to say. And then if there is a clause, then what I want to try to do is to frame the release in a way that will only allow the carrier to get what's relevant and potentially will also limit the way that the carrier contacts the treating physician. We can't prohibit contact, but what we can do is to say any contact with the medical provider has to be in writing, no phone calls. We need to be copied with the correspondence so that There is some degree of understanding about what information they're getting and the response. But a blanket, "I'm not giving you any information," is not going to cut it. And you can clearly see that the court agrees. Now, hopefully, if you're able to negotiate some modification, you want to make sure that the modification aligns with the terms of the policy and the plan.
 
 Nancy Cavey [00:14:15]:
 And allows for reasonable compliance. And so sometimes, as I said, there's this negotiation back and forth. It's in writing so that we can confirm that they agreed to modify the release and the method of the modification. I will tell you that carriers, in certain cases, particularly if you have a residual disability claim where we're trying to figure out what your before monthly income is so that they can pay the correct amount of total benefits is going to require proof of earnings, finances, and tax returns. Failing to comply with these requests can also destroy a claim, as you're going to see next or hear next in our next segment. So let's take a break.
 
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 Nancy Cavey [00:15:40]:
 Welcome back to Winning Isn't Easy. Let's talk about the production of financial documentation and cooperation clauses in ERISA disability policies or plans. I'm often asked, hey, can this disability carrier or plan legally deny or terminate my benefits if I don't supply them with financial information, my ICD-9 code information, or tax returns? And the answer is maybe. Why do I say maybe? Well, there's no uniform disability policy or plan, and we want to see that policy or plan to review the cooperation clause. Now, that cooperation clause in the right situations can also require you to provide information, financial information and tax returns. And so in the right circumstance, Based on the language of the policy of the plan, you may have to produce this documentation. So let me give you 3 examples of where I think you have to produce the documentation. Number 1, you have a disability insurance policy or plan that pays you residual benefits for the loss of income that you have while you're working.
 
 Nancy Cavey [00:16:47]:
 And to determine what you are due is you have to start out by determining what the pre-disability wages are. And that is gonna be defined by the terms of the policy or the plan. So it might be that they're gonna look at your income tax returns for the last 5 years, or only take the highest of the 3 of 5, or only take the highest of the 5 years, 3 of, last 3 years, or the highest of the year in which you're claiming disabled, you're disabled. And so you've gotta supply all this information because they gotta figure out, well, what's the number, the pre-disability wage, against any wage loss that is— or loss, rather, that is being calculated. So they are going to determine, number 2, that monthly base earnings. It's called a BME or PDE. I've seen it abbreviated in different ways. But what they've gotta do is figure out what's that pre-disability number against which all your subsequent monthly earnings are going to be calculated.
 
 Nancy Cavey [00:17:54]:
 Now, obviously, to calculate what you're due each month, they're going to want your financial, uh, documentation, your production numbers, your ICD-9 codes. They're going to want to see maybe profit and loss statements, because what they want to do is to calculate legitimately what it is you earned that month as that term is defined by the policy of the plan and do the math calculations. I'm just gonna use an easy example. Let's say your pre-disability earnings are $1,000 and this month you earn $400. Well, normally they're gonna pay a percentage of the difference. Or let's say the next month it's $1,000 BME, but you earn $800. Then the math question becomes, well, are you entitled to benefits? And if so, the amount of those benefits. And I will tell you that when they're paying the residual disability benefits, they are going to ask for that year's return so they can reconcile it against the monthly financials, and potentially they're gonna redo their calculations.
 
 Nancy Cavey [00:18:58]:
 Unum is infamous for that. Now, how about the third circumstance? The disability carrier plan may think you're working while they're paying you full disability benefits. How would they know that? They use investigators, and they do things like corporate record searches. They also do other kinds of social media searches about your financial activities. There was a case involving a, a person who was trying to develop a sports facility in New Jersey while being disabled, and he submitted information indicating that he didn't have any earnings. Well, guess what? The, the carrier found out about this because the local newspaper did an article about the sporting complex he was involved in, and there is his name, which led them to say, hmm, let's do a corporate record search. Hmm, let's take his statement. Let's see what he has to say.
 
 Nancy Cavey [00:19:58]:
 And of course, we want to get his financial documents, his tax returns, the corporate business filings, the bank loan information. By the way, we want to talk to the partner of this business that he created. You can imagine that did not end up well. So can you say no? Well, I would certainly say no, you can't say no in examples 1 and 2. But how about example number 3? And this is again another real-life case, because I think you can learn lessons from the stupid behavior of— or greedy behavior of some people. And I don't mean to be disrespectful, but this is sort of common sense. So this is the case of Panky versus Aetna Life. This is a case out of the Middle District of Florida.
 
 Nancy Cavey [00:20:45]:
 I unfortunately was not involved in it, but Aetna asked Mr. Panky to provide financial proof of disability, including his tax returns, which he didn't supply. They terminated his benefits, and this case ends up in front of a federal judge. And so his brilliant argument was, hmm, Aetna has never terminated benefits in the past when I didn't supply my return. Then as a result, their failure to document my earnings in the past means they can't ask for documentation in the future. Well, guess what? The court had no sympathy and noted that he was required to submit financial proof of his disability. And the court said, we're not even gonna get to the issue of disability and the calculation of benefits because your failure to provide this information was a breach of the policy or plan requirements. You had to cooperate with the claims process, and too bad, so sad, because you didn't.
 
 Nancy Cavey [00:21:43]:
 Now, I will agree with you that there might be situations where the production of financial information can be challenged, but this is not one of them. One of them, nor are the other examples I just gave to you. Again, we come back to what does the policy require in terms of documentation of before-monthly income, uh, income on a monthly basis, reconciling that information, ongoing or newly developed businesses that you are creating that can impact your entitlement to benefits and the amount of the benefits. Those are the things that are pretty germane and material. Now, can they get your wife's tax return? Unless your wife is joining you in some business venture where there might be a residual disability claim or a question about total disability, I would say to you no. And in those cases, we negotiate with a disability carrier plan to only provide the relevant information involving the policyholder or plan beneficiary. So you can see that preexisting condition clauses, cooperation clauses, and those cooperation clauses requiring you to supply financial documentation are minefields. Even when your medical condition clearly documents disabling medical conditions, failing to navigate these provisions carefully can and will result in a claim denial or termination.
 
 Nancy Cavey [00:23:11]:
 I think that understanding these traps, maintaining compliance, and strategically managing documentation is essential to protecting your benefits. Paying attention to detail, following the terms of the policy will help you safeguard your entitlement to benefits and your continuing payment of benefits. After all, you paid for that coverage and you should get what you deserve. But you'd understand it's not a one-way street. You have obligations that you have to meet, or otherwise the carrier can say, too bad, so sad. Now that wraps up today's episode of Winning Isn't Easy. I would like to thank you for tuning in, and if you found this episode helpful, please take a moment to like our page, leave a review, share it with your family or friends, and of course, subscribe to this podcast. I want to ask you to please join us next week for another insightful episode of Winning Isn't Easy.
 
 Nancy Cavey [00:24:06]:
 Thanks again for listening.