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Long-term disability claims benefit from early preparation

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Diligent preparation is crucial for successfully addressing the heavy scrutiny that long-term disability claims are facing, said Evan Schwartz, founding partner of Quadrino Schwartz.

One of an insurance company’s first steps with a long-term disability claim is conducting a recission review to examine a policyholder’s income and medical information for any misrepresentations, Schwartz said Sunday at the National Association of Insurance and Financial Advisers Career Conference and Annual Meeting in San Diego.

The insurer conducts a financial review for several purposes, the initial reason being to determine that an insured was doing the type of job he or she claimed to be at the time of becoming disabled, Schwartz said.

In fact, long-term disability coverage is based on occupation at the time of disability, although many people misunderstand this and think instead that coverage is based on their job at the time they purchased a policy, he said.

A policy that remains in force beyond the two-year incontestability period isn’t necessarily exempt from concern over claims that the insurance company has the basis to dispute, Schwartz warned.

“The insurance company could use that to sort of taint the credibility of your insured,” he said. “To say, ‘Well you claim you’re disabled, but you lied about X, Y and Z to get the insurance, so why should we believe that you have this pain, that you have these symptoms, that you have this fatigue?’ ”

Having a doctor’s diagnosis of a disabling condition is crucial in a long-term disability claim, Schwartz said. Difficulties can arise, however, because some doctors may provide excellent treatment to a policyholder but may be too busy for paperwork, and some physicians form their own biases about whether a patient should be working, he added.

Situations where a disability such as migraines, depression or chronic fatigue is hindering a person’s cognitive abilities require an evaluation by a neuropsychologist, Schwartz said. An insurer is likely to view a neuropsychologist’s evaluation as a “objective support of a classically subjective condition,” he said.

Another key step in preparing for a claim is “documenting deterioration,” in which a person working with limitations and looking to file a claim ensures that the doctor is informed of the symptoms, which are then reflected in a medical chart, Schwartz said.

Policyholders with residual or partial disability coverage also should inform their insurer of disabling conditions, because doing so will help them if they need total disability coverage later, he said. The insurer will have already conducted the necessary investigations, and the policyholder can start receiving partial payments, he said.

Schwartz also warned that policyholders need to be aware if they are the subject of surveillance following a claim, which he said has become a common practice among insurance companies.

Disputed claims filed under the Employee Retirement Income Security Act, which applies to private employer-based plans, can have a lower likelihood of payouts than individual disability claims, Schwartz said. And pre-emption under ERISA means that every other state statute “is out” with regards to a disability claim, including laws relating to bad faith and unfair business practices, he said. In addition, ERISA cases have a limited standard and scope of review by a judge, he said.