Why Did My Insurance Company Deny My Claim for Long Term Disability?

Q: The Social Security Administration has found that I am unable to work. Why did my insurance company deny my claim for Long Term Disability (LTD)?

A: This question comes up frequently in my conversations with Long Term Disability clients. Since I have experience in both areas, i.e., Social Security Disability (SSD) claims as well as Long Term Disability (LTD) claims I will give you my best answer in this post.

The definitions of disability differ in SSD and LTD claims. Typically LTD insurance policies define disability for the first two years as the inability to do the material duties of your own occupation, and thereafter as the inability to perform the material duties of any occupation for which you have training, education, or experience. SSD defines disability as the inability to engage in any substantial gainful occupation.

As you can see, both of the definitions are subjective and wrought with ambiguity, but arguably the SSD definition is harder to meet than is the LTD definition. There are, however, many so-called rules of decision for SSD claims .. rules designed to push decisions from liberal and conservative extremes into somewhere in between. No such rules of decision apply to LTD claims.

Because of the differing rules of decision LTD insurance companies have succeeded in persuading the courts to ignore, or to consider irrelevant, the SSD decision. In 2008 the United States Supreme Court considered this issue in which the majority of the Court found that the SSD decision is relevant to the LTD decision, however it alone is not dispositive but is only one of several factors for the lower courts to consider in deciding LTD claims. As of the time of this post the net result of the 2008 decision is that insurance companies need only treat a favorable SSD decision with lip service, thus rendering it of no benefit to LTD claims except in rare instances in which the claim is under review by an astute district court judge.

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