Individual Disability Policies vs. Group Disability Policies

There are many differences between individual disability and group disability policies. While both provide insurance against the inability to work, the specific policy terms can vary dramatically. Regardless of the specific words used by the policy, there exists an important, invisible, difference between the two: one is governed by state law, and the other by federal law; this results in vastly different remedies in the event you need to bring a lawsuit against your insurance company.

A common question asked by our clients is “will I be able to sue the insurance company for all the emotional distress they have caused me?” We understand that life with a disability and battling a long term disability insurance denial is emotionally and financially devastating. However, depending on how you obtained your disability insurance, the answer to this question will be very different.

· Group Disability Policies:  This coverage has probably been made available to you by your employer or union, and the premiums are paid, at least in part, by your employer.

It is not individually underwritten, meaning that your employer will not use your health history to determine your eligibility, but rely on the general health of a group of people. With your employer paying at least part of your premiums, this coverage should be less expensive than an individual policy.

Group policies are most often governed by ERISA (Employee Retirement Income Security Act), a federal law which determines your rights. Under ERISA, your legal remedies are usually limited to your unpaid disability benefits and, possibly, attorney’s fees! This is because ERISA “preempts” or overrides state laws that might otherwise provide additional relief to you.In short, because of ERISA, this type of policy will not allow you to sue your insurance company for emotional distress. It will also not enable you to punish the insurance company for its wrongdoing through an award of punitive damages.  

If your group long term disability claim has been denied, you must file a timely appeal before you can file a lawsuit. There is no jury trial, but rather a judge will review the contents of your claim file and only the contents of your claim file! The evidence you are able to submit is limited.

For more about ERISA see: http://www.creakyjoints.org/blogs/insurance-matters/2012/12/30/why-was-my-long-term-disability-claim-denied

· Individual Policies: This is a policy that has been purchased privately, independent of your employer. It is individually underwritten, meaning any medical pre-existing conditions, health history, or other factors unique to you could affect your coverage. You are responsible for paying the entire premium, which can be more expensive than a group policy. 

Individual policies are not governed by ERISA. Rather, state law will apply. Depending on which state law applies, you may be able to sue your insurance company not only for unpaid benefits, but also for your emotional distress, future benefits, attorney’s fees, and even punitive damages. You can also help others when receiving an award of punitive damages. This is designed to encourage your insurance company, and other insurance companies, to ensure that they act properly.

Typically, this type of policy does not require you to submit an appeal before filing a lawsuit. You can elect to have a jury, rather than a judge, make the decision in your case. Evidence outside of your claim file can be considered by the jury, as can all events leading up to the trail.

Take a moment to think about how you obtained your insurance coverage (or use the chart below) to help you determine what type of policy you have. Blue represents a group disability policy governed by ERISA, and red represents a policy not governed by ERISA. Was it through your employer (or your spouse’s or parent’s employer)? Who is your employer (often if your employer is a government or religious entity your group coverage is not governed by ERISA)? Was it through an individual policy? These questions will lead you to a better understanding of the limitations and advantages of your policy.  If you have questions about your disability policy or your long term disability denial, feel free to contact Kantor & Kantor at (800) 446-7529 or www.kantorlaw.net for a no-cost consultation.  

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