With increasing media attention on the investigation into UnumProvident insurance company’s long-term disability claims handling practices, clients will increasingly be contacting attorneys for advice on obtaining benefits from a disability policy, or for counsel on fears that existing policy benefits are about to be terminated.

Before handing out sage guidance, it’s critical to recognize that disability insurance law is a complex subject Ð one where mistakes or assumptions can quickly turn into legal malpractice. From recognizing the applicable body of law for various policies, to navigating sticky procedural minutiae, to knowing when to expect bad news from a carrier, below we offer an overview of some challenges involved with disability insurance representation.

State vs. Federal

Any attorney offering advice on a disability policy must first identify the applicable body of law. Generally, disability insurance policies can be broken into two types: private and group.

Private policies are purchased directly by an individual from an insurance agent. Under these circumstances, state law governs the disability policy. This means that if a claimant is denied disability benefits, he or she can find remedies in Washington statutes, and the Washington Administrative Code will govern the manner in which the disability carrier deports itself.

On the other hand, federal law Ð specifically the Employment Retirement Security Income Act (ERISA) Ð governs group policies. Because many people obtain disability coverage through their employer, they are automatic participants in an ERISA plan. Their rights and remedies are spelled out by that statutory scheme and the Code of Federal Regulations promulgated by the Secretary of the Department of Labor. The most frequent exception to this rule is that church and government employees are not covered by this statue.

ERISA Quirks

Why is it so important that a lawyer advising the client be clearly aware of the distinction between state law and federal law? If it is a federal law claim, attorneys must follow very specific guidelines defined by ERISA-or their advice may lead to unintended consequences. In many respects the development of an ERISA case is almost counterintuitive to state court work.

There is a term in the ERISA context known as the “file,” the body of information that ERISA administrators reference when they determine benefits. Frequently, claimants believe that they and their physician are responsible for determining disability. That is not true! In fact, the ERISA administrator typically has the discretion to interpret the terms and definitions of the policy in light of the information in the claimant’s file and determine whether or not they meet the plan’s definition of disability.

Often, when the ERISA fiduciary renders an adverse benefit decision, claimants seek legal redress by going directly to court. This may be an egregious error. By filing suit, the claimant forfeits the opportunity to submit additional evidence supporting the case, and forces the federal judge to make a decision solely based on the fiduciary’s material. Absent exceptional circumstances, the fiduciary’s file or the record cannot be supplemented.

The rules governing ERISA provide an administrative appeal process-a period of 180 days when the claimant has the right to submit to the file information from various health care providers, vocationalists, and employers which bears on whether or not the individual is disabled pursuant to the terms of the plan. The claimant is responsible for the cost of this evidence.

However, the fiduciary is under no obligation to advise the claimant about what information is needed, nor the specific issues the insurer is considering. The claimant should always check to make sure their submissions make it into the file, as sometimes they don’t. At the conclusion of the 180-day period, the fiduciary has two 45-day periods to make a final determination on the claim.

If the claimant files suit, generally the only record the federal judge will review is contained in the file. If the claimant’s supporting material wasn’t included during the administrative appeal process, the judge will likely uphold the ERISA fiduciary’s decision-even if the court personally disagrees with the fiduciary- unless the claimant can demonstrate a manifest abuse of discretion.

Often the reasonable basis that the courts will use to uphold an adverse determination is the opinion of one medical provider who reviewed the claimant’s records and offered a conclusion differing from the claimant’s treating physicians. It is not unusual for an ERISA fiduciary to rely on the one dissenting opinion of a mere records reviewer who may or may not be qualified in the particular field of medicine.

Again, for this reason, it is vital that the practitioner or claimant compel the ERISA fiduciary to disclose all of the contents of the administrative claim file at the onset of the administrative claim process. Once the file has been obtained, the practitioner will have an opportunity to analyze the contents, respond and better build the client’s case.

The ERISA venue is vastly different from state cases. In state cases the claimant has an opportunity for a jury trial. Typically, disability carriers remove these cases to federal court because these cases usually satisfy the diversity of citizenship and the amount in controversy requirement to grant federal jurisdiction. Nevertheless, there is a jury trial where the standard rules of evidence will be applied to determine disability. No deference is typically given to the benefit determination offered by the disability carrier at that time but the burden of proof still remains on the claimant.

Anticipating Closure

Irrespective of whether your potential client has a state case or an ERISA case, one matter is typically uniform: there are routine times when insurance companies will attempt to shut down a claim.

Many policies have two definitions of disability: “own occupation” and “any occupation.” But, even an “own occupation” policy has a time limitation. If clients have a disability that keeps them out of their own occupation, the insurance company will pay for benefits for a period of two years, and then relax the definition of disability to “any occupation.” Thereafter, proof of disability is generally more difficult. This two-year change of disability definitions almost invariably invites the insurance company to scrutinize the file.

Disability policies typically contain other “limitations.” For example, most policies limit benefits for psychological disabilities to two years Ð which provides another milestone for the carrier to review the file. Increasingly disability carriers are also writing additional limitations into policies for “softer” disabilities such as fibromyalgia, chronic fatigue syndrome, or other invisible disabilities. Genuine physical disabilities may be characterized as mental or as belonging to one of the specified “softer” disabilities in order to restrict payment to just two years.

One hint that a disability carrier is preparing to shut down a claim is the call for an insurance medical examination. Nearly all disability policies require claimants’ attend an insurance medical examination. By breaching one’s duty to cooperate and attend these examinations, the carrier will likely be able to cut off benefits, often resulting in a complete loss of benefits. In addition, it is helpful for your client to see one of their own health care providers shortly before or after the examination takes place to either confirm or refute the findings of the insurance medical examiner.

In conclusion, the increased scrutiny of insurers and their review practices can result in a rising number of people seeking legal advice about disability benefits. Attorneys advising clients in this area must make sure their guidance is accurate by identifying what body of law governs the potential client’s policy, navigating the administrative appeal process, and preparing for and responding to attempts to close a client’s claim. n