Long Term Disability, Life and Health

Individual life insurance policies are written in various forms such as whole life and term life.   These policies provide insurance benefits to named beneficiaries upon the death of the policy owner.  The policy owner can assign the policy to an unrelated entity and this entity can change the beneficiary.

By statute, life insurance policies have a two year incontestability limit which means that an insurance company cannot challenge the policy based on conditions that the insured should have known.  However, fraudulent misrepresentations will extend the incontestability limit.  An insured who lies about a pre-existing condition is not protected even if the insured dies from an unrelated condition.  The specific questions on the application must be analyzed.  Since the insurance company, if provided with details of medical conditions may have rated the policy or otherwise not issued a policy, the insurance company has the right to deny coverage and rescind the policy.  However, if the misstatement would not materially affect the acceptance of the risk, a challenge by the insurance company after the incontestability period may not be successful.


Group Life Insurance

Group life insurance policies are generally term insurance policies which means that the insurance is provided for only the term of the policy and the death must occur within the term covered. There can be one year term policies or multiple year policies.

Employers generally offer group term life insurance as a benefit of employment. Coverage generally ceases at the termination of employment but the employee may convert the policy to an individual policy. When an employee is disabled, most policies contain a waiver of premium and continue to provide coverage during the disability.


Individual Long Term Disability

Long term disability policies can be purchased on an individual basis to provide an income source in the event the insured has become disabled from working.  There are “own occupation” policies and “any occupation” policies.  Most policies provide for disability from the insured’s own occupation for a period of time and then require that the insured be disabled from any occupation from which he is qualified by education and experience.

These plans do not provide for permanent disability.  The insurance company has the right to obtain the insured’s medical records and require the insured to be examined by a doctor selected by the insurance company.  If the insurance company determines that the insured is able to work, it will deny future coverage.  Also, there is no requirement that the insurance company pay any disability benefits.  The insurance company can decide that the insured is not disabled under the terms of its policy.

Denial of individual long term disability benefits are litigated as breach of contract claims.  Most policies have a requirement of a certain number of appeals before litigation can be filed.


Group Long Term Disability

Group long term disability policies are a benefit that may be provided by the employer.  Most employer plans are subject to a federal law known as “ERISA” (Employment Retirement Income Security Act).  There are federal regulations that must be followed by the plan administrator when handling an employee’s long term disability claim.

A denial group long term disability benefits is not a breach of contract claim.  Rather, an ERISA claim is an appeal from the denial of benefits.  These cases can be filed in state court but are typically removed to federal court.

Since it is an appeal of a denial, the court review is based on the record which is the insurance files.  Generally, new documents cannot be added after the claim is denied.  There may be very limited discovery and a jury trial is not permitted.

The group long term disability policy language determines whether the court will review the claim on a “de novo” basis or on an “arbitrary and capricious” standard.  Under the de novo standard, the court will review the record and make its own determination without deference to the plan administrator’s decision.  If the plan grants discretion to the plan administrator to make decisions, the court will review the plan under an “arbitrary and capricious” standard which gives deference to the plan administrator’s decision and the amount of deference given will be determined based on certain factors including whether there is a conflict of interest considering the employer’s profits etc..


Individual Health Policy

Health insurance policies provide coverage for medical expenses incurred as a result of an illness.  Most policies have specific exclusions for expenses incurred as a result of an automobile accident or workers’ compensation accident.

Unlike automobile policies, health policies are not required to contain standard language or coverage.  Therefore, each policy must be read carefully for exclusions and limitations  from coverage.  The NJ legislature has enacted certain statutes that make mandatory certain coverage for certain conditions or illnesses.


Group Health Insurance

Group health plans are insurance obtained by employers.  If the employer has a group health policy, coverage must be offered to all employees. The coverage can differ between different levels of employees.  The employees can be required to contribute toward the premiums.  If coverage is available through  employment, an individual health policy cannot be purchased.

Although the employer with group health policy must offer health insurance to employees, the employer is not required to completely fund the health insurance nor provide a certain level of coverage.  If the group plan offers very limited coverage, catastrophic policies are available for individual purchase.

Union plans are not group health insurance policies.  These plans are funded by the union through union and employees contributions.  These plans may run out of money and not pay for employees’ health expenses.  Likewise, certain employers can be self insured.  Again, these plans are not insurance plans and may be short of funds to pay for medical expenses.  Catastrophic plans can provide an individual layer of protection.


Accidental Death Insurance

Accidental death policies provide coverage to a beneficiary for a death to the insured caused by an accident.  These policies generally provide that death must be independent of other causes.