Negotiation, Mediation, Limitations
If your insurance company denies or terminates a disability claim it will send you a letter explaining why. The letter will quote the language in your policy, or the facts surrounding your claim that are the basis for the denial. If you disagree with your company’s decision, you should take the matter up with a claims manager or supervisor. Think through the reasons for your disagreement carefully and talk to the manager or supervisor about the situation. If that fails, put your thoughts in writing. It is often wise to obtain advice from an insurance expert before writing this letter.
In addition to the above, most disability policies provide for an appeal process within the company. This more formal process bumps the claim to a higher level within the company.
Mediation is a process whereby an independent third party, chosen by the agreement of both sides and experienced (in this case, in insurance matters), steps in and tries to facilitate a resolution of the disagreement. Mediation, unlike certain types of arbitration, is not binding. No decisions are made by the mediator. Instead the mediator simply tries to bring the two opposing sides together in a joint effort to avoid litigation.
There are professional mediators available through organizations such as The Judicial Arbitration and Mediation Services (JAMS), and other organizations which promote mediation services.
Be sure your mediator is objective and does not have a built-in tendency to favor one side or the other.
Statutes of Limitations and Contractual Limitations
Statutes of limitations are laws setting time limits for the filing of civil lawsuits. The time limits differ according to the state you reside in and according to the type, or theory, of the lawsuit in question (negligence, breach of contract, intentional infliction of mental distress and bad faith can all have different statutes of limitations.) Contractual limitations, on the other hand, are provisions in contracts which may alter or change a state’s statutes of limitations. You should be aware of both your state’s statutes of limitations and of any contractual limitations in your insurance policy. Both types of limitations restrict your ability to sue if you disagree with a decision your insurance company has made. If you do not file a lawsuit within the time period set forth, you may lose all of your rights to contest any adverse decision(s) made regarding your claim.
Sometimes either the policyholder or the insurance company will propose payment of a lump sum to buy out the insurers continuing monthly payment obligation.
Calculating the amount of a buyout involves the following issues:
- Is there a chance the impairment will go away? The insurer will often state that there is – even when that argument is absurd.
- What is the insured’s mortality (life expectancy) and how does that affect the number of monthly payments? You should never accept the insurance company’s mortality assessment. Get you own medical opinion on this.
- Does the policy provide lifetime benefits or age 65 benefits?
- What discount rate should be applied to calculate the present value of future payments?
- Is there a COLA (Cost Of Living Adjustment) in the policy and, if so, when does it kick in and how long does it apply? (Often it does not kick in until after the disability occurs and even with a lifetime benefit, the amount is frozen at age 65. Again, when it comes to assessing discount rates and present value calculations it is best to consult with an expert.
- The insurer will argue that it is under no duty to offer a buyout and will only do so if it saves money by doing so. This is true, but the Company will save a considerable amount by not having to monitor medical and policyholder updates going forward.
- The insurer will argue that a buyout mainly benefits the insured because he/she gets the money now and it becomes part of the insured’s estate regardless of how long they live.
Often, a buyout offer is simply too low to be accepted. However, for a fair amount, to some people it’s worth it simply not to have to deal with the insurance company any longer and worry about future changes in personnel, in the law, or in continued investigation, or ongoing surveillance. Insurance companies have been known to pay benefits for a time only to change position down the line.