Residual or Partial Disability: Backdating A Claim

While consulting with dentists seeking to file disability claims or who have questions regarding their existing coverage, we have seen an interesting issue raised time and again.

The issue is whether an insured with a disabling condition, who suffered a decline in income from his practice for a year or 18 months (or sometimes longer), can file a claim for disability insurance on their policy backdated to when the income declined. Such a strategy has the potential to provide a significant amount of money to an insured, depending on the loss of income suffered.

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The answer is largely dependent on the policy language, but the main issue in this analysis relates to not if the claim can be backdated, but how far back it can be backdated. Most policies require an insured to provide “proof of loss” — with time periods for such proof as short as 30 days or as long as 6 months after the commencement of the disability.

One important policy provision that would be important to analyze is the Notice of Claim provision. Ordinarily, the policy will have language such as "proof of loss" to be provided shortly after a claim occurs (typically 30 to 60 days). While those are requested time frames, these policies also usually contain language stating that proof is to be provided as soon as reasonably possible, but in no event, more than one year after the period in claim.

As a practical matter, what does this mean? Can you file a claim more than one year prior to the date of disability? The answer is yes, but perhaps the issue becomes one of whether you can receive benefits for these subject periods. One strategy to employ would be to utilize some of these otherwise “disqualified” periods to accrue the elimination period — that period that must be satisfied before benefits are payable. By using this period to satisfy the elimination, your benefits become compensable within the notice period.

An insured who has a disabling condition, and who suffered a loss of income often does not appreciate the policy provision for “residual” or “partial” disability, and thus fails to realize that benefits could be payable for the period with the loss of income. That period could also be utilized in many cases to satisfy the elimination period (the period which must be satisfied before any benefits are payable).

Thus, if an insured has a disabling condition that has caused a decline in income, most of the policies would permit recovery for partial disability for that period. The only remaining question is whether the insurance company will argue that the notice of claim was too late. Of course, the insured must be under the regular care and treatment of a doctor for the claim to be compensable.

Most residual disability policies permit an insured to determine “Prior Monthly Income” based on a choice of earnings, ranging from the best two consecutive years of the five years prior to disability, to the best calendar year of the three years prior to disability, permitting an insured to initially evaluate and determine the greatest base income to utilize for pursuing a residual disability claim.

Residual disability claims present the greatest challenge for claimants, since the issues involve financial evaluations in addition to the usual occupational and medical issues. Careful consideration must be given to best strategize such a claim prior to filing.

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Jason A. Newfield, Esq., is a founding partner at Frankel & Newfield, a national disability law firm, where he aggressively represents claimants in long term disability insurance, ERISA, and other insurance claims and litigation. He holds an AV® Preeminent Peer Review from Martindale-Hubbell and has been named to the Super Lawyer New York Metro list from 2013 — 2016. Mr. Newfield is frequently invited to speak before bar associations, medical organizations and other trade organizations regarding disability claims and has published numerous articles on Disability Insurance. He is a member of the American Conference Institute, regularly presenting to attorneys and claims personnel at national conferences on disability litigation.