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Long-Term Disability Insurance and ERISA Claims for Business Owners

As a business owner and entrepreneur you have dedicated almost everything to the development of your business, to the employees that rely on you and to your family. Along the way, you either purchased directly or earned as part of your compensation package a long-term disability insurance policy. Why did you do this? To protect your family if illness required you to step-down from your business.

So, after taking these wise steps and securing long-term disability insurance, you now face the unbelievable – an insurance company that had no problem collecting your premiums but now denies your claim for long-term disability benefits. Unfortunately, for the insurance company, this "game" is all about revenues and profits (i.e., the more claims denied the greater the profit). For you, this is all about your family and removing unnecessary financial concerns and burdens while you focus on your health and a recovery process.

If this is a situation that you are faced with, the following information about long-term disability insurance and disability claims may be of assistance.

Identify Your Plan and Corresponding Legal Rights

The legal rules and laws that apply to Long Term Disability (LTD) Insurance and LTD claims varies between "group plans" and "individual plans". LTD group plans are typically provided to employee owners as part of their compensation package. Individual plans are those LTD disability plans that you – as an individual – purchase directly from an insurance company. The laws and contractual issues governing the denial of your LTD benefits vary between group plans and individual plans. Federal law (ERISA – Employee Retirement Security Act) governs group plans, while traditional state contract law governs individual plans. With Individual plans when faced with a denial of your LTD claim, your immediate course of action requires the commencement of a lawsuit. With group plans governed by ERISA, when you receive a denial of your LTD claim, there is a technical appeals process that must be followed.

Timing is Critical

When faced with a disability with uncertain or slow onset, it is critical to immediately file a claim. Far too often business executives and business owners are met with claims denials based on a late claim or an insurance company that insists that the condition was pre-existing. It is better to file a claim early then wait and face an unnecessary denial. If your claim is denied, you must act promptly as there are contractual and legal obligations that mandate an immediate appeal or challenge process.

Secure Critical Insurance Documents

When filing a claim, your long-term disability insurance policy is critical. Within this document will be critical terms and information relating to the benefits elimination period, coverage dates and filing deadlines. If your plan is covered by ERISA, by law the insurance company is required to provide you with a "Summary Plan Description" (SPD). The SPD will include a description of critical policy terms that you must be aware of.

The unfortunate reality is that the law surrounding the filing, denial and appeal of long-term disability claims is one that is highly technical and procedural. LTD insurance companies look to maximize profits through the denial of claims and procedural lapses by the claimant. So if you are facing the filing of a claim or the denial of your claim, understand the basics and consult with an experienced disability insurance lawyer about the protection of your legal rights.

Charles Internicola

by Charles Internicola
National Business and Franchise Lawyer

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