Beware of Own Occupation Insurance Disability Claim Benefit Denial Tactic

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jul 16, 2021

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In the 1980’s and 90’s several major insurance companies offered what are known as own occupation insurance policies that quickly became popular among white collar professionals. As insurance companies attempted to win customers and gain market share, they added increasingly generous benefits to these policies. This proliferation of benefits resulted in several insurance companies overwriting the terms of the policy to the point where they may not be able to administer claims and still make a profit on the policies.

Recognizing this problem, insurance companies have responded by attempting to deny or settle claims for less money than they are worth. Own occupation insurance, like any insurance policy, is profitable to the insurance company if it receives more in premium payments than it pays out in claims. Because the generous benefits of the own occupation policies, the claim amounts can be quite high and, as such, any claim faces a chance of being denied or settled for less than the claim is worth.

Advance Pay and Close – Reducing Your Own Occupation Disability Benefits

When a company denies individual disability insurance claims, the holder of the policy is likely to dispute the denial. The policy holder may even contact a disability insurance lawyer to help pursue their benefits. To avoid the messiness of claim denials, several providers of own occupation insurance policies have developed a different practice designed to reduce the amount of money they pay out in disability insurance benefits known as Advance Pay and Close (APC).

After you file an own occupation disability claim, your insurance company may attempt to settle it by sending you a check and a letter. As the letter will explain, the check is an amount of money based on an estimate of how much time you will be out of work generated by the insurance company’s in-house physicians. If the insurance company’s doctors determine that your disability will keep you from work for six months, then the check will reflect six months of benefits.

The letter explains the terms of the APC and generally the following provisions:

  • The check covers the amount of time you will miss work due to your disability;
  • You will not have to fill out any additional claims paperwork;
  • The check is an extra contractual agreement and does not change the terms of the existing policy;
  • Accepting the APC does close the current claim, and should you elect to reopen your claim in the future and the insurance company will require you to start the claims process all over again, and will recover all of the money should it find any evidence of fraud or misrepresentation in any part of your claim paperwork.

As the APC is separate from any other disability insurance benefits found in your own occupation insurance policy, it does not account for benefits you are due to receive after you return to work.

TIP: You do not have to sign anything to agree to an APC. All you have to do is deposit the check, and you have agreed to the terms outlined in the insurance company’s letter.

Companies that use APC’s include: Paul Revere, Provident Insurance, Equitable Insurance, Minnesota Life, Standard Insurance, Northwestern Mutual Insurance, and New England Financial. If you have an own occupation insurance policy with one of these companies, you may receive an Advance Pay and Close offer as a response to your benefits claim.

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Critics of APCs Believe Insurance Companies Use Them to Discourage Legitimate Claims

Critics of the APC method argue that the insurance companies are buying their customers off. Insurance companies are counting on the fact that policy holders who receive a large check, avoid a difficult and cumbersome claims process, and, in most cases, return to work anyway, albeit at a lesser salary, are not going to pursue the full range of benefits available under their own occupation insurance policies. Because the policy holder has been paid, and returns to work, the insurance company makes it seem like it is better for them not to file valid future claims, even though they are entitled to lost wages compensation benefits still available to them under their policy.

Opposition to the policy argues that the APC exists as a preemptive tool in the insurance company’s back pocket. By appearing to do the insured party a favor, the company in fact may pay significantly less money under the policy because it avoids paying the disability insurance benefits owed to policy holders who return to work and neglect to refile their claim.

TIP: Note that the APC does not change the terms of your own occupation insurance policy. You may still collect any continuing benefits that you are owed. Your claim process may be difficult and lengthy, but the APC does not preclude you from pursuing one.

Using a Disability Insurance Attorney

If your claim has been denied, you have received and accepted an APC, and you feel your individual disability insurance policy entitles you to more disability insurance benefits, you should consult an attorney. If you elect to consult with a disability insurance attorney, keep the following in mind:

  • Most long-term disability attorneys offer free consultations and are paid on a contingency basis;
  • You can do so at any time, and at any point in the process. Whether you have just had a claim denied, just received an APC letter, just cashed the check, or have since gone back to work, it does not matter;
  • You can file a claim, and potentially a lawsuit, for money that the insurance company should have been paying you during the time your claim was denied or not filed because you were discouraged to do so by the AP;
  • Several people consider the claim denials and APC letters generated in response to own occupation insurance policy claims to be in bad faith. A handful of states have bad faith laws that can award you additional damage if a judge or jury agrees your insurance company acted in bad faith when it responded to your disability insurance claim;
  • A lawsuit, successful or unsuccessful, cannot cancel your own occupation insurance policy or the disability insurance benefits that you are entitled to receive.

TIP: Many disability insurance lawyers will offer you a free consultation. It does not hurt to bring your own occupation insurance policy to them, explain your claim and your insurance company’s response to see if you are owed more money than you were given.

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