No ‘Temporal’ Element in DI Policies, Court Rules

Disability insurance benefits flow from the time an illness prevents the policyholder of an in-force policy from working or from the time the patient requires medical care, not from the time of the doctor’s visit, a U.S. appeals court has ruled.

Two insurers had argued that the time of the doctor’s visit was tied to the start of the benefit period, but the U.S. Court of Appeals for the 7th Circuit disagreed.

Under the insurers’ interpretation, the existence of an illness would depend on the date the insured saw a doctor and such reasoning would quickly become problematic, the court ruled.

“Hypochondriacs might find a doctor who spots an illness at the earliest possible moment, while those who lack the resources to see doctors regularly might suffer for months or years and yet not be considered to have an illness or injury,” the three-judge appeals panel wrote in a decision handed down last week.

“Or what about a woman who discovers a lump in her breast, but who cannot see a doctor for several months and only then is told she has Stage 4 cancer?” wrote U.S. Circuit Judge Diane P. Wood.

Plaintiff is Pit Broker

The case involved plaintiff Eric Berg, a former pit broker with the Chicago Mercantile Exchange who suffered from hand tremors.

The tremors become so bad that he could no longer write trading pit orders and in 2007 the 48-year-old Berg decide to file for total disability benefits, more than a decade after buying two separate disability policies.

His insurance companies, New York Life, and the administrator of the policies, Unum Group, argued that they were responsible for paying disability benefits beginning only in February 2010, when Berg went to the doctor and was diagnosed with a sickness.

In April 2012, more than two years after Berg’s doctor’s assessment, Unum discontinued Berg’s total disability benefits on the grounds that Berg was only eligible for residual-disability benefits because his “regular job” in February 2010 was that of an unemployed person.

Berg sued and when a lower court ruled in favor of the insurers, he appealed.

Not only do the policies contain no “temporal language in the physician-care requirement,” the policies state that sickness is covered so long as it first manifests itself while the policy is in-force, the appeals court said in its nine-page decision.

No prerequisite as to the onset date of the illness is required to trigger the benefit, the court added. Berg also met his policies’ definition of “total disability” when he left his job as a pit broker, the court ruled.

“Average insureds would presume that their benefits will flow from the date that their malady became severe enough to prevent them from working or require medical care, not when they actually went to the doctor,” the court wrote.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.