Types of Disability Policies Claims
California State Disability Insurance (SDI): If you’re an employee in California, you will have 1.2 percent of your wages deducted to pay into the state’s short-term disability program. The program will last a maximum of 52 weeks, and like long-term coverage, it requires medication documentation as proof.
Private Disability Insurance: Employees are often offered long-term disability (LTD) policies at work. If you purchase an LTD policy at work, it will most likely be covered by the federal law known as the Employee Retirement Income Security Act (ERISA). If you purchase an LTD policy on your own, outside of a work-related offering, it most likely will not be covered by ERISA, which makes a difference in how you can file appeals and take matters to court.
Social Security Disability Income (SSDI): If you have no private or employment-based LTD policy and you face long-term disability, you will have to rely on the SSDI program offered by the federal government. Eligibility rests on how many “work credits” you have accumulated from paying into the Social Security system (FICA taxes), and the number of credits required depends on your age. Supplemental Security Income (SSI) is available for low-income individuals who don’t qualify for SSDI.
Filing a claim under any of these programs requires that you supply sufficient medical evidence to prove that you are unable to perform the duties of your current job. Some private insurance policies may also have clauses requiring you to prove you cannot work “any occupation” in order to qualify for permanent benefits. The Social Security Administration (SSA) also requires that your disability prevents you from engaging “in any substantial gainful activity.”
Appealing a Denial
If you receive a letter denying your claim for benefits under California SDI, you have 20 days to file an appeal either using Form DE 1000A or a letter you compose. For SSDI, you have 60 days to appeal after you receive your letter of denial. There are four levels of appeal.
The first is to request a Reconsideration by someone other than the person who denied your claim. If the Reconsideration is turned down, you can request a hearing by an Administrative Law Judge (ALJ). If the ALJ dismisses your case, you can request a review by the SSA Appeals Council. After that, your only recourse is to file a Federal Court review.
If you have an LTD policy from a private insurance company and it’s covered by ERISA, you have 180 days to file an appeal from the date you received your denial letter. A second appeal is sometimes possible if the first one is turned down.
The final step is to file a lawsuit, but ERISA pretty much stacks the courtroom process in favor of the insurance company. You, as the claimant, are not allowed to call witnesses or introduce new evidence. The judge must decide the issue based on the documents submitted during the claim and appeals process and the arguments made in court by you, your attorney, the insurance company, and their representatives.
If you purchased an LTD policy on your own, then it’s likely not covered by ERISA, but the policy should spell out your appeals options.
Insurance laws in California are generally more consumer-friendly than ERISA. Your attorney can advise you on the best route to take on appealing an LTD denial.
What If You’re Offered a Lump Sum Buyout?
Insurance companies are in the business of making money, so a denial is basically in their best interest dollar-wise. Another step to protect their bottom line is to offer you a lump sum settlement. The lump sum may be in your best interest if you need a large cash infusion, but after accepting it, monthly benefits will no longer be an option.
You will need to consider whether you will be better off with cash on hand, which you can possibly use to make more money through wise investments or business opportunities, or taking the monthly payment with the knowledge that the insurer may find a way to cancel or lower your benefits at any point in the future. It’s best to involve a knowledgeable disability attorney to help you decide on the wisest step forward.