When you have been denied or cut-off long term disability benefits you have the option of retaining a qualified disability lawyer to file suit against your insurance company for reinstatement of your monthly payments. In Ontario, you have up to 2 years from the date of your denial to start your claim – but you should not wait that long – since getting your case before Judge (if it does not settle) can take up to 2 years. As a plaintiff in a disability lawsuit, you would seek a declaration made by a Judge that you are totally disabled from your employment duties within the meaning of your disability policy – as well as payment of arrears owed to you from the date of your denial to the date of the Court’s decision. There are two types of long-term disability settlements – reinstatement and lump sum settlements. Both have advantages and disadvantages.
If your insurance company decides to reinstate your benefits, the insurer will usually pay some or all of the arrears, prejudgment interest and costs (toward your legal fees) and make either full or reduced payments going forward, subject to all the normal terms of the policy. With reinstatement, there is risk that the disability insurer can cut off your benefits again in the future.
Reinstatment however, is sometimes a viable option. When claimants are quite young, or there are too many medical variables to make an accurate prediction about the future or the benefit payment is too substantial, the disability case may be best settled by way of reinstatement. A reinstatement can actually balance both parties well – if the insured’s condition improves and he or she can get back to work, then the there will be no under or over compensation. A reinstatement is actually the closest thing the claimant would have been “but for” the breach of contract by the insurer.
Many claimants, however, do not wish to entertain a reinstatement due to the relationship between the claimant and the insurance company being poisoned. After the litigation process many claimants are mentally stressed and emotionally damaged by their own insurance company rejecting them in the first place. Claimants are often afraid of adjusters terminating their claims again, putting them in a financially strapped position and forcing them to hire a lawyer and go through the litigation process again.
Sometimes disability lawsuits can result in a settlement, although you should never expect or anticipate a settlement occurring. When you issue a claim against a long-term disability insurance company, you should expect that your disability lawyer will bring your case to court before a judge to determine whether or not you are disabled from performing the substantial duties of your own job, or any occupation as defined under the definition of total disability under your policy.
Disability settlements and pay out of benefits sometimes does happen, but normally within the context of litigation. You as a claimant have the onus of proving your disability, normally through litigation, which is certainly not for the faint of heart. Disability settlements typically involve some sort of meeting of the minds between the claimant and the insurance company, as to what the future exposure for the insurer is. With individual long-term disability policies, the present value of the future stream of payments is calculated, CPP deductions are normally calculated, and then a negotiation takes place, hopefully based on rationally analysed medical evidence, the possibility of the policyholder recovering, litigation risk and the value of ending the relationship with the insurer, with a discount applied against the value of the future stream of payments. Once the present value of the future benefits has been calculated, settlement negotiation and finalization can be carried out quite easily.
When one is settling an individual policy be at either on a reinstatement or lump sum basis, it’s important to keep in mind that a waiver of premiums takes place when an individual is found disabled under this type of policy. Therefore, if a claimant has paid premiums to keep the policy in place despite the denial of benefits, he or she will be entitled to a repayment of those premiums as well as prejudgment interest on them. This is frequently overlooked.
When settling lump-sum payments under a group disability policy there are multiple factors to be considered. Normally the first step would be calculating a claimants arrears and prejudgment interest. It’s important to remember that group policies issued by employers often have many types of collateral benefits that follow along with them. This may include CPP disability, pensions, accumulated seniority and other types of enhancements that are continued while the claimant is in receipt of benefits.
A claimant’s job or employment status may also be affected by the termination of litigation. In a lot of cases, employers are waiting to see what happens with respect to the disability litigation before making a decision to terminate a claimant’s employment – or they will look to terminate employment at or around the change of definition of total disability under the policy, at the two-year mark. At that point, employers can argue frustration of contract or, in other words – that it’s reasonably expected that the you as the employee will not return to work.
There’s tax implications that must sometimes be considered when settling the LTD claim. Normally your disability lawyer will confirm in writing whether or not the disability payments that were either paid or should of been paid, were taxable or nontaxable. This is normally determined by whether or not you made a contribution to paying for your benefits as distinct from the premiums having been paid by your employer. If the premiums were paid by your employer, they are a taxable benefit. If the premiums were paid by you as the claimant, there are non-taxable. If your benefit was taxable, then the arrears paid as part of reinstatement will also be taxable. Your disability lawyer and the disability insurer would work together and the circumstances to fill out a T-1198 tax form to allow you to amortize the taxable benefits over the years that they would’ve been received so that they are not all taxable in the year in which they are received.
There are many advantages and disadvantages to different types of settlements available, when settling the long-term disability claim. The issues involved can become complex and overwhelming. It’s important that you retain the services of a qualified long-term disability lawyer if you’ve been denied or cut off your disability benefits.
Are long-term disability lawyers are based in Hamilton but represent claimants all over Ontario. Call us for a free consultation at 905-333-8888 or fill in a contact form and we will get back to you within several hours. We represent claimants at all stages of disability, who suffer all different types of chronic medical ailments and injuries preventing them from working and we would be happy to discuss your case with you.