Long Term Disability insurance is based on the basic premise that you are too disabled to work, and that you are insured for a percentage of your pre-disability income. This percentage can vary anywhere from as low as 50% to as high as 80%, depending on the wording of the policy along with the riders contained in the policy.
You know what your pre-disability income was. But your long term disability insurer does not.
Chances are, your long term disability insurer has never heard of you, met you, or hasn’t the faintest idea what you do for a living until you’ve applied for long term disability insurance.
Once you’ve applied, the only way the insurance company has a chance to get to know you is on paper; based on the forms you’ve submitted to them in support of your application for long term disability insurance.
A very important form is the Employer’s Statement, or Employer’s Declaration.
This form is important for a variety of reasons. The form will confirm a variety of information including but not limited to:
- that you were gainfully employed at the time of your disability
- your first day of work;
- your last day of work;
- your job title;
- the number of hours you worked per week
- your job duties
- your salary, bonuses, commissions
This last point confirming your income is very important. It’s based on this employer’s confirmation of income which the insurer bases your monthly long term benefit.
If you are entitled to 60% of your monthly gross pre-disability salary, and you were earning $5,000/month, then your long term disability benefit (exclusive of any applicable set offs) would amount to $3,000/month.
In the example above, you were earning $5,000 gross per month. But what happens if the person in HR makes a mistake and indicates on the form that you were earning $3,000 gross per month. At 60%, that would translate in to a monthly benefit of $1,800, leaving you with a $1,200 monthly shortfall.
Our long term disability lawyers found it very interesting that the insurer does not rely on tax returns, T4s, or salary details contained in the employment file when calculating the initial long term disability benefit. Instead, they rely upon these forms completed by the employer.
It’s not unheard of for the employer to make a mistake in completing these forms, thereby prejudicing the disabled client. This can result in the disabled client being put at a loss, and can result in a situation where the employer must be sued for erroneous reporting if the situation cannot be rectified.
Fixing a mess like this sounds simple. And often, it is. The insurer will get a hold of the employer and indicate that the monthly reportings of the employer don’t correspond with the reported income on the tax returns, T4s, paystubs, and what’s in the employment file. A reasonable insurer should see that the numbers don’t jive and that an error was made. This also assumes that the employer will confess about their misreporting error.
But sometimes these mistakes aren’t easily fixed. Sometimes employers are non-responsive, insurers are unreasonable and will take advantage of the employer’s error in an effort to save money. This may lead to a situation where the employer has to get drawn in to the litigation. Further complicating matters is when the employee is unionized and does not have a cause of action in Superior Court against his/her employer on account of the terms contained in the collective bargaining agreement. Any dispute must be pursued by way of grievance through the Union. Often long term disability disputes are outside the scope of practice or expertise for Unions. Getting to the bottom of the quantum of one of their members’ incomes for the purposes of a long term disability dispute won’t be a priority. The Union has other big fish to fry. The process will only get delayed and potentially derailed much to the chagrin of the disabled plaintiff. All of this isn’t fair.
What can be even more harmful to the disabled Plaintiff is that because their claim was under reported at first instance, the insurer’s reserves have been under reported based on that lower projected income as well. This will result in less money being available to a disabled claimant to get the claim resolved in an expedient period. Getting the reserve level adjusted to reflect the increased reported income can take a long time. It can take a few internal meetings, or perhaps a call or email depending on the insurer. Regardless, the additional layers of bureaucracy within the insurer to make the change happen can slow things down or leave a scar on an otherwise meritorious case which can’t be wiped away.
Pro tip: Check to see how much income your employer has indicated you were earning prior to your disability on the form they completed for your Long Term Disability. You know your earnings best. If the reported income seems wrong, tell your employer and insurer about it immediately. The faster this mistake can be rectified, the better. If your employer and long term disability insurer are non responsive or are giving you the run around, then put your concern in writing. That way your personal injury lawyer can go back to your correspondence for the purposes of your law suit and rely on it in support of your claim to a greater monthly long term disability amount.
Ask that your employer provide you with a copy of any forms and correspondence which they submit to your long term disability insurer in relation to your claim. Keep these documents so that you can show your personal injury lawyer.
Finally, don’t panic. The last thing you need in your life is more stress. Lawyer up with a competent, capable and experienced personal injury lawyer so that they can help take the burden off your shoulders and get you the results which you deserve. Fighting these cases against large, multi national, multi billion dollar insurers is not a fight you should take lightly, and certainly not on your own.