According to Ray Bourhis’ Insult to Injury in 1945 congress enacted the McCarran-Ferguson Act, which prevents the federal government from enacting any insurance consumer protection. Period! Out of the millions of pages of regulations and laws there is not one single word that regulates insurance practices.

Most states have enacted their own laws against unfair insurance practices that makes it illegal to:

• engage in unreasonable delay
• underpay, terminate, or deny valid claims
• put their financial interests above those of their policyholders
• conceal benefits from claimants
• interpret policy ambiguities against insured
• use their superior size or wealth to intimidate or undersetlle claims
• force policyhoders to sue them in order to obtain benefits due

Insult to Injury goes on to explain that not a single state has an insurance department that has the authority to sue an insurance company on behalf of a cheated claiment. What most state’s department of insurance (DOI) do is investigate whether insurers are violating unfair practice laws and fine them. It is rare that a state fines an insurance company.

In 1974 congress enacted ERISA and orginally was designed to protect retirement benefits against mergers, acquisitions, and other corporate activities that might endanger a retirement plan. ERISA, when originally enacted, had nothing to do with state regulations.

In 1987 Justice Sandra Day O’Connor wrote an opinion regarding the case Pilot Life v. Dedeaux. As a result the legal rights to protect policy holders from fraudelent and bad-faith insurance practices by the states was all but eliminated. It is an ironic twist that the McCarran-Ferguson Act that prevented federal regulation of insurance companies was extended by a Supreme Court ruling.

Currently ERISA eliminates all state insurance protections on all policies purchased at work. Because ERISA provides no remedies for misrepresentation the consumers who acquire their LTD policy through work have no anti-fraud or bad-faith protections under federal or state laws. None!

On April 7, 2003, the Supreme Court of the United States handed down a decision on State Farm Mutual Automobile Insurance Company v. Campbell, which restricted the amount of punitive damages that a state court could award. Punitive damages, said the Court, had to have a “single digit” relationship with actual (compensatory) damages awarded. That is, if damages range from $200,000 to $300,000 the punitive damages would be limited to $2 million or so.

On February 18, 2005, President Bush signed into legislation a law that he had personally proposed. The law effectively banned all state court class actions and forced them to be filed in federal court. He said that it would protect Americans from “frivolous litigation.”

Learn more about LTD claims made under both ERISA and non-ERISA. Read Ray Bourhis’ Insult to Injury.

If you are someone who has never been denied a long-term disability claim or know someone who has had the unpleasant experience, then you might think that the book is sheer fantasy. Coming from the perspective of having someone close to me who has gone through the LTD grinder this book reads more like a Shakespearean tragedy that leaves you with a heavy heart. Just knowing that people across the U.S. are being denied LTD simply because someone in a nondescript office ‘feels’ that the person filing a disability claim ‘should’ be able to work is both disturbing and unconscionable.

Glass lists 15 common mistakes that LTD claimants make when filing a claim and 7 nasty things that LTD insurance providers plant in contracts to be used later to deny you benefits. The contract provisions mentioned are not required by any state or Federal law. Most employers are unaware of their existence or how they will be used against disabled employees who attempt to file a LTD claim.

The author advises you to get a copy of your disability contract (it must be furnished to you within 30 days of a written request to an employer) to see if any of these provisions are mentioned:

• The insurance company has the “discretion” to determine your benefits.
• You only get paid benefits if you can’t perform “each and every” important duty of your job.
• Your benefits are limited to 24 months if your disability is caused or contributed to in any fashion by mental illness, depression, or anxiety.
• You benefits are not payable, or are limited, if your illness is fibromyalgia, chronic fatigue, chronic pain, or any illness where the symptoms are “self reported” and thus not “verifiable” by a blood test or other diagnostic study.
• Your benefits will be terminated if the insurance company says you could work part time in any job, but don’t.

If you find any of those provisions in your contract seriously consider purchasing your own LTD insurance policy. Tip: don’t go through an employer and if you have your own company do not use any company funds to purchase the policy. If your employer or company becomes involved, in any way, when you acquire a LTD policy, the plan may fall under the ERISA guidelines. This even means if you found an advertisement for a LTD plan stapled to a bulletin board at work.

If your LTD benefits fall under ERISA you should be aware that any money paid to you is taxable income. On the other hand, if the LTD policy falls outside of ERISA’s oversight, then the benefit paid to you will be tax free. That is something to consider when most disability policies provide coverage that ranges from 60%-66% of your income.

It is worth mentioning that 99.9% of all LTD claims that are denied fall under the Federal ERISA guidelines. If your policy does fall under ERISA, then see ONLY an attorney that specializes in ERISA. These attorneys are extremely difficult to find, but do not give up until you do find one.

One thing that Glass dispels is the false belief which most of us have—that what an employer (or Human Resources employee) says means something to the insurance company. However well meaning your employer or HR person is, it means absolutely nothing to the insurance company. Insurance companies do not care if the owner of the company ‘knows’ that you are disabled, much less what someone from HR ‘thinks’. [In Robbery Without a Gun you'll learn that insurance companies care even less about what your doctor has to say about your condition---and the courts support this thinking.]

He also advises you to be cautious when the insurance company provides a ‘free’ consult to help you with your Social Security Disability claim. It only helps the insurance company to move you into a position where they can later deny your claim. Another important point is that some insurance companies will deduct the legal fees for the services they provided you in obtaining your SSDI benefits from future payments.

As mentioned previously, this is not a thick book, although I’d suggest that you read it with a pad and pencil by your side because you will want to take notes. There are a lot of nuggets of knowledge to mine and any one of them you might find priceless.

At the root of Health Net’s decision was that the insurance company rewarded employees for canceling high dollar value policies with claims for medical treatment. Health Net’s employees were also expected to meet a quota for the number of cancellations. Bates was able to produce internal communications that exposed the insurance company’s practice.

Health Net had rewarded itself with more than $35 million by rescinding policies with claims between 2002 and 2006. The Los Angeles city attorney, Ricky Delgadillo, had ironically brought a suit against the insurance company a day before Bates’ record settlement was announced. In LA’s lawsuit Delgadillo alleges that Health Net illegally terminated over 1,500 policies.

If Bates’ award follows what has happened to other large settlements the $9 million dollar award will be appealed and dragged out in the courts for as long as Health Net’s attorney’s can manage. The amount that will be paid to Bates will most likely be far less than the reported $9 million.

Bad faith lawsuits, like the kind against Health Net, continue despite large settlements. In previous years several Long Term Disability insurance companies had their hands slapped for the same type of practice as Health Net’s. Unfortunately, there is no real incentive to stop. Even if Bates’ award is not reduced, Health Net has still profited handsomely for their efforts.

Sadly, the employees who participated in the Draconian practice of denying insurance claims, because of financial rewards, will never feel the hurt and pain that they have caused to so many people. They will not have to look into the faces of their victims or have to walk a day in their shoes. Certainly, those employees had to know what they were doing was illegal–yet they let Health Net continue the practice. 

Is the insurance industry serious about bringing a halt to the practice of canceling policies based on quotas? Probably not, but maybe there are some smart attorneys who are willing to create a whistle blower fund that pays for evidence of cancellation quotas so they could pursue class action lawsuits.

Because so many people live from paycheck to paycheck a disability is often catastrophic. In fact, ‘medical reasons’ is the leading cause given for bankruptcy as well as foreclosures. Despite the new bankruptcy laws, intended to provide a series of gauntlets before bankruptcy is granted, the number of bankruptcies is once again on the climb.

NOTE: Long- term disability insurance doesn’t mean you are protected from financial loss. Disability Happens has articles on lawsuits filed against insurance companies for not providing coverage promised.

This writer personally knows of one case where an individual payed for her own long-term disability insurance through CNA insurance. She had been out on physical disability for one year during which time CNA insurance did a co-pay with the state.

When the year was up and CNA insurance was going to have to pay the benefits on their own this woman received a letter from CNA insurance denying her benefits. CNA insurance said that someone with her type of surgery should be better and should be able to work.

The CNA insurance employee who denied her benefits had never examined her. In fact, not one representative from CNA insurance, at that time, ever examined her. The woman had no less than five doctors who said she was 100% disabled. Eventually, even SSDI said she was 100% disabled.

CNA insurance felt no pressure to pay because they knew the case would be heard in the Federal Court. What that meant to CNA insurance is that the most they would have to pay the plaintiff would be the benefits originally due her. They also knew that the Federal court does not allow punitive damages in this type of case, which means finding an attorney would be next to impossible.

If you have been denied disability benefits, from a company like CNA insurance, and unable to find an attorney to handle your case the most likely reason is that the benefits come under the rules of the Employee Retirement Income Security Act (ERISA).