A recent $1 .4 million recovery by a pediatrician in a disability insurance lawsuit may serve as a valuable lesson for members of the medical profession. The case reads as a rea1-life version of the Grisharn novel The Rainmaker, including the unfortunate maneuvering of a major insurance company to avoid its obligations.
The case setting is the 1980s when many insurance companies were aggressively marketing a special form of disability insurance coverage to professionals such as doctors. The policies are known as ‘own occupation’ coverage, providing disability insurance benefits in the event the insured professional cannot perform the duties of his or her ‘own occupation.’ The example often used is the physician who was a surgeon at the time of her disability, who can no longer perform surgeries because of the disability. Even though the surgeon could still perform the duties of a physician (and obtain gainful employment in many other fields), she would be entitled to full disability payments because she was unable to perform her own occupation, i.e., a surgeon.
As time went by and insureds began to become disabled under the special definition of these policies, many of the insurance companies realized that they had bitten off more risk than they wanted to chew. This area has now become a fertile breeding ground for litigation, as more and more insurance companies seek to limit or avoid their exposure.
In the case in point, a pediatrician could no longer examine and treat patients because of a severe, well-documented back disorder. He was astute enough to have obtained two sets of these “own occupation” policies several years prior to the onset of his disability, paying hundreds of thousands of dollars to both of the insurance companies for premiums over the years. When he became disabled, he applied for his benefits under both sets of policies, believing that his foresight had paid off so that he could remove the financial burden of his disability. One of the insurance companies properly acknowledged his disability and paid his full benefits each month. The other insurance company, however, raised one unsuccessful excuse after another in an attempt to avoid paying the benefits.
The pediatrician consulted with his attorneys from the outset of his attempt to obtain his rightful benefits to make sure that his case was well-documented and properly administered from the early stages of his long battle.
First, the insurance company claimed that the pediatrician supposedly defrauded it in obtaining other insurance coverage. It was demonstrated to the insurance company that there was no fraud under the circumstances. The insurance company then shifted its position and claimed that it had no obligation to pay any benefits because the pediatrician supposedly breached a ‘condition’ of the policy by obtaining other insurance coverage. When it was pointed out that there was no such ‘condition’ anywhere in its own insurance policy, the company offered a nominal amount to buy out the policy.
The pediatrician was then forced to pursue his rights in Federal Court where he sought not only the monthy benefits that had gone unpaid, but also the present value of all of the future payments for his life expectancy – under an innovative legal theory called ‘anticipatory breach.’ It was learned in the lawsuit during questioning of one of the company’s former employees (who had resigned abruptly when the company was asked to produce him for an examination under oath) that he actually determined that the pediatrician was entitled to insurance benefits, but the company’s claims manager directed him not to pay the claim anyway.
The company then asked the Court to dismiss the case, bombarding the pediatrician with extensive papers claiming that it could cancel the policy because a purported condition of the policy was breached. The motion was defeated, and the pediatrician obtained the right to present his case to a jury. Shifting again to the next battle, the company sought to show that the pediatrician was really an administrator of a medical practice and not principally a practicing doctor. The company (1) enlisted a team of accountants to review and analyze virtually every book and record – hundreds of thousands of pages — maintained by the pediatrician and his medical practice; (2) hired its own physician to examine the pediatrician’s medical condition; and (3) extensively questioned the doctor and his office manager under oath. All along, the company was trying to force him to give up the case for various sums of money, well short of the full benefits.
After all this extensive scrutiny, the company then finally admitted in Court that the pediatrician was indeed totally disabled. With only one legal issue remaining, the company finally agreed to settle the case on the eve of trial for nearly $1 .4 million, well in excess of the past monthly benefits.
This case study reveals valuable lessons:
- Seek legal advice from experienced counsel at the earliest stage of any potential legal issue or dispute. (How often do physicians themselves lament that patients could have been successfully treated if only they sought medical attention sooner?)
- Do not surrender or compromise your rights when presented with an uncooperative insurance company.
- When you have rights worth fighting for, do not hesitate to resort to our justice system and the counts to pursue and enforce those rights.
- Persevere in litigation even in the face of vigorous opposition.
- Compromise and resolve your case when the time is right.