April 22, 2021
LTD Benefit That is Off the Rails - Short Case Study
A recent Long Term Disability claim challenge came to light in our peer group. We were asked to offer our opinions of the possible challenges and outcomes for all parties involved. We thought you would benefit if we shared this with you.
Case: Male age 47,senior management, long term employee, diagnosed with cancer, requiring surgery and treatment, will probably be off work 2 years overall. Files LTD claim and thought he was covered for $8000 per month to age 65. He finds out he was only covered for $4000 base, and $4000 optional coverage which was never exercised. He was four months past his "optional enrollment date" and the carrier has confirmed they will not back date any enrollment for any reason.
Further Challenges: His employer is willing to pay the additional $4000 directly for the expected time off, but they are properly advised not to or they may assume the role as the insurer and may find themselves on the hook to age 65. That's about $1 million dollars.
Employee and employer hire separate lawyers to get some much needed help.
The Benefit Guys identify a number of possibilities in terms of a settlement. Most cases like this are settled before going to court and it will all come down to documentation by the parties involved. How would your company fare?
The Employer: Was an annual review of benefits conducted with this employee? Were the benefits, particularly the optional benefits discussed and offered? In what manner was that presented? Did the employee acknowledge and sign off? What is the company policy on this matter of late enrollments, annual reviews info to employees about the company benefit plan?
Is this insurance "mistake" covered on your CGL business insurance policy as illustrated here, on the TBG website? There are many other questions. This is how it will start.
The Benefits Broker: Does the Broker review coverages with the employer annually? How is it documented? How do you, as the broker, advise the employer to present and sign off on "optional benefits". Will your E&O carrier cover this if there is a claim? Many more questions about the brokers' business policies and procedures will be asked. Broker retains lawyer.
The Employee: We believe the employee will receive between $4000 and $8000 a month until back to work or turning age 65. The question is from whom. As you can see, there is a list of responsibility and accountability requirements for all parties involved. It may turn out that an excellent broker is involved who documented and presented everything properly to the employer. In fact, the employer may have done the same. Only investigation and documentation will clear it up. Maybe the employee is 100% at fault. The lawyers for the insurance companies, and for everyone involved, will figure it out. This is all preventable. The above outline is just the beginning of an "off the rails" situation.
It's a lot of unnecessary grief for everyone involved.
The Benefit Guys are familiar with the benefit challenges and solutions for today. We look forward to "helping you navigate the complex benefits landscape with creative, relevant, affordable and responsive solutions". We are like a great app which is included in your benefits package at no extra charge. We run in the background and keep things current and smooth. Why not activate us today? The password is AOR.
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