UnumProvident Settlement Affects Social Security Recovery Process

Another provision of the settlement agreement that may be of interest to Social Security specialists is that the 24-month mental and nervous limitation will apply only after a physical condition ends. It will not run concurrently with a physical condition.

This means that if a person has a mental and physical disability, and the physical disability ends after 24 months, for example, the worker still may receive benefits for another 24 months for the mental disability. Similarly, "self-reported" condition (e.g., pain, weakness) benefit limitations will be prohibited.

Also, mandatory rehabilitation will no longer be permitted under the settlement agreement. This has been another way to coax a worker back to the work force–and a socially beneficial method at that.

The definition of "total disability" for the "own-occupation" period shall be defined as "a disability that renders one unable to perform with reasonable continuity the substantial and material acts necessary to pursue his or her usual occupation in the usual and customary way."

For the "any-occupation" period, in addition to meeting the own-occupation requirements, the definition further requires the inability "to engage with reasonable continuity in another occupation in which he or she could reasonably be expected to perform satisfactorily in light of his or her age, education, training, experience, station in life, physical and mental capacity."

Depending upon the particular policy language involved, these definitions may be more or less favorable to the insured. The better policies should have language that is more favorable. One would expect that more favorable language would still be acceptable, as the required language should be only a minimum requirement.

This settlement follows one earlier this year by UnumProvident that was a multistate agreement, which California opted out of. Interestingly, that agreement did not apparently address the offset issues found in the California settlement. The settlement contains other provisions affecting the claims process but not the SSDI part of it as directly as those discussed above.

Since all insurers will be required to meet these requirements, including appropriate policy language, the California department has issued approved policy forms. This may require insurers to refile their forms, unless the existing policy language is deemed sufficient. Since definitions are involved, insurers may have to refile their forms with amended language.

As for the claims handling requirements, insurers that already are operating in accordance with these issues should be able to continue to operate without making changes in operations.

On its face, the settlement agreement has no exceptions to the general rule prohibiting offsets. Of course, one would expect that new policy language may help to alleviate this loss of insurer clout.

The courts may ultimately have to determine whether the offset prohibition applies even if the insurer deems the insured as noncompliant, that is, in breach of the policy contract. These provisions may make group LTD more expensive in California, albeit, while making a difficult situation easier for some insureds. Without even rehabilitation as an option, the insurer will have fewer tools available.

Douglas I. Friedman, a partner in the Friedman & Downey, P.C. law firm of Birmingham, Ala., is national counsel for Social Security Disability for insurers. His e-mail address is [email protected].

The California settlement agreement prohibits using SSDI offsets except as to amounts actually received by the claimant

One provision of the settlement is that the 24-month mental and nervous limitation will apply only after a physical condition ends; it will not run concurrently with a physical condition.