Long Term Disability Claim Exposure

[Guest tdambrosia]

The Disability Income carrier for our association group replaced its own policy in 4/2003. The replacement policy has revised 'other income offset' provisions that are more favorable to a claimant. The coverage is voluntary through salary reduction.

For some reason, the association did not begin to actively market, sell and enroll employees into the replacement policy until January, 2005. The carrier continues to pay claimants benefits under the terms of the old policy, despite the replacement policy's effective date of 4/2003. There is no difference in premiums for the old and new (replacement) policies.

Should the carrier be paying claims under the provisions of the new (replacement) policy? If so, what issues or liabilities may arise from this situation? Thanks.

[Kirk Maldonado]

What do the policies state are the rules that apply in these circumstances?

[Guest tdambrosia]

What do the policies state are the rules that apply in these circumstances?

The policy is really 'off-the-shelf' coverage. Here is the only provision that I can find that might apply:

1. CERTIFICATES:

An Individual Certificate will be issued for delivery to the Insured. The Certificate will describe:

a) the benefits under the Policy;

b) to whom the benefits will be paid; and

c) the limitations and terms of the policy.

If more than one Certificate is issued under the Policy to the Insured, only the last one issued will be in effect.

The new (replacement) Certificates were not placed into use until January, 2005; however, a new (replacement) Group Master Policy was sent to a claimant in October, 2004. And therein lies the problem, a claimant has a copy of the new (replacement) Group Master Policy that provides a much different benefit than that being paid by the carrier under the old Certificate.

[Guest tdambrosia]

What do the policies state are the rules that apply in these circumstances?

The policy is really 'off-the-shelf' coverage. Here is the only provision that I can find that might apply:

1. CERTIFICATES:

An Individual Certificate will be issued for delivery to the Insured. The Certificate will describe:

a) the benefits under the Policy;

b) to whom the benefits will be paid; and

c) the limitations and terms of the policy.

If more than one Certificate is issued under the Policy to the Insured, only the last one issued will be in effect.

The new (replacement) Certificates were not placed into use until January, 2005; however, a new (replacement) Group Master Policy was sent to a claimant in October, 2004. And therein lies the problem, a claimant has a copy of the new (replacement) Group Master Policy that provides a much different benefit than that being paid by the carrier under the old Certificate.

Perhaps a time line might help:

May, 1999 - Carrier issues original DI Policy

April, 2003- Carrier issues replacement Policy

August, 2004- Claimant Files and is Approved for benefits under terms of original (5/1999) DI Policy

October, 2004- Claimant Files ERISA request and is sent a copy of replacement Group Master Policy (4/2003) by carrier.

January 1, 2005- Data Transfer of Enrolled Employees, Billing Reconcilement and New Enrollments into Replacement Policy begins

February, 2006 - Claimant files appeal citing terms and provisions of replacement Group Policy (4/2003) s/b used in processing of August, 2004 claim.

[Kirk Maldonado]

I recommend that you retain competent counsel to advise you on this matter.

[GBurns]

I agree, you need competent counsel not only to represent you if there is any action that can be taken but also to explain to you the inconsistencies, errors and/or questionable items that you have posted in this thread. It is always better to understand terminology before forming opinions.