Give Workers Info Often On Their LTD Coverage

Remember when we were taught to tell the audience what you were going to talk about, then tell them, and then tell them what you just said?

Thats good advice for producers and product providers who want to avoid getting sued for selling group long term disability coverage.

The audience in this case is the covered worker. Workers need several opportunities to learn about how their LTD coverage works! Unfortunately, this doesnt always happen. Well discuss how to improve things here, by looking at three critical junctures.

1) When the employee joins the company. The employees first information about LTD typically comes during initial training. But, all too often, the worker may not listen, because he or she is being bombarded with all sorts of new and diverse information. The particulars of LTD, with its many definitions and waiting periods and formulas, are just too hard to absorb.

During the training, many workers do receive a Summary Plan Description (as detailed under the Employee Retirement Income Security Act) on their LTD coverage. (Indeed, the SPD is often presented in a benefits booklet that also describes other employer benefits.) Even so, LTD distinctions and nuances make it difficult for new workers to understand what they are reading.

Solution: Even though its hard to deliver LTD education at the time of initial employment, make an effort at least to describe the LTD benefit at this critical point in the persons work history. Plant the seed, if you will, so that if disability should later occur, reviewing what LTD is and how it works will not be totally foreign.

2) When an employee becomes disabled. This is probably the next chance you will have to educate the worker about his LTD plan. Fortunately, you are now likely to have the workers full attention. However, you may still face challenges, due to employee fear of “losing everything” and his or her resulting inability to focus on explanations of benefits. Since that explanation is key to your ability to avoid problems–like getting sued–you need to make education at this juncture a top priority.

Solution: Provide a full explanation of benefits the very first time inquiry is made, assuming the worker is seriously contemplating a disability claim. An excellent way to do this is to provide a written explanation, such as a copy of the SPD or a page from the employee booklet. (Tip: Dont assume the employee still has the original booklet. Many times, people move and/or forget where they put their benefits books.)

A second thing you can do at this juncture is to put the employee in touch with an “expert” at the employer or insurer who can help answer questions. Dont try to do this yourself, unless you specialize in LTD and know the terms of the employers contact intimately. After all, even contracts from the same insurer may differ widely between employers–in benefit amounts, waiting periods, etc.

(Note: differences in the amount and type of offset provisions may cause the most distress among claimants, usually because the employee does not understand how the policy is constructed. For instance, the employee may think he or she is entitled to both the LTD amount, which may be 60% of salary, and the Social Security disability benefit.)

The point to keep in mind is that explanations often help avoid lawsuits. The best explanation, I think, is to point out that the LTD benefit, plus the Social Security benefit, may be more than the employees salary.

Most people understand that disability should be a safety net, not a bonanza. But not all people. Some remain unconvinced–and are therefore unhappy that the expected benefit amount wont be paid–regardless of the best explanations and intentions of the employer and agent. In such cases, a lawsuit may result.

3) When you receive angry phone calls and legal actions. Should you receive an angry call, handle it carefully. A prompt response with accurate information may save the day. Similarly, if youre served with a complaint, notify the insurer and your malpractice carrier immediately.

Solution: Always think about what you are saying to the covered workers–at all times, but particularly when a dispute may arise. Also be careful with your written communications, including e-mails.

Furthermore, remember that ERISA provides you with some protection if a claim is litigated. In general, under current law, if suit is filed for benefits, the employee can seek only the benefits, and not other compensatory or punitive damages. (Note: Legislation has been proposed to change ERISAs litigation limitations of but so far it has not passed.)

Often, plaintiffs sue not only the insurer, but also the individual agent. The reason is usually to keep a case in a state court, where juries and judges may be more favorable to local workers. Here, too, ERISA can be helpful–because an ERISA claim can be removed to federal court, where judges are appointed for life and jury trials are not available for ERISA claims.

The bottom line? Give complete and accurate information, at all times, and as often as possible. Hopefully, through your efforts, the employee will become comfortable enough with understanding the benefits and be able to move on to the more important issues of how to live the rest of life in a rewarding and fruitful manner.

Douglas I. Friedman, is a Birmingham, Ala., compliance attorney for insurers. You can e-mail him at doug@

friedman-pennington.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, February 25, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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