Knowing the steps in a LTD legal claim
For the purpose of this post, we are focusing on the last stages of LTD litigation.
It is devastating when a long term disability benefit application is denied. This also applies to the termination of regular benefits. When your world is seemingly falling apart, the thought of litigation can be overwhelming. Thankfully, there are lawyers who specialize in this area of law who will typically represent this type of claim on a contingency fee. In fact, it is common for your lawyer to cover all the costs of litigation. In such a situation, it is imperative that your lawyer move quickly to obtain the necessary medical evidence to prove entitlement to benefits.
There are three paths to resolution:
(1) Trial. Either you win, or you lose.
(2) A negotiated settlement before trial where the LTD Insurer admits that they made a mistake, and reinstate your benefits, with the payment of arrears.
(3) Reaching a negotiated settlement where the insurer agrees to buys-out the policy (also called a surrender of the policy) for a larger sum of money, and you give up all rights under the policy forever.
Reinstatement vs. Buy-Out
LTD insurers very rarely go to trial unless they have an extremely strong case on the merits, or there is a novel point of law. In fact, there have been less than 10 LTD trials in Atlantic Canada in the last 20 years. This said, it is much more likely that your claim will resolve by a reinstatement or buy-out. LTD Insurers will usually resist a reinstatement, if at all possible. Insurers will always prefer a buy-out, as long as the terms make sense from an economic assessment. Buy-outs are typically negotiated quickly, as they are usually favourable to the Insurer. If you insist in having your benefits reinstated, litigation will normally last an extra 3-6 months.
When you have a surrender versus a reinstatement, you will pay a significantly higher amount of legal fees, and you will lose all the other benefits that are often attached to the LTD policy (i.e. waiver of life insurance premium, life insurance coverage, medical coverage).
However, trials are not a perfect solution. The trial judge is only able to speak to your entitlement to LTD benefits until the day of the trial. This means that the judge cannot award you benefits into the future. The trial judge can award payments of past benefits, costs, interest, and in rare circumstances, damages for bad faith and punitive damages. The issues surrounding bad faith and punitive damages, are complex, and will be addressed in a future post. Trials are incredibly stressful events, whether you set it down before a judge or jury.
In an upcoming post we will talk about the all the factors that need to be considered when deciding whether to hold out for reinstatement, or to accept a surrender.