Total vs Residual Disability

Hi, I'm Greg Dell here with attorney Frank Daris and attorney Steven Jessup. And guys, today we're going to talk about total disability versus residual disability. We've talked about this years ago, but I keep getting a lot of calls about it recently. And I figured let's do an update video. Let's talk about what's going on in the industry and what we're seeing in policies because things do change, but since it seems to be that the disability insurance companies may be leaning on this a little bit more now to get from a total to residual, I want to talk about why they're doing it, what it means, and kind of use it as a basic tutorial for people because they just think they're disabled and why am I not getting paid? So Frank, I want to pitch to you because you've been dealing with total versus residual for more than 40 years. And it's a big, big part, probably the majority of the cases that you handle deal with this issue all the time. And the reason it always comes up and reaches us a lot is because the disability company says you're residually disabled, not totally disabled. So we'll touch on that in a minute. But let's start with the basics. What's total disability and what's residual disability? Total disability means that you can't do the important material and substantial duties, and we measure it at the onset of the claim. We look backwards in time to the 12 months or six months before you said you were disabled. And then we look at time spent, money, got to have a doctor who certifies your disability and you should collect your benefit. Okay. And then what is residual disability? Residual disability is probably the most egregious and misunderstood provision of a policy and the smarter you are, the quicker they're going to hang you with your own words. Example. I remember when they sold me my disability policy a hundred years ago and the agent said to me, Oh Frank, gosh, you're a lawyer. You're a trial lawyer. If you can't do some of your duties as a, as a lawyer, they're going to pay you whether you could go be a law clerk or paralegal, or you could own a gas station and sure enough, I said to myself, wow, if I get a stroke, they're going to help me work my way back. If I'm partially disabled, I work sometimes and I have a loss of earnings. This is the best thing since white bread. Oh my gosh. Well, carriers now are reframing a total disability claim as residual to save millions and millions of dollars a year. Example. What if you, Greg said, I bought a total disability, I bought a policy and it's got life benefits. You paid a rich premium plus extra for life benefits beyond age 65. Did you know if you were residual under your contract, your benefits end at age And by the way, most people remember what they told me. Gee whiz, Frank, if you can't do what you did, you're going to get paid. Even if you're doing something else wrong, the smarter you are, the more they're going to use your own words to hang it. Example. I'm a surgeon, heart surgeon. I work two days a week doing major heart surgery. Tuesday, Thursday, Monday, Wednesday, Friday, I do pre and post follow up care and treatment. Carrier gets you on the phone after your claim and says, gee, doctor, I see that you're doing pre and post-op follow up care and treatment. And you do surgery. So you're doing some of the important duties of your occupation. You're in the office three days a week. So for my doctor, he admits, yep, I'm doing pre and post-op. The carrier doesn't tell him it's time spent or money earned. Probably earned $60,000 twice a week to do heart surgery. Chiropractic. I can't do the manipulation, the putting the patient in line of drug to deliver got chalk or whatever the method is, but he says to the carrier, well, yeah, I've got a vitamin and a dispensary in my chiropractic practice. I also have rehab. You can come in, you can get adjusted and we've got physical rehab for you. Carrier says, oh, you've got these other two areas, do you manage those? Oh, yeah, I manage those. Lawyer, PI lawyer, who is a trial lawyer, get disabled. You can't stand or you can't sit or you can't carry or you can't focus and concentrate. For the PI lawyer then that sits in on a call or the carrier says, do you manage the firm? Oh, yeah. Do you write the checks? Oh, yeah. Do you have a business manager? Well, I pretty much run my law firm. Well, that's not the important, that's not the material and that's not the substantial duties of being a personal injury lawyer. Got to do the work, try the cases. What good is a business owner if you don't have cases? But the carrier reframes the claim as residual and then you get to the brain damage of the policy. What is a residual claim? What's the definition of residual? You could do some but not all. But wait a minute, does that mean you're going to require me to have a loss of earnings every month? Yes. How much? Some say 15, some say 20. Well, wait a second. Do they average them for the year? And if I have a 60% loss, I'm getting 60% of the benefits? No. We have to calculate your pre-disability earnings and that's where you need a disability financial expert. So as you go down the path, they're going to find 17 ways that you're residually disabled and my smartest clients are the ones that do the fatal claim mistakes with their own words, which is why I say to them, what's on your tax return? Can I see your tax return? What did your tax accountant put on there? By the way, are you on your wife's company as one of the officers? Got any rental real estate? Well, Frank, what does that have to do with me being a surgeon or a lawyer or a chiropractor or a dentist? Well, got rental income, carrier's now going to say dual occupation. These claims need a lawyer at the front so we prevent a wrongful reframing and residual. I've had thousands and thousands of cases where the carrier's tried to do that. Well, we got involved at the beginning. We saw the tax return. We talked to them about their business. We looked at time spent, money earned. We could then reframe the claim, make sure we protect total disability, which Greg means you could get life benefits if you paid for it and you get the full policy benefit without any offset. You have to be so careful. And also Steven, as you know, if someone has the true total disability or an own occupation definition of disability, and we see this a lot with our physician clients or, I mean, mostly with the physician clients where maybe they're running a, the substantial material duties of their occupation were doing surgeries, but really if they weren't doing surgeries, they wouldn't be in business at all. And then a lot of our doctors are like, look, it's my hands, it's my neck, it's my back, it's my shoulders. I just don't feel safe anymore doing surgery, but I want to do file reviews. I want to do independent medical exams. I want to work for an insurance. You know, I want to work for an insurance company to do health insurance type claims. And then the disability insurance company says, well, if you do that, we think you're going to be residual. So how do you go about analyzing a claim, getting into the details of whether the doctor is residually or totally disabled? How do you prove the insurance company to say, no, this doctor is total. Well, I mean, from a doctor standpoint, it's different than other things because you do have production reports and codes and see where the earnings come from. Um, I had a cardiothoracic surgeon sometime ago, and I remember similar to what Frank had said, they'd investigated, well, you're spending this time in the office as well. And we think you can still do that. And the argument clearly was, is the only reason why he's in the office seeing people is because they've been sent to him to do the surgery. So people don't come to see him unless he can do the surgery. Right. So, you know, just really focusing on what's the moneymaker, what is the actual duty, you know, an orthopedic surgeon is getting paid to do surgeries and everything. And it usually is in furtherance of getting to that point or post care, you know, post care with regards to it. So I think it's really getting into the documentation of the codes that were billed. Um, and then also in the policy language, like you said, you know, the true total your own occupation is the ones where, you know, you're totally disabled if you can't do the material substantial duties of your job, even if you're working in some other occupation. But a lot of people I've spoken to think they have that language, don't have that language of that nature. So then it can kind of get into shades of gray and what the insurance company is going to say, Oh, you practice medicine, but you're doing some other type of medicine. Well, that's a doctor, a doctor's a doctor, you know, same thing they may try to do with lawyers and stuff. So I think Frank is, is right on point with the idea of how they're going to try to set it up from the inception. And I've even seen on two Northwestern mutual cases I have where they both found that the client isn't totally disabled, but would be residually disabled, but one of them's not working, but they're still paying her a total disability benefit. And on the other client, he was an optometrist and now he is just doing insurance submissions for the practice. So they're using that as his residual occupation. Otherwise they wouldn't pay him because they didn't think the medical is enough to support that he couldn't do the duties of an optometrist, even though he's not doing them at all. So I've even seen where they've tried to, you know, client's not working whatsoever and they're still trying to claim it's a residual because medical is not strong enough to make it totally disabled. But in that, but such good, such good information. Three examples for our physicians. You know, I had a plastic surgeon that was totally disabled. There was no question that he couldn't do hands on plastic surgery. His wife had an esthetician business where she did Botox and fill and all the good stuff to stay young. Guess who an esthetician needs to be able to work independently? A medical director. I said, as I got the tax returns before he filed the claim, I said, do you realize that since you pay yourself, your wife pays you handsomely to be her medical director, that the substantial material duties at the onset of the claim are you as a plastic surgeon clearly can't do it, but you're a medical director for your wife's company, you're earning money. In that particular case, we were able to look at the tax returns for the last couple, three years. We looked at it and said, before you file this claim, let's eliminate the medical directorship and you're going to have one job, hands on plastic surgeon. It eliminated an issue that had he gone in, just submitted the claim, figured, well, gee whiz, you know, I'm just a medical director, but she paid him a hundred grand a year, you know, put that in front of a jury. A hundred grand is real money. So pre-claim prep, where you're hired to look at these policies that pay tax-free dollars of 15, 25, 50,000 a month, it's real money and most of the time we see the doctor not saying, well, I got real estate, rental real estate. Well, yeah, you own the building. Well, wait a second. Do you charge your own practice rent for your building? Well, of course I do, Frank. That's my, my own real estate investment. Well, who manages the real estate? Do you have a person, a manager or somebody that does all this? And well, I do it. Well, no, you don't. Because the important material and substantial duty at the onset of the claim is you as a doctor, hands on. It's not the rental real estate. For a very small amount of money, we can get a rental manager to be able to manage the property. Two things that come up a lot when it comes to, to, to physicians. Dennis, here's the worst part for, for Dennis. They're great. How many chairs do they have? They call them operative theaters. Dennis may have five chairs. They go from one chair to the next, to the next, to the next. What if they can't stand? They're a standup dentist. Think about your own dentist, right? They either sit down or they're standup. He can't stand. Now, what does he do? He's totally disabled, except the carrier gets him on the phone and says, by the way, Greg, did you hire some dentists to replace you in the practice? Well, yeah. Who hired him? Well, I did. Well, you're managing, of course, and supervising, because boy, your name's on the door, sure enough, they're managing, they're supervising your own words. Carrier says, you're a business owner. In addition to being a dentist, the tax returns, you sign the checks, you're managing and supervising, you hired them, right? You hired and fired them. Sure enough, the carrier says, an important aspect is managing the practice. What could we have done? We get in early, we have the business manager sign the checks to make sure that he's not doing any hiring and firing, and he's a hands-on dentist for purpose of total disability. I think the takeaway is clear that if you plan appropriately, then you can set yourself up in the best manner possible to maximize your policy, which would be for total. The areas that we see these issues come about is that it's the person who wants to continue to work in some kind of capacity. So it's rare, even though you brought up an example where someone's trying to say I'm residual and the disability company says they're not, I often will consult people who, you know, they have like the lingering medical condition where they're saying, I'm having trouble at work. I'm not sure if I'm going to be able to continue working. And I'll suggest to them, let's set you up first as residual, where you cut backs. You're not able to work for as much time as you did before, or eliminate one of your important duties. Then you'll definitely fall into the residual and have a percentage of loss of income. Then you'll go residual. And then from there we can transition into a total, but a lot of the heavy litigated denial claims we get is the person who is doing something. There's no dispute about it. And the issue becomes, is what you're doing a substantial and material duty such that now you're not eligible for total and where the rub comes and where all the dollars are and where you say the disability companies beat claimants out of millions of dollars is either on a lifetime benefit, the amount of money you can make, the period of time you're going to get paid. Some of these policies, especially in the group world, God forbid you go over a 60% or 80% in one month. Say you were like a salesperson or something and a commission came in or whatever, and you get more than your 60% of your predisability earnings, the policy ends. It is over or say you didn't know. And you took a bonus that particular month and it went more than what your predisability monthly earning was. They end the policy on you. We've come from, you know, we just emerged from COVID. COVID was the biggest blessing for disability insurers on the planet. Why doctors weren't operating, chiropractors weren't treating. You couldn't go to the dentist because the dentist was closed. So as the carrier looks backwards in time to figure out time spent, money earned, 22 and 23, we came out of COVID middle of 23. Now the hospitals are open. Now the dentist is back on and all the people are coming in to get their teeth cleaned and we all have rotten teeth after two years, right? Or the chiropractor, people are now going. COVID was a blessing for disability insurance companies because if you look at the onset of the claim, they're looking backwards 12 months or 24 months, then they add up the number of surgeries or the number of chiropractic patients they see, or the number of patients they see as a dentist. COVID was a blessing to carriers because most of my smart clients think that back to the sales pitch, Oh, if you can't do what you did, you're entitled to your total disability benefits, no matter what else you're doing. Not after COVID, more important to get some sage financial disability insurance expert advice, frame the claim properly. So you get paid. I think the takeaway from this video is that if the disability insurance company is telling you that you're residual, you may not be, you may very well be total. And a lot of people don't unfortunately plan ahead. And then they figure, Oh, okay. I'm getting 50% of my benefit, or maybe I'm getting all my benefit. Cause I have the loss and they're okay with that, but it may not be right. You may have left hundreds of thousands of dollars or millions of dollars on the table, and they still do write lifetime policies. People go, Oh no, those were the good old days. No, they're still, they're still out there. You can get it. I mean, Berkshire writes a lifetime policy. It's a scaling policy. If you're totally disabled before age 45, and then it cuts back 5% each year until 65. So these are all things that have to be looked at. But if you're someone out there who has this kind of claim, we've handled this hundreds of times, you know, arguing residual versus total heavily litigated, super experienced. And also if you're considering filing a claim, reach out to us because we will plan. I mean, how many claims have you had that have contacted you a year, if not two years before in terms of shaping their practice in terms of what they're going to do? I mean, you gave one example. Sometimes people go, Frank, I can't really do this, but I'm going to bring in an associate. And then they bring in the associate. They don't file their claim. The associates doing like 75% of the work. And then they say, well, you know, and then you file the claim two years later and they go, well, you're really just a business owner. That's what you're disabled from because this associate was doing 75% of the work. So why are you telling us you can't do it? And their own words, their own words. I said at the beginning of this, their own words where you say to the carrier, I can't focus. I can't concentrate. It's not safe for me to do my practice. God forbid you had a mental nervous problem. And yet there you are on the phone. You're focused. You're on task. If you're a physician, chiropractor, a dentist, you're rat a tat tat in your medical history. And the carrier says, didn't sound disabled, Steven. If you were focused, you were on task. They record those phone calls. Why, if you've got a mental nervous claim or anxiety or what have you, are you on the phone with the carrier anyway? Why are you writing letters? If you are writing letters, I hope you're misspelling every third word and your punctuation is terrible. So the carrier can see they're not focused. They're not concentrate. There's, there's absolutely no sustained attention. So stay out of it. Let somebody do the heavy lifting and especially in these total versus partial or you leave many, many dollars on the table. Well, if you're someone out there who has a total or residual disability claim, whether it's a policy you bought on your own or an employer provided policy, feel free to reach out to Frank, Steven, myself, any of our lawyers, no matter where you live in the country, we're available to assist you. And we'll always provide you with an initial free phone consultation.