When an individual who is insured under a disability income insurance policy Cannot perform one or more of his or her regular job duties This is known as?

“Notice and Proof of Loss”: The burden of proving disability is on the insured. Disability policies require the insured to notify the insurer of a potential claim, to submit a sworn proof of loss and to cooperate with any investigation. The form and content of notice and proof of loss is determined by statute. See Cal. Ins. Code §§ 10350.5–10350.7. Proof of loss is usually required within 90 days after the date of loss. However, Courts have interpreted these provisions with varying degrees of flexibility. A delay in providing notice or proof of loss does not invalidate “any claim if it was not reasonably possible to give proof within such time.” See Cal. Ins. Code § 10350.7. Furthermore, under the “notice-prejudice rule,” an insured’s delay in giving notice of claim or proof of loss does not bar recovery unless the insurer is actually prejudiced by such delay; otherwise the delay is excused as immaterial. If an insurer denies liability prior to the time proof of loss is required, then proof of loss is waived. Finally, an insurer may be held to have waived the requirement of a timely proof of loss if the delay in the presentation is caused by the insurer or if the insurer failed to object promptly and specifically on that ground. Generally, courts have looked favorably on claims of waiver by insured on the time requirement for proof of loss in order to avoid forfeiture of benefits. See Beasely v. Pacific Indem. Co., 200 Cal. App. 2d 207, 209 (1962).

“Total disability” provisions: these provisions typically provide that an insured is totally disabled if he or she is unable to perform the substantial and material duties of the insured’s own or usual occupation in the usual and customary manner. “‘(T)otal disability’ does not signify an absolute state of helplessness but means such a disability as renders the insured unable to perform the substantial and material acts necessary to the prosecution of a business or occupation in the usual or customary way. Recovery is not precluded … because the insured is able to perform sporadic tasks, or give attention to simple or inconsequential details incident to the conduct of business …. ” Erreca v. Western States Life Ins. Co., 19 Cal. 2d 388, 396 (1942). Note that ERISA policies issued as part of an employee benefit plan governed by ERISA are interpreted under federal common law standards, rather than state law.

“Residual/Partial disability” provision: these provisions typically provide that if the insured is not totally disabled and can perform “one or more” of the substantial duties of his or her employment, they may be entitled to benefits. This coverage protects against loss of income rather than the inability to work. These provisions typically define “partial” or “residual” disability in terms of the percentage of duties the insured is able to perform and the percentage of lost earnings. For example: “‘Residual Disability’ means that due to Injury or Sickness: a. (1) You are unable to perform one or more of the important duties of Your Occupation; or (2) you are unable to perform the important duties of Your Occupation for more than 80% of the time normally required to perform them; and b. Your Loss of Earnings is equal to at least 20% of Your Prior Earnings while You are engaged in Your Occupation or another occupation ….” Partial or residual disability benefits are usually set at a percentage of total disability benefits (in proportion to the degree of disability) and are payable so long as the disability continues or until age 65.

“Own occupation” provision: “Own occupation” provisions require that disability benefits be paid if the insured is unable to perform the material and substantial duties of his/her customary occupation in the usual and customary manner and with reasonable continuity. However, the precise definition of “own occupation” differs from policy to policy based on the precise language contained in the policy. Some policies provide benefits if an insured is unable to perform the duties of the insured’s own occupation as that job was actually performed. Under these types of policies, insurers and administrators have a duty to carefully evaluate the insured’s material and substantial job duties when determining whether the insured is disabled from insured’s own occupation. In doing so, insurers and administrators generally must consider the employer’s description of the material duties of the insured’s occupation and the insured’s own description of insured’s occupational duties. To a lesser extent, the insurer may look at the description of the position as it is traditionally performed. However, the latter is typically not very relevant to the inquiry. With these types of policies, it does not necessarily matter that the insured is working in another occupation as this would not disqualify the insured from collecting benefits.

Other types of disability insurance policies define “own occupation” as “not engaged in any other occupation.” With this type of policy, if an insured is working in another occupation, then he/she will not likely qualify for disability insurance benefits.

Yet other policies define disability from an insured’s “own occupation” as the inability to perform the material duties of a vocation of the same or similar general characters is typically performed in the general economy. In this type of policy (typically found in group insurance policies), the insured’s actual occupational duties are relevant but carry less weight. Under these policies, the insurers and administrators are not limited to considering the insured’s own occupation duties, but may consider the way the occupation is generally performed in the national economy. This often involves using the Department of Labor’s Dictionary of Occupational Titles. Under these policies, the insurer or administrator will take the position that it can deny an insured’s claim if it determines that the insured is capable of performing his/her occupation generally, even if the insured’s actual occupation is more demanding or strenuous. These “own occupation” provisions give insurers and administrators more leeway in determining what job description to apply to a particular insured. However, the descriptions applied are often inaccurate and do not fit the insured’s occupation. As such, these denial decisions are often incorrect and a basis for appeal.

“Any occupation” provision: “Any occupation” means disability benefits must be paid if the insured is disabled from working “in his customary occupation or in any other occupation in which he might reasonably be expected to engage in view of his station and physical and mental capacity and given his education, training and experience. The occupation must be “gainful,” which usually means that it pays the insured at least 50%-60% of his pre-disability income. It is common for insurers to misapply this definition. For example, in determining whether the insured is “totally disabled” (under an “own occupation” or “any occupation” policy), the job market for his or her services must be considered. If employers are generally unwilling to hire persons with such a disability, the lack of employment prospects is evidence of disability. See Moore v. American United Life Ins. Co., 150 Cal. App. 3d 610, 630 (1984).

“Offset” provisions: Disability policies (especially group policies) often provide for offsets (usually dollar for dollar reductions in benefits) where income is received from other sources on account of the same disability (e.g., income from other disability income policies, Social Security disability income benefits, state disability income or workers’ compensation benefits, and settlements in lawsuits for the injury causing the disability). By far the most important of these offsets is for Social Security disability income. Often times, the policies provide that insureds must sign reimbursement agreements and apply for such benefits, otherwise, an estimate can be made.

“Elimination period” provision: Almost all policies establish an “elimination period” following onset of a disability (e.g., 30, 60, 90, 180 days) during which no benefits are payable. Under such a policy, the insured must establish that he or she is “totally disabled” continuously during the elimination period. If he or she returns to work during the elimination period, there is no coverage. See Moore v. American United Life Ins. Co., 150 Cal. App. 3d 610, 618 (1984).

“Illness vs. Accidental Injury” provisions: Disability insurance policies often distinguish between disabilities caused by illness and those resulting from accidental injury. Typically, a shorter period of benefits is provided for disability based on sickness (e.g., 2 or 3 years, or to age 65); while longer benefits are payable for disabilities resulting from accidental injury (e.g., lifetime payments). A disability results from “accidental injury” if the accident is a proximate cause of the disability. It is enough that the accident “triggered” or set in motion the chain of events that ultimately resulted in the insured’s total disability.

Limitation on Benefits for Mental Illness: Disability policies often provide more limited benefits for a disability based on “mental illness.” These provisions, which are generally enforceable, typically limit benefits to a period of 24 to 36 months. These provisions may or may not be enforceable depending on the language of the limitation provision and depending on the nature of the condition at issue. For example, conditions commonly thought to be primarily psychiatric in origin but that are organically based (e.g., autism, schizophrenia, bipolar disorders) may not be subject to the provision. See Bosetti v. United States Life Ins. Co. in City of N.Y., 175 Cal. App. 4th 1208 (2009). Most policies specifically define the term “Mental Illness” to include a specific list of mental illnesses that are subject to this provision. However, if a physical condition is also separately totally disabling, then a disability claim is not generally limited by this provision.

Preexisting Condition Exclusions: Disability policies often limit or exclude coverage for disabilities attributable to preexisting illness or disease. These provisions differ substantially and it is important to review the applicable language. Some policies require the illness “first manifest” during policy period. In order for this provision to apply, typically the insured must have been correctly diagnosed and treated for the condition causing disability before the policy was issued. If this language is used to contest the policy, it may not be enforceable, depending on the contestability period. Note that a preexisting condition exclusion applies only if the insured’s disability is substantially and directly caused by the preexisting condition. If a condition is not diagnosed before the policy issuance date, the exclusion may not apply.

“Receiving Physician’s Care” and “Appropriate Care” provisions: Disability policies often require, as part of the disability provision, that the insured must be “receiving a physician’s care” or is receiving “appropriate care” for the condition causing disability.

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