Phillips Nizer LLP Articles

Article - Court Rules Right to Disability Benefits Should be Based on Work Performed, Not Job Title

More and more, disability carriers have been faced with claims by maturing professionals, such as doctors, dentists and podiatrists, whose day-to-day functions have evolved to administration and management, rather than principally treating patients. These professionals manage practices staffed by employees and/or independent contractors and then claim to be disabled from performing patient services which no longer constitute the major part of their workday.

Duties Then or Duties Now?

These claims often present difficult issues to resolve. On the one hand, the professionals believe that they have paid premiums for years to protect themselves from financial loss due to disabling illnesses or accidents, not fully appreciating that the policys definition of total disability usually speaks in terms of "being unable to perform the material and substantial duties" of the insureds occupation at the time of the disabling illness or accident. While the definition is designed to have the coverage move with the insureds career changes, it also has the effect of limiting the coverage where the insured shifts to a less physically demanding occupation. The converse is also true. Coverage continues when the insured changes careers to one which is physically more demanding. When a claim is made, the insurer must determine just what the insureds occupation was at the time of the disability.

Judge David Trager of the United States District Court for the Eastern District of New York has contributed a definitive opinion to the resolution of such claims. In Klein v. National Life of Vermont, et al., No. 94-CIV-0181, 1998 U.S. Dist. LEXIS 8650 (E.D.N.Y. June 3, 1998), a podiatrist had purchased disability insurance policies from three different carriers over a six-year period, starting in 1985. At the time he bought the policies, Dr. Klein worked as a podiatric surgeon in partnership with another. As their business prospered, the two partners organized a group of storefront podiatric clinics, in which a number of other podiatric surgeons were employed. By the time Dr. Klein claimed that he became disabled, the revenue from this growing number of clinics represented the overwhelming source of his income.

The carriers all denied benefits on the grounds that Dr. Klein was not totally disabled under the terms of his several policies. They argued that Dr. Klein was able to perform the material and substantial duties of his occupation as it then existed. The argument continued that Dr. Klein now had two occupations: principally, that of owner, operator/manager and administrator of a number of podiatric clinics and secondarily, that of podiatric surgeon. After an extensive audit of his books and records, the carriers jointly moved for summary judgment, making a very detailed showing of how Dr. Klein spent his workday, the billings of all the clinics, their receipts, the receipts from his own billings and the extent of his remaining personal efforts as a podiatric surgeon in the period immediately before the onset of the claimed disability.

Summary Judgment for Carriers

The Court rejected Dr. Kleins conclusory arguments to the contrary and required him to respond to the carriers detailed presentation, line-by-line, which he did, virtually conceding the overwhelming portion of the factual presentation. The result was that the Court granted summary judgment to the three carriers. It concluded that whether one approaches the question from a dual/single occupation perspective or from the perspective of determining just what was the insured's occupation in the period immediately preceding his disability, the Court's role is the same -- namely, to disregard labels and to perform an analysis of the insured's workday and the sources of his professional income. Put another way, the Court found that, based upon the evidence, podiatric surgery no longer constituted a material and substantial part of Dr. Klein's occupation at the time he became disabled. Nor did his disability prevent him from performing the material and substantial duties of an owner, operator/manager and administrator of his podiatric clinics. Dr. Klein did not appeal.