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How Do Disability Insurers Define “Disability” in a Policy

L. Jason Cornell, Esq. Jan. 10, 2023

“Disability” is an important term when making a claim for short- or long-term disability benefits.  ERISA was enacted to promote the interests of employees under employee benefit plans, including protecting contractually defined benefits.  Each disability policy should have a clear definition of “disability” so that the parties understand when coverage is triggered under an insurance policy.

In a recent disability case, the court discussed the insurer’s definition of disability when considering whether to grant an employee disability benefits under the policy.  See Logan v. Prudential Ins. Co., No. 2:20-01742, 2022 WL 16836642 (E.D.Cal. Nov. 9, 2022).  The employee in Logan was a claims adjuster for an insurance company who fractured her ankle after falling from a ladder.  She ultimately had surgery on the ankle, however, she soon realized the ankle was not healing properly.  

The employee in Logan submitted a claim to Prudential, however, Prudential denied the claim. Exercising her rights under the policy, the employee sued Prudential in federal court.  In issuing its decision, the court looked at the language of the policy to see how it defined “disability.” 

The policy in Logan defined disability using three criteria. First, the employee must be “unable to perform the material and substantial duties” of their “regular occupation” due to “sickness or injury.” “Material and substantial duties mean duties that:  are normally required for the performance of your regular occupation; and cannot be reasonably omitted or modified.” Next, the employee must be under “regular care of a doctor.”  Finally, disability requires the employee must have sustained a loss in monthly earnings of 20 percent or more due to that sickness or injury.

Understanding a disability policy’s definition of disability is critical to establishing and receiving benefits. Disabled employees need to provide admissible evidence that shows they are disabled pursuant to the terms of the policy.  Failure to do so is certain to result in a denial of benefits, which can be catastrophic for an injured employee. 

The employee in Logan successfully established a disability claim, in part, due to the court finding her record evidence satisfied the policy’s definition of disability.