A new decision from the United States Court of Appeals for the Fourth Circuit sends a clear warning to any physician who is currently receiving disability benefits under a long-term disability insurance policy. This decision affects physicians in Virginia, Maryland, West Virginia, and North Carolina.
Virginia Beach orthopedist Paul Krop was insured under a group long-term disability policy issued by AIG Life Insurance Company. After Krop sustained a partial disability in January 2000, he filed a claim for benefits. His claim was filed under the “partial disability” provision of the policy because, while he was no longer able to operate on a full schedule, he was able to maintain an office practice. Thus, he had suffered a reduction in income.
AIG ultimately agreed with Dr. Krop and began to pay benefits. Each month Dr. Krop received income from his group orthopedic practice. The policy had been bought by the practice in part to make sure that any physician whose income was diminished would have that diminution “made up” by the insurance policy. The policy provided that if in any month, the partially disabled physician’s income was between 20% and 80% of his pre-disability average monthly income, benefits would be paid.
Dr. Krop’s monthly income was based in part on the income for the entire group. When his income in a month exceeded 80% of his pre-disability income (because the group as a whole had a good month), Dr. Krop thought that his disability payments would be suspended for that month. The insurance company, however, took the position that Dr. Krop’s disability benefits permanently ceased even though he had the same disability and even though he may not be able to earn anywhere near 80% of his pre-disability income at any time in the future. Dr. Krop’s position before the court was that he still had years of benefits available to him for those months in which his income was less than 80% of his average disability income.
In an opinion that shocked attorneys who represent claimants in long-term disability claims, the Fourth Circuit Court of Appeals upheld the lower court’s decision that, indeed, the “good month” that the practice had caused a permanent end to Dr. Krop’s long-term disability payments.
This case sends a clear message to anyone receiving long-term disability insurance benefits to make sure that they fully understand the policy. If a claimant is working and receiving partial disability benefits, then other income must be aggressively managed to prevent a permanent and unnecessary cessation of benefits.