Why You Must Act Immediately if Your Long Term Disability Insurance Benefit Is Underpaid

Most employers in Chicago provide employees with short term disability benefits, long term disability benefits, or both, in the event you are not able to perform the duties of your occupation because of illness or injury. Many employees who participate in those plans only focus on whether their claims for such benefits are approved. But a dispute can arise even if the claim is approved, where the insurer or plan administrator under calculates the monthly benefits due to you. The only way to know for certain if you are receiving the correct amount of benefits is to consult the governing plan documents, which may consist of a plan document created by the employer, a summary plan description, and/or an insurance policy. This applies equally to disability benefits or pension benefits.

The plan documents generally define the benefit percentage. But the dispute can arise because the benefit percentage is applied to the wrong base of earnings. Some plans include overtime, commissions, or bonuses in the covered earnings, while others do not. Another area in which the administrator or insurer can miscalculate your benefits is by applying the incorrect benefit percentage if the plan provides a different benefit for different classes of employees. I have had cases where there is a disagreement as to which class of employees the participant falls into. Sometimes the administrator does not include cost of living adjustments when the plan requires it to do so.

Even if your claim is approved, it is extremely important to confirm your benefits are being paid at the correct amount. If you do not, and too much time passes, you may become barred from seeking a higher benefit payment. That is precisely what happened recently in a case out of Massachusetts, Riley v. Metropolitan Life Insurance Co., No. 12-10531 (D. Mass. Sept. 11, 2013). In that case, the applicable statute of limitations was 6 years, but the claimant challenged the benefit calculation more than 6 years after the claim became payable by filing an action under ERISA § 502(a). Riley argued that disability benefits are analogous to an installment contract, and that each payment is a separate violation. The court noted the trend to treat the claim as accruing upon the first alleged underpayment, rather than a separate accrual for each underpayment, and held the claim was barred by the statute of limitations.

The applicable limitation on legal actions can be significantly shorter than 6 years. In Illinois, courts apply a 10 year period unless the plan document further limits the period, but in my experience, most plans do limit the period to 3 years or less.

When receiving disability benefits, you should not delay in confirming the calculation of your benefits is correct. A simple miscalculation to the tune of $300 per month could cost you tens of thousands over the term of your disability. If you have questions regarding your long term disability insurance benefits, contact an experienced ERISA lawyer.