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Dentist with a Standard Insurance Disability Claim Gets Drilled

Outline: Dentist sues Standard Insurance Company because disability benefit was reduced each month by disability policy purchased from American Association of Endodontics.

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The Standard Insurance Company has sold disability insurance policies to thousands of dentists throughout the USA. Most dentists that purchase a Standard disability policy for their dental practice and employees are not aware that their monthly benefit may be reduced by any other group disability coverage they own.

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for pension plans in private industry. ERISA does not require any employer to establish a pension plan. It only requires that those who establish plans must meet certain minimum standards. The law generally does not specify how much money a participant must be paid as a benefit. ERISA requires plans to regularly provide participants with information about the plan including information about plan features and funding; sets minimum standards for participation, vesting, benefit accrual and funding; requires accountability of plan fiduciaries; and gives participants the right to sue for benefits and breaches of fiduciary duty. ERISA also guarantees payment of certain benefits through the Pension Benefit Guaranty Corporation, a federally chartered corporation, if a defined plan is terminated.

In a recent case decided by the Third Circuit Court of Appeals, a dentist sued The Standard Insurance Company because his $10,000 monthly disability benefit was reduced each month by the $1,500 disability policy he had purchased from the American Association of Endodontics (AAE).

This dentist was being paid benefits under both disability policies, but he believed that his Standard disability policy did not clearly state that his insurance through the AAE would be a deductible source of income. The Standard Disability policy stated that "any amount received because of disability under "another group insurance coverage" would be deductible income, but any "individual disability insurance policy" would not be deductible. The Standard policy did not define the words "another group insurance coverage" or "individual disability insurance policy", therefore the dentist argued that his contract was ambiguous.

Your ERISA Group Disability Policy May Not Be Worth What You Think It Is

In most insurance contracts the law is that any ambiguity contained in a contract should be construed in favor of the insured.

Unfortunately, the Standard Policy in dispute in this case was a Group policy governed by ERISA and it contained a discretionary clause. A discretionary clause is language in the disability policy which states that The Standard "has discretionary authority to determine eligibility for benefits or to construe the terms of the plan."

There are more than 12 states that have abolished discretionary clauses as they are unfair to disability claimants and give too much power to insurance companies. The Standard Insurance Company has been on the front line in many states trying to battle to keep discretionary clauses in disability policies.

When an ERISA governed disability policy has ambiguous language and the insurance company is authorized to interpret it, courts "must defer to this interpretation unless it is arbitrary and capricious."

In this recent case, the Court's hands were tied and they were forced to defer to the contract interpretation used by Standard. The end result is that this Dentist thought he had $10,000 of monthly disability coverage from The Standard, but he only had $8,500 due to the $1,500 individual policy he maintained for many years.

Any dentist or medical professional should always pay close attention to all of their disability policies. Group Coverage is cheap for a reason. Individual disability insurance policies usually do not contain any set-offs and they are not limited by the vicious discretionary clause.


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Cite: Journal: Disabled World. Language: English. Author: Dell & Schaefer. Electronic Publication Date: 2012/06/01. Last Revised Date: 2016/03/20. Reference Title: "Dentist with a Standard Insurance Disability Claim Gets Drilled", Source: Dentist with a Standard Insurance Disability Claim Gets Drilled. Abstract: Dentist sues Standard Insurance Company because disability benefit was reduced each month by disability policy purchased from American Association of Endodontics. Retrieved 2019-11-19, from https://www.disabled-world.com/disability/insurance/dental/drilled.php - Reference Category Number: DW#477-9052.
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