Area of Law: Personal Injury
Answer # 494
Things to consider before agreeing to a settlement with the insurance companyRegion: Ontario Answer # 494
If you have filed a claim for long-term disability (LTD) insurance benefits and the insurance company has denied your claim, you have options. You can appeal the insurance company’s decision, file a lawsuit against them, or negotiate a settlement.
Making a settlement with the insurance company means that both you and the insurance company agree to a payment amount, which is almost always less than the amount you originally claimed.
Why settle instead of going to court?
Many lawsuits for disability benefits do not end up going to trial. Settling a matter is much faster and less expensive than going to court. Therefore, in most cases, the insurance company will be willing to enter mediation in order to negotiate a settlement. It is highly recommended that you have a lawyer represent you who has experience dealing with LTD claims and insurance companies.
Things to consider
Before agreeing to settle your LTD claim, as opposed to suing in court, it is good idea to think about a number of things, including the following:
- What is the nature of your disability? Is it ongoing or will you eventually recover?
- Do you need money now?
- Are your medical bills currently being paid?
- Will your medical costs continue?
- Are you fully aware of all of your options?
- Will you hire a lawyer to help with mediation and negotiating a settlement with the insurance company?
- Do you understand the offer being made to you by the insurance company?
- Will the settlement be enough for you in the short-term and long-term?
- Many insurance companies would rather settle out of court so they can avoid paying any additional fees and expenses.
- A trial could take months even years before you are awarded any money if you are successful. A settlement would pay out immediately.
Types of settlements
There are generally two types of settlement options your insurance company could offer: a reinstatement settlement, or a one-time lump-sum settlement payment.
A reinstatement settlement means your insurance company only agrees to pay the LTD benefits you were denied – known as arrears – which cover benefit payments from the date you were denied up-to and including the date of the settlement. This type of settlement often includes an additional amount for interest and some of your legal costs.
A reinstatement settlement does not guarantee that any benefits will be paid after the settlement date. Therefore, after the settlement date, your insurance company may assess your situation and then choose to:
- continue paying your LTD benefits, referred to as futures, or
- terminate your LTD benefits at any time after the date of the settlement.
A lump-sum settlement is one payment that your insurance company will pay you. It is a full and final settlement of the following claims:
- LTD arrears – benefits you would be been paid up-to and including the date of the settlement,
- LTD futures – benefit payments made after the date of the settlement,
- legal costs, and
Advantages of a lump-sum settlement
If you decide to sue for benefits, even if you are successful, judges in a LTD case are only able to award disability benefits up-to the date of the trial. After the trial, the insurance company can terminate your benefits at any time. Similarly, with a reinstatement settlement, payments may end after the settlement date. A lump-sum settlement, however, could guarantee you an amount that covers a LTD benefit beyond a trial or settlement date.
Disadvantages of a lump-sum settlement
However, a lump-sum settlement offer will usually be for an amount less in comparison to the amount that could possibility be paid over time. Insurance companies generally will offer an amount that avoids paying out more over a long period of time, and which also saves them other costs, such as for a long and expensive trial.
Signing a Settlement Claim form
If you do settle with your insurance company, before you are paid you will be required to sign a settlement claim form, also known as a full and final release.
The settlement claim form is proof that you are agreeing to the settlement amount, and a promise that you will not pursue any further action in court against the insurance company. This is your formal acceptance of the insurance company’s offer. This release sets out the terms of your settlement, and ends your claim for the LTD benefits covered in the settlement. In the case of lump-sum settlements, it also ends your involvement with your disability insurance company.
The following are examples of terms commonly found in a release:
- You are finally and permanently settling your claim for the benefits specified.
- You are forever giving up the right to claim such benefits in the future, even if your medical problems get worse.
- You are permanently giving up your right under the Insurance Act to dispute, litigate, appeal, apply to vary, or to proceed to judicial review by a court, concerning the benefits which are the subject of the settlement.
- The tax implications of the settlement may be different than the tax implications of the benefits described.
Get legal advice and help
Negotiating a settlement for LTD benefits can be a difficult and confusing process. Each policy is different. A personal injury or disability insurance lawyer can help you understand your policy, notify you of any deadlines, guide you through the claim process, review your forms and documents and deal with the insurance company. This will help ensure that you will get the benefits you deserve in a timely manner.
Even when an individual has a legitimate cause for claiming their LTD benefits, often insurance companies will initially deny the claim, or offer an amount much lower than asked for.
If you or someone you care about suffers from a long-term disability and has disability insurance, contact our preferred lawyers, Bergmanis Preyra LLP . They can help you get the LTD benefits you are entitled to, even if your claim was denied. They offer a free consultation and do not charge up-front fees.
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