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kotak: what to expect from a long-term disability settlement

here's what you need to know if you're forced to sue your insurance company after they deny you disability benefits.

by nainesh kotak

oct 24 2022

3 minute read

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what to expect from a long-term disability settlement

even if your claim goes the distance in court, judges are relatively limited in what they can order, following a full hearing of the evidence. getty

when people get sick or injured and take time off work, they’re generally assuming that they’ll eventually recover, and things will go back to normal. but what if that doesn’t happen? what if you file a long-term disability claim, and your insurance company denies it?

this can happen for many different reasons: insurers may disagree with your doctor’s assessment that you can’t work, for instance, or they’ll suggest you get a job in another field. by the time you’ve been forced to sue your insurance company in court for an unfair termination of benefits, the relationship has often soured and moved beyond the point where it can be repaired.

a lump-sum settlement can mean a clean break

if you decide to file a lawsuit to resolve a long-term disability claim denial, you should realize that if you win your case, that could mean having your disability benefits reinstated, but more likely, it could mean a lump-sum payment. a lump-sum settlement can provide the clean break from the long-term disability benefit that many disabled individuals are looking for in protracted or difficult long-term disability lawsuits.

in a 2019 study on long-term disability terminations by a research committee of the canadian institute of actuaries, featuring data from most major insurance companies operating in canada, mental disorders were the leading cause of disability claims at 25 per cent. musculoskeletal disabilities (such as tendonitis or repetitive strain injuries) ranked second at 22 per cent, and cancers were the reason for 14 per cent of claims.

even if you attempt to return to work or your long-term disability benefits are reinstated, there is nothing to stop an insurer from subjecting injured or ill workers to rehabilitation or “ work hardening” programs, or even terminating benefits again after some passage of time.

that’s part of the reason why so few long-term disability cases end up going to trial — many disabled workers end up accepting a lump-sum payment somewhere along the way that severs the relationship with their long-term disability (ltd) insurer for good.

even if your claim goes the distance in court, judges are relatively limited in what they can order, following a full hearing of the evidence. when the decision goes in favour of the insured person, the result is typically a reinstatement of benefits, plus payment of arrears owing.

for some disabled workers, that could be the ultimate aim; the return to work and a return to “normal” life. but for others, their medical condition may prevent them from being able to return to any form of employment. in these circumstances, they might be happier and it may be more in their interest to walk away with a lump-sum payment.

lump-sum settlements offer injured workers a way to ensure some measure of financial security into the future, without the frustration and humiliation that often characterizes the relationship with a hostile insurer.

in addition, clients who opt for a lump sum are able to take control of their funds, investing as they wish in their retirement, family expenses or to pay off debts. the money can also be passed on to family and friends as part of the person’s estate, should they die . moreover, if the long-term disability benefit is taxable, there are often favourable tax advantages to a lump sum settlement.

the size of a lump-sum settlement will differ in every case, depending on many individual factors, including the value of the policy’s monthly benefit, the strength of the worker’s medical evidence, the length of time left in the policy, and its type: a private policy or a group plan offered by an employer.

on the downside, the finality of a lump-sum settlement can be unsettling, and a wrench for some clients. typically, part of the deal is that the insured person must sign a full and final release that relieves the insurer of any further obligation to them, which means that there is no going back on the agreement.

whether there will be a settlement differs from case to case, but from the moment a lawsuit is filed, your lawyer should remain open to the possibility of settling if that’s the situation that works best for you. early mediation can often result in serious settlement talks between the parties.

nainesh kotak is the founder of kotak personal injury law, a firm focusing on protecting their client ’ s rights to justice and obtaining the compensation their clients deserve. he also serves as the chair of the long-term disability section of the ontario trial lawyers ’ association.

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kotak: what to expect from a long-term disability settlement

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a lump-sum settlement can mean a clean break

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kotak: what to expect from a long-term disability settlement

here's what you need to know if you're forced to sue your insurance company after they deny you disability benefits.

a lump-sum settlement can mean a clean break

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