How to Get A Disability Insurance Settlement

Hi, I'm attorney Greg Dell joined by attorneys Cesar Gavidia and Alexander Palomara. And we're going to talk about a great topic today, which is something we deal with every day because it's the time when the clients are going to get money. And that deals with lump sum settlements and also lump sum buyouts. But as you guys know, there's all different stages of a claim where someone could get a buyout or they can get a settlement. So we'll talk about those different stages. We'll talk about what these settlements or buyouts mean. And we'll talk about some pros and cons as to what we've seen from the thousands and thousands of settlements that we've been involved with, with every single disability insurance company as to whether it's advantageous or not for a client to take it. And also maybe touch on some of the reasons why some of our clients have taken these settlements and why they haven't in the past. So, um, Alex, I'll, I'll come to you first and we'll talk about when is the most common time that you see a disability insurance company making a settlement offer on a long-term disability insurance claim? Typically the most likely time you're going to get a settlement offer is once your claim is denied and a lawsuit's filed. Yes, there are buyouts of a person on claim. They can be bought out of the remainder of their policy. That doesn't happen on most long-term disability insurance claims, maybe one in, I don't even know, 20 maybe, or maybe less than that. But the most time you're going to find a buyout is if they deny your claim, they deny your appeal, and then you file a lawsuit. And during the legal process, there are negotiations for settlements of that lawsuit. All right, Cesar, you know, someone got their claim denied and they're saying they don't think I'm disabled. So why would they offer me money on this particular claim? Well, you know, it's, it's also, it's not just a matter of, well, the insurance company has taken this position. They don't feel I'm disabled, but now they're offering me money. So, you know, this inconsistency just doesn't make a lot of sense. Then maybe they really do think I'm disabled. That's not what that necessarily means. The insurance company is essentially evaluating or assessing its, its risk. It's assessing whether it's going to potentially cost them more to defend this disability claim, this lawsuit, this continue perhaps through a more prolonged administrative process versus offering you a certain amount of money to just resolve the matter. So there's, you hit the nail on the head when you go, they're assessing their risk because what business are insurance companies in the risk business, they ensure risk. They hope that no one's ever going to get disabled, that they'll pay their premiums. And then the insurance company, they'll collect the premiums and the insurance company won't have to pay out. But they're also smart enough to know that every single lawsuit that gets filed against them, they're not guaranteed to win. Neither the insurance company, neither our client. So what ends up happening? They're saying, look, it becomes what I call the business to business transaction. And there's a couple factors that, you know, the disability insurance companies look at. Number one is they say, we have to pay our lawyers. There's no free lawyers for them. That's going to cost us money. If we lose this case, we're going to have to pay the claimant. And on top of that, in most cases, if they were to lose the case, we're going to have to pay the claimant's lawyers. The benefit, you take a firm like ours that a court could award anywhere from, it's a big range, anywhere from $500 to $1,100 an hour, depending upon where you are in the country and depending on the experience. Nice thing about our firm that gives leverage to a client is when you hire one of the most experienced disability insurance law firms in the country, you're going to get a much higher hourly rate, which is going to make the insurance company go, wait a second, the more we drag this out, the more we're going to have to pay this law firm that's represented here. Whereas if other people hire these law firms that do a few of these here and there, they're not going to command a high hourly rate. Hence, the client doesn't have as much leverage. Hence, the client doesn't get as big as a settlement offer. Now, Alex, the big question for a lot of people is why would I settle? How do I know when to settle? What do you tell your clients once this settlement offer or negotiation process even begins? There's a lot of things to consider. Cesar was talking about the insurance company's risk. They have a risk here. My clients have risk as well. There's a risk that you're going to lose the case. I mean, ERISA lawsuits are difficult to win because the ERISA laws really do protect the insurance company. So there's a fact that you could actually lose this lawsuit, high risk. Now, let's talk about if you win the lawsuit. If you win the lawsuit, the insurance company is not guaranteed to pay you. Let's say you're 55 years old or 45 years old for the next 20 years or 10 years or 12 years, however long your policy goes. It typically goes to 65 or 67, most of these group policies. Just because you win your lawsuit doesn't mean that the insurance company is going to pay you to the end. It's going to go back to the insurance company and they're going to start paying you benefits again if you win your lawsuit. Then what they're going to do is they're going to reevaluate your claim 12 months later, 18 months later, 24 months later. If you win your lawsuit, you're probably going to be fine for a little while because they don't want to deny the claim again and you have to file another lawsuit. The judge is going to be like, what are we doing here again? I just dealt with this case a year ago. So you'll probably be fine for a little bit, but there's no guarantee they're going to pay you to age 65 or 67. You could get better in your benefits end. You could die your benefits end. And there's no rights of survivorship. No rights of survivorship for these policies. So there's a risk you could lose your lawsuit and there's no guarantee they're going to pay you to 65. Some people just want to have a free break. They want to have a complete divorce from the insurance company because they've been dealing with the insurance company for months or years. They're like, I can't deal with you anymore. I can't deal with Prudential anymore. I need a break from these people. I'd rather just have my money, move on, and figure out my life, whatever I can do with this money and figure out what I'm going to do in the future. Now, Cesar, I'm not going to hold your feet to the fire with this one, but everyone who's watching this video is saying they're talking about settlements. What should I expect in a settlement? And I don't want someone's going to watch this video and call you back and say, Cesar, you said this number or that number. But how do you answer this question? Because I think that's the logical question anyone's going to say. What do you think my case is worth? How do you get to that? Yeah. So I always say that you shouldn't get caught up necessarily in so much of the valuation of the policy, the valuation of the benefits that you're owed, and the valuation of those monthly benefits through age 65 or 67 or however long the policy may pay, because really it's based on case valuation. Case valuation depends on a lot of things. Of course, the policy valuation, but also the issues involved in the case, the legal issues, the medical merits of the case, meaning what your medical conditions are, how strong the medical support is for those conditions, and also the insurance company. Insurance companies doing this as long as we've been doing it, we know the reputation and the proclivities of all of these big disability insurers, what they tend to do, how they tend to approach a settlement, where they often end up at the end of the day. We've managed to establish relationships with these people that make these big decisions over there for these insurance companies. And not necessarily relationships. People think relationships, oh, what does that mean? Does that mean good or bad, or what is a relationship? Well, we deal with these people on a daily basis. So of course, we're going to know who they are, how they work, what they essentially usually try to focus in on. And we're always really, really well prepared when we engage with them. So when we get down to what can they expect? Well, they can expect that oftentimes the insurance company is not just going to roll over and say, oh, here's as much as we've got. Here's all the money that we can possibly offer on this. That's very, very rare. It doesn't start that way. And it rarely ends exactly that way. Because a lot of it, going back to what we originally started talking about, was the risk and their assessment of that risk. And that changes. That changes with a lot of the advice they receive from their own counsel or their own in-house counsel. And as the case goes on and as the money is expended by the insurance company, that risk can change and the settlement offers can change. So generally, yes, it's based on what the valuation of these past benefits that they owe you are. And a valuation of this future stream of benefits, reduce the present value, and you get into all these forensic calculations. I was looking for the word of these actuarial calculations because that's how they determine what the future value is. But basically, that's how it's all assessed by them. One of the things I want people to know, because Alex, a lot of people call and let's say they have a policy. I'll keep the numbers simple and they go, look, I got five years left on my policy. I got a $10,000 a month benefit. That's $120,000 a year, five years, five times 120,000, $600,000. They owe me $600,000. And yes, but there's a thing called present value. They owe you $600,000 over a stream of payments. If you were to be eligible, if you are to survive for the next five years and yes, you will get $600,000. However, how much money if you're getting a settlement today, do you need in order to have $600,000 five years from now? So for example, and I don't know the exact number, but I think they say at 5% money doubles every seven and a half years or something like that. But the bottom line is just to keep it simple. If you were getting just say 10% on your money and I gave you $450,000 today and you put it in the bank and never touched it again, five years from now, believe it or not, that money would be more than $600,000. So likely I probably need to give you $380,000 at 10% growing from now to get there. Now the insurance company doesn't care about five years from now. They're looking at today. So anytime you start this basis of negotiating for a settlement, they're always looking at present value dollars, not the future value. And that's shocking to a lot of people when they call because they have this number that's multiplied out over the number of years. And it's not that the insurance company isn't being fair in terms of coming to the table to negotiate a settlement. That is the way it's done in any type of financial buyout of any type of product when there's a stream of payments. So that's something that's called a present value calculation that a lot of people need to understand in terms of before you even start. Then from there, the insurance company is saying, look, our worst day in court is 100% of the present value, which this present value number, if you thought it was $600,000, and in my scenario, it's really $380,000, they're thinking our worst case scenario is $380,000. So when you start your negotiation and you think your policy is worth $600,000, the most you could ever get from the insurance company's point of view is $380,000. That's the top. What's unique about these long-term disability lawsuits compared to lots of people who watch television and hear in the media are these personal injury lawsuits where you go to a trial and you ask the jury because you got hurt in an accident, you had surgery for $5 million for your pain and suffering, your lost wages, and all that stuff. None of that applies here. The only thing you can get are the benefits that you're owed. And as you said, Alex, the only thing you're going to get is the benefits from the day they denied you until the day that the court makes an entry of judgment. So it's not five years down the road. So this is a little bit of a benefit here because we have a finite amount of money. We don't have to ask the jury for some other number. We'd love to be able to do that, but there's no such thing as this extra contractual damages, bad faith, punitive damages in these ERISA-governed cases. So when people come to us, we're going to start at the present value. And where the negotiation is going to be, if either we're asking for 100% of that number or we're asking for 80% of that number, whatever the risk scenario is. And not to be surprised if the insurance company comes back and says, we'll give you 10% of that number. And where you go from there, remember, is going to be somewhere between 10% to 100%. There have been cases where you can get more maybe than 100% because now you're in it so deep and they're like, your attorney's fees are exceeding what we're even paying here. And you're like, yeah, you got to make my client whole. You got to pay the attorney's fees and you got to pay this particular judgment. But a rule of thumb to tell people, because we don't misrepresent anything. The insurance company is looking at it no matter what, no matter how good your case is usually where they think they have a 50% chance of winning this case. Unless you have a super, super strong, super strong case where it's like, we're telling you like, we're going to win this thing no matter what. And that's a rarity. They rarely go above a 50% number because they feel like if we lose this case, we're not going to owe you more than 50% of the value of the policy anyhow. We'll pay you your back benefits. And then whatever we think we did wrong, we're going to get another doctor. We're going to examine you and we're going to come after you. And that's why they're somewhat reluctant to try to pay more. But if they, a lot of times we get involved in litigation and we explain to them, look, person might have done their own appeal. They didn't present it appropriately. They don't understand the scope of how injured this person is, how sick they are, and that they really are going to have to pay them. And they don't have a mortality issue where they're going to die. And I have seen cases come back more than 50%, but I don't want people to have these false promises from other law firms. Oh, we're going to get this, this and that. Sure. You have a good case and you want to go the distance. We'll go because more often than not, we're going to make more money with the attorney fee award. Then we're going to make off of the settlement for the client. So, but that's the client's decision ultimately at the end of the day. And we don't control that. We'll do whatever the client wants and let them know that upfront. So that's the challenge of these particular cases. If everyone wants to know the number, but it's hard. Now we're going to do this last part a little bit quickly. The buyout offers that come were completely different than everything that we've been talking about. And Cesar, you can talk about these lump sum buyout offers that come in a claim that is not a disputed claim. Meaning insurance company goes, we agree. We're going to pay you the rest of this term. There's no doubt about it. This is a business decision. We just want to buy you out of the claim. Of course. How do you handle those? So most often in these cases, and it's and people need to understand it's not every disability insurance company that necessarily offers these lump sum settlements or that will agree to engage in negotiations or in discussions to resolve your case through a lump sum settlement. But there's a good percentage or majority of them that will. And like you said, it really does come down to a business decision and it's really a mutual business decision, a mutual business decision by the insurance company and a business decision by you, by the claimant, by the insured. And going back to talking about the valuation, because they've paid you up to this certain point. So we're not talking about any back benefits that they necessarily owe you. Now it's about this future stream of benefits, reduce the present value and also mortality and morbidity risks and different things that are calculated into that particular calculation. But what people need to understand, because I know that when I'm contacted by someone who's either had a lump sum settlement offer extended to them, usually they're, what does this mean? And they're very apprehensive about it. They fear that maybe the insurance company, if they don't accept it, that they're going to get their benefits cut off. That is extremely rare. There are certain companies that will extend a, and I won't call it a lump sum settlement offer, not in the context that we're talking about here, but it's more like one of these like brush off, we're going to just throw this number at you because the next thing we're going to do is cut you off. And you can usually tell because those offers are typically very, very low, not even proportional to- I call those the strong arm settlement offers. Of course. Yeah, exactly. So that's not to be confused. Lump sum settlements are not to be confused with those. These are in cases where the insurance company, and I often tell people, look, not that you should be complacent or be sitting on your hands or obtain any false sense of security from this, but the insurance companies accepted that they're more likely than not going to be paying you out for a long period. And based on that assessment, they're making the decision to extend a settlement offer to you to resolve this and see if they can just essentially close the books on the client. And Alex, there's a handful of companies that do these buyout offers. Do you negotiate these buyout offers for clients? Of course. Actually, there's one or two companies that make an offer and it's not negotiable at all, but we negotiate these buyouts for the other companies all the time. Now, a few things you have to consider is that as compared to a settlement of a lawsuit, a buyout offer is going to be a higher percentage of that present value of your claim. It's going to be almost night and day, much, much higher than a settlement of a lawsuit percentage. Now, always keep in the back of your mind, though, that the insurance companies, they're selfish. They're doing it to save money. They're doing whatever's in their best interest. So someone's going to say, oh, my present value is $100,000. Pay me $95,000 to make me walk away. They're not going to do that. They're going to do something closer to 75% at most, maybe 80% very highest, or something lower than that because they want to save money. They pay you 100% of the present value. They're not saving any money whatsoever. So they're not going to ever pay you 100% of the present value, pay you at a lesser rate, but we negotiate as high as possible. And we know the tricks of the trade. We know what they do with their actuaries, with their numbers, what percentages they like to settle at, and the arguments to make to make them go a little bit higher, push them a little bit more, get a few more months of benefits out of them at the very least. But yes, we negotiate a regular basis, but settlement versus buyout, they are different. The same thing in the end, but it's a complete divorce from the insurance company. And again, one thing to consider, there's no taking back fees. If you take a buyout from an insurance company or settlement from an insurance company, and you go to Vegas, put it on black and red shows up, you can't go back and say, hey, listen, I need my benefits again. You can't do that. So it's a complete divorce. And go ahead. No, no. I was going to say, but, but, uh, you know, I often say it's also guaranteed. Yeah. And people, you know, people are like, and I recommend this and we work with the client and their financial advisor, but you're not going to beat, you're not going to get the money and necessarily beat the return, you know, more often than not, because no matter what, it's never going to be more than, like you said, 80% of what's the present value. Just, it just doesn't happen because the insurance company is offering this because they want to save a little bit of money. They want to clear out their insurance reserves because then it comes off their books. So it's no longer a liability. And then, you know, if people who take it more often than not, a couple of things, one, they're thinking, you know what? I want to try to work. I feel like I'm in a prisoner. And they get that feeling like I can't work. People are watching me all the time. I got to send their claim forms. And if I try, no good deed goes unpunished. They're going to punish me and say, oh, you can work because you tried. So here they are on claim for many years because these never happened until at least two years. They've been approved for social security disability, or they have an own occupation definition of disability where they, in that scenario, they may be able to do some other kind of work, but more often than not, they're not able to do any work. So they come to us and they go, yeah, I want to try to work, but I don't want to lose my benefits. That's a potentially a good reason. If you really think you're going to be able to do something or you have an opportunity, some people have a, um, a big business opportunity, a business opportunity or something where they go, Hey, if I get this lump sum of money, I ran the numbers. I put it into this investment. I'm going to beat what that return is. That's a, you know, that's a real reason to do that. Other people, and I don't like when this happens, they're just saying I'm sick and tired of dealing with them. I just, I, it's not worth it. It's just not worth it to me. The stress I get from them every month and, and, and they're threatened. They do this, they do that. I send them something. They say they don't get it. They make me go to this doctor. They make me send them this paperwork. I'm tired of it. I just want to settle. I don't like that because no one should ever settle out of fear because they're potentially leaving money on the table. But a lot of people get that reason as well. So, um, a final reason though, some people are scared they're going to die. They could be 53 years old and have 15 more years or 14 more years into their policy. They say, if I died in tomorrow, if I get in a car accident, my benefit ends, I have nothing from my family. So they say, we'll take, I want to buy out of my, of my claims to ensure that I have some money in nest egg and I can invest it. And if something were to happen to me, it's there. And, and that's interesting. You mentioned that because that's a, that's kind of unique in these disability claims, right? This, this buyout, if you're working for a company, you can ask for a buyout of the remainder of what your potential employable, you know, salary is for the next few years. And if something does happen to you while you're employed and working, there are no survivorship to your, to your salary, to the income that you're earning. Right. So that's something that's interesting with these disability policies is that there is that potential opportunity that if you are struggling with something that could potentially be life-threatening and you're concerned about leaving something for either your family or, or something that could potentially grow over time, then the buyout is, is I guess those are some of the benefits to that. Right. But along those lines, the insurance company, if someone's like, God forbid, got a bad diagnosis or something, and there's someone tells them, Hey, you have two months to live. You can't, the disability insurance company is going to ask you what's going on. You can't go to them and say, Hey, I want to buy out now. I want to get five years. It doesn't work like that. They're going to nine out of 10 times ask. And they may even want you to go to a doctor to certify that your medical condition is not anything other than what it currently is. And, and they make you file a form or something to certify to say, nothing's changed. This is my current medical condition. Because then otherwise the only remedy they do preserve is that if you commit fraud, they can come back after you or your estate or your family, God forbid you got the money and you died or something like that. So that's a real important point. But we've unfortunately seen people who got buyouts, turned them down, call us back a year later, and they had some horrible disease and they want to get the buyout again. And then we're like, look, we'll ask them, but the likelihood is, is they're going to say what's going on with your client medically. And that's a horrible situation, but you shouldn't take a buyout to bet against yourself. That that's not a good reason because the likelihood of that happening is slim to none, you know, for somebody, it's very, very low. But if you feel like, Hey, if I got four or five years or six years of a benefit and I got that from my family and that's all they ever got. And I had that certainty. I'm good with that. Then take that buyout, but not for the other reason to say, I'm scared they're going to cut me off or, but in the scared of cutting me off, if you have a doctor who every time you're going to saying, look, I'm not filling out this paperwork anymore. I don't think you're disabled. And you think that's just that. And we've had that too, where like my doctor doesn't support me. I can't find another doctor. That's a good reason to take a lot. So there's so we, I mean, when you've done thousands of buyouts and settlements like we have, we can run through all of them and tell someone. So what I recommend, if you're someone out there who's considering a settlement, wants a buyout, feel free to call Cesar, Alex, myself, any of our lawyers, no matter where you live in the country, we'll always provide you with a free consultation and we're available to help you anywhere. Thank you.