Lump Sum Settlements


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Lump Sum Settlements

Long Term Disability claims, whether governed by ERISA or Insurance Bad Faith, are sometimes resolved by settlement. Disability settlements most often occur in the litigation process or after a person has been receiving LTD benefits for a period of time. In the latter circumstance, the disability insurance company will offer a “buy-out” of an Long Term Disability policy to completely resolve future benefits to the claimant.

We assist LTD claimants with “buy-out” offers as much as possible, depending on the timelines. It’s important to seek legal advice as quickly as you can if you receive a buy-out offer, because there are usually short timelines associated with the offer. Also, many insurance companies will offer to pay a certain amount of your long term disability attorney’s fees to help you secure legal advice. You have nothing to lose in speaking with an attorney about the buy-out offer and your options, especially if you do so very soon after receiving an offer.

Settlement usually consists of a lump-sum payment to resolve past and future long term disability benefits, as well as any other claims that could be at issue in your matter. Future disability benefits are generally calculated to the maximum benefit period under the long term disability plan or policy and discounted to present value. Sometimes, there are arguments for a past-due interest rate on wrongfully withheld benefits. Long Term Disability lawyer fees are usually included in the overall settlement and are extremely difficult to get separate from a lump-sum settlement in ERISA cases. It’s also important to be mindful of any potential offsets to your monthly benefits (such as Social Security Disability benefits) and how those offsets could impact the value of your LTD insurance policy claim.

If you are looking at settling your long term disability claims, you should anticipate that the insurance company may try to settle for a percentage of your overall claim value. How high that percentage will be depends on the strength of the medical evidence, your age, the type of disability, and the stage of the claim at which the plan terminated benefits. It is common for the insurer to offer less than half of the total value. That may seem unfair, but there is no guarantee that a claimant will prevail in ERISA cases. For this reason and others, settling can be an attractive option. A settlement will never make you whole; by its nature, it is a compromise, and the harm caused to you by the insurance company or your employer can never be truly compensated under the law. But, a settlement usually results in you being free of the insurer’s near-constant review of your claim.

The longer a disability case is litigated, the higher the costs, which comes out of any settlement recovery. When you are the prevailing party in federal court on an ERISA disability matter, relief is limited to a remand to the LTD insurer or past-due benefits, as well as potential relief for breach of fiduciary duty and ERISA attorneys’ fees. There may be other relief available, depending on your long term disability claims, but it’s important to understand that ERISA preempts State law claims. The long term disability policy or insurance carrier can continue to require you to qualify monthly for disability benefits or terminate benefits again. Because of the uncertainty of both litigation and future benefits, coupled with the ongoing stress in dealing with the LTD insurer, the best outcome in some cases may be a reasonable lump-sum settlement offer.

For non-ERISA cases, the settlement values tend to be higher because the insurance companies could be at risk for Bad Faith and punitive damages. In these cases, our Long Term Disability lawyers value what constitutes to be a reasonable settlement differently than if it is an ERISA case. Our highly experienced Long Term Disability attorneys know how to fight the insurance companies for your best outcome so you aren’t bullied into anything less than reasonable. We will communicate all settlement offers to you. Long term disability law firms cannot settle a case without your consent, nor can LTD insurance companies. You always have final authority.

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