Long Term Disability Policy Rescissions Based On Non-Disclosure Of Prior Existing Conditions
By Ray Bourhis and Alexander MacDougall
When someone is buying an insurance policy, such as for Long-Term Disability (LTD), they usually sit down with an agent to fill out the application. This is an important part of the insuring process. The application questions posed by the insurer must be accurately and fully answered whether the questions are read by the applicant themself, or are read to the applicant by the agent. If the answers are not correct, the insurer, even though it accepts premium payments for many months, may be able to rescind (disavow) coverage if a claim is eventually made. Waiting to investigate alleged inaccuracies until a claim is presented and then using an inaccuracy in the information provided is known as “retroactive underwriting.” Although there are often time limits on the ability of an insurer to rescind coverage on this basis, it can, and does, happen.
Often when this occurs it is over the alleged non-disclosure of a “prior existing condition.” In other words, the insurer claims that the insured withheld or covered up material information that was important to the insurer’s underwriting process.
Inaccurate answers to vague, overbroad, open ended questions such as “name every doctor you have ever seen for the diagnosis or treatment of head, neck or back pain,” would probably not be sufficient to justify cancelling a disability policy post-claim; but narrower questions that are limited in time and to isolated conditions may be. Therefore, when answering questions about preexisting conditions, it is imperative to include as many relevant details and facts as possible and to do so in writing. To ensure the accuracy of such answers, an applicant should do two things: One, read the questions themself rather than allowing them to be read by the agent; and Two, answer the questions in full and with detailed responses.
Note that just because there is complete disclosure of a preexisting condition does not mean that the insurance will be provided. But it does guarantee that the policy won’t be eliminated when a legitimate claim is made.