How to Make a Late Claim Under Your Former Disability Insurance Policy

When it comes to disability insurance claims, insureds are generally required to notify their insurer promptly, and while the policy is in effect and the insured is still an employee covered by it. But what if the insured doesn’t know she is disabled when she stops working? What if doctors cannot determine the correct diagnosis for another year or two? In many western states, including Washington, California, Oregon, Arizona, Nevada, Alaska, and Montana, a former insured can make a retroactive claim for disability benefits unless the insurance company can demonstrate actual prejudice because of the late notice.

What is the Notice-Prejudice Doctrine?

The notice-prejudice doctrine is a legal principle in insurance law that protects policyholders from having their claims denied solely because of late notice, unless the insurer can demonstrate that the delay caused substantial harm or prejudice to their ability to handle the claim. This doctrine ensures that policyholders aren’t unfairly penalized for failing to provide timely notice of a claim, provided that the delay does not adversely impact the insurer’s position.

Historical Context and Evolution

Historically, insurance policies often included strict notice provisions requiring policyholders to report claims “promptly” or “as soon as practicable.” If a policyholder failed to meet these deadlines, insurers could deny claims regardless of whether the delay caused any actual harm. This approach was rooted in the belief that timely notice was critical for insurers to investigate claims, mitigate damages, and prepare defenses.

Over time, courts recognized that denying coverage based solely on technicalities—without any showing of actual harm—was unduly harsh. Thus, the notice-prejudice doctrine emerged, requiring insurers to prove that a delayed notice materially impaired their ability to investigate a claim.

Key Components of the Notice-Prejudice Doctrine

1. Delayed Notice: The policyholder must have failed to provide timely notice as required by the insurance policy.
2. Proof of Prejudice: The burden is on the insurer to demonstrate that the late notice resulted in substantial prejudice. This means the insurer has to be able to prove that the delay impaired their ability to effectively handle the claim.
3. Material Impact: The insurer must prove that the delay had a material impact on their position. This could involve difficulty in investigating the claim, lost evidence, or increased costs due to the inability to mitigate damages.

Practical Implications

The practical effect of the notice-prejudice doctrine on disability insurance claimants is the ability to bring a claim for benefits even after you’ve left the job that provided you the disability insurance coverage. Claimants often leave their jobs because they cannot keep up with the demands of their job anymore, not realizing that their inability is rooted in an undiagnosed illness or injury that has disabled them from performing their occupation.

Examples of Prejudice

• Loss of Evidence: If critical evidence is lost or destroyed due to delayed notice, making it impossible to accurately assess the claim.
• Increased Costs: If the delay prevents the insurer from mitigating damages or increases the cost of handling the claim.

Statute of Limitations

The notice-prejudice doctrine does not remove statutes of limitations, including those created by the policy language. A statute of limitations creates a limit on the date by which you can bring a litigation. For most disability insurance coverage obtained through an employer, the statute is governed by ERISA, and it is either six years after the violation, or three years after the earliest date on which the plaintiff might have known about the violation. Many disability insurance policies also include a contractual limitation on suit, often limiting the time to bring suit to 2 or 3 years. How does this work with the notice-prejudice doctrine?

At least in Washington, courts have held that even with a contractual limitation on suit an insured can obtain benefits. , In George v. Northwestern Mut. Life Ins. Co., 2011 WL 3881476, case no. C10-668-RSM, the court considered a situation where a doctor stopped working in 2004 due to back pain. He did not make a claim for disability benefits until 2007. The claim was denied and the doctor brought suit. His insurance policy stated that suit could not be brought more than three years after written proof was required to be provided. As the insurance contract required ongoing submission of proof of disability, the court held that the requirement of “written proof” was likewise ongoing, so that the doctor could recover retroactive benefits for up to three years earlier.

Conclusion

The notice-prejudice doctrine plays a crucial role in insurance law by ensuring that claims are not unfairly denied due to procedural delays unless such delays cause actual harm to the insurer. It reflects a fair approach to handling insurance claims, balancing the need for timely notice with the recognition that not all delays are prejudicial. Policyholders should strive to notify their insurers promptly, but they can take comfort in knowing that the doctrine provides a safeguard against unjust denials. Meanwhile, insurers must be prepared to substantiate any claims of prejudice resulting from late notices to deny coverage.

If you left your career because you were unable to perform its duties, and only learned later that you had a diagnosable medical condition preventing you from performing those duties — depending on the specific facts of your situation, it is entirely possible that you may still be able to bring a claim for benefits.