Many insurance professionals dabble in group insurance. It is on the product shelf and it looks pretty easy, so they bind the odd contract. Group insurance is a field where superficial knowledge may get the business but it can spawn unexpected problems.
I recently sent an article I found to one of our employee benefit specialists. It was about an avoidable lawsuit and subsequent loss.
The case discussed is Feldstein v. 364 Northern Development Corp.,  B.C.J. No. 128 (S.C.), and involves a situation where a new employee required long term disability (LTD) coverage as a condition of employment and the hiring manager assured him it was available. He had a pre-existing condition and as it turned out the claim was not covered. The company paid damages in excess of $90,000 when a claim arose.
The article I saw is here. It might be good to pass it on to clients.
The response I received from our associate said,
Thanks. We see this all the time. At least 3 or 4 times a year. We advise clients to tell new hires that the benefit plan is a contractual relationship with the insurer. They should say to prospective employees, here is the employee benefit booklet, ask if there are things you do not understand. It is important for the broker to emphasize that the employer cannot promise amendments to the plan. The problem usually comes when people outside HR hire the new people. For example, suppose the board of directors hires a new CEO and promises 2/3 of pay or about $20,000 per month as an LTD benefit. The contract limit is $5,000 per month. The message should be you can promise whatever you want, but you will be responsible for the amount in excess of what you have insured.
Insurers write and enforce clear contracts. Understand them and do not expect exceptions. It is good business to remind clients of the contractual meaning.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772