Once a Long Term Disability claim has been denied for the final time, or exhausted, a lawsuit may be filed. At this point in time, we begin to have serious discussions with our client regarding the actual value of their claim.
This point is most often discussed in the context of a mediation, which is a form of voluntary, alternative dispute resolution, during which a client will usually need to make a decision whether to accept a lump-sum offer. Many considerations go into this decision. We like to call this decision a business decision, because it is best, to the extent possible, to leave emotions out of the considerations as a claimant must make a decision regarding their long-term financial future. And this can be very hard to do, so we do our best to ensure our clients have the most information with which to make their decision.
We calculate the present value of their claim and provide a breakdown of the income streams they would have expected had their claim not been improperly denied. The present value calculation is intended to capture the total value of Short and/or Long Term Disability benefits in dispute. These totals fall into two categories, past and future benefits. Both categories are calculated by multiplying the number of months benefits are due by their net monthly benefit. The net monthly benefit can be found by subtracting offsets (other sources of income which are set out in the policy) from the total gross monthly income. The past and future benefits are brought to present value using the appropriate factor to account for inflation and/or interest.