An insured bought disability income policies from two insurers, and the combined monthly benefit exceeds the earnings on which the coverage was based. One of the policies contains the relation-of-earnings-to-insurance provision. When a disability claim is submitted, how does that provision operate?
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Why D is correct
The relation-of-earnings-to-insurance provision at Va. Code § 38.2-3504(6) (with 14 VAC 5-141-60 addressing the same subject for individual disability income) provides the remedy when total disability coverage exceeds what earnings justify: the insured is treated as overinsured, each insurer pays only its pro rata share of the earnings-based benefit, and the insurer returns the portion of premium attributable to the excess. The claim is not denied and the policy is not voided — the benefit is scaled to the income it was meant to replace. That is how Virginia law keeps disability benefits tied to earnings without punishing the insured with total forfeiture.
Why the other options are wrong
- A) Overinsurance does not void the claim; the provision's whole purpose is to scale payment proportionately rather than deny it.
- B) Full payment by one insurer defeats the earnings limitation; the reduction applies pro rata across the overinsured coverage.
- C) Suspension pending a return to work is invented; the provision operates at claim time by computing the earnings-based benefit.
Memory hook
Overinsured? The benefit shrinks pro rata and the excess premium comes back.