Disability Insurance Archives - Page 3 of 44

Understanding ERISA Deadlines: When Insurance Appeals Must Be Decided

If you have insurance coverage through an employer-sponsored benefit plan that is governed by the Employee Retirement Income Security Act of 1974 (ERISA), it can be vital for you to understand the timing and deadlines related to the claims process. ERISA sets forth specific guidelines that insurers and administrators must adhere to when processing claims and appeals. One critical aspect of these guidelines is the timeframe within which the insurer or administrator must provide a decision on appeal. Failure to adhere to these deadlines can have significant implications for both the insurer and the claimant.

The ERISA Appeals Process

Pursuant to the ERISA regulations, you have the right to appeal the denial of your claim for benefits, and in fact ERISA requires that you go through the appeals process and exhaust your administrative remedies prior to suing the insurer or administrator. This appeals process is typically the first step in seeking review of an adverse benefit determination, such as a denial of coverage for medical treatment or disability benefits.

When you submit an appeal, the insurer or plan administrator must review the appeal and issue a decision within a specified time. For non-urgent health insurance claims, ERISA regulations generally require the administrator to make a decision within 30 days after receiving the claim. However, this period can be extended by an additional 15 days if the administrator notifies the claimant in writing, explaining the need for the extension before the initial 30-day period ends. For life insurance and accidental death and dismemberment claims (“AD&D”), the claims administrator must make an initial decision on a life or AD&D insurance claim within 90 days after receiving the claim. This period can be extended by an additional 90 days if the administrator notifies the claimant in writing before the initial 90-day period expires, explaining the need for the extension and providing the date by which a decision is expected.

For disability claims, the appeal decision deadline is 45 days from the date the appeal is received, but the insurer or administrator can take up to an additional 45 days if they demonstrate that failing to meet the first 45-day deadline is warranted due to “special circumstances.” For example, the insurer or plan administrator will review your medical records in deciding your claim, and these reviews typically consist of having the records reviewed by third parties who provide reports, providing you an opportunity to respond to any inquiries made by these reviewers and their reports, and obtaining recent or ongoing medical records. Courts have held that because such events are typical in disability claim reviews, failing to meet an appeal decision deadline due to waiting for updated medical records, or for you to respond to a third-party report, for example, do not constitute special circumstances that justify missing the deadline.

Consequences of Missing the Deadline

A vital regulation of ERISA is that if an insurer fails to render a decision on your appeal within the appropriate period (or any extended period that may apply), you may consider your appeal denied and therefore, your administrative remedies exhausted. The significance of this rule is two-fold: First, it allows you to continue moving toward an ultimate conclusion, barring the insurer from indefinitely delaying its decision and holding you in limbo. Second, it can impact the evidence that will come into play when you sue the insurer and/or administrator. If the insurer or administrator misses the 45-day deadline for an appeal decision for disability claims without notifying you before the deadline of special circumstances justifying a delay, the claim will be deemed denied and you may consider your administrative remedies exhausted as of the 45-day deadline date. This allows you to properly file suit in federal court any time after that date, meaning that your claim is no longer on the insurer or administrator’s schedule, but on the court’s schedule. Additionally, the court’s review is limited to the administrative record at the time of its final decision, so the insurer or administrator may be unable to develop additional evidence to support its denial of your claim. In addition, the de novo standard of review would apply even if the abuse of discretion standard would have otherwise applied.

For example, the insurer may contract with an independent medical expert to provide a report based on your medical records. If the insurer misses the deadline for your appeal decision and you sue to recover your benefits, the administrative record in court will consist of the evidence available to the insurer at the time of the deadline. Thus, if the insurer had not yet provided you with that independent expert’s report, that report will not become part of the administrative record without permission from the court. The result could be that the insurer’s primary piece of evidence to support its denial of your claim is not considered by the court, thereby increasing your chances of a successful outcome.

How to Address a Missed Deadline

If your insurer or plan administrator misses the deadline to provide you with a decision on your appeal, you should take proactive steps to protect your rights:

Documentation: Keep detailed records of all communications with the insurer or administrator regarding the appeal. This includes the date the appeal was submitted, any acknowledgments received, and subsequent follow-ups.
Communication with the plan administrator: write a letter to the plan administrator and to the claim administrator confirming that it is your position that appeal deadline has passed without an appropriate decision and detail the consequences of their failure to comply with the ERISA deadlines.
Consultation with Legal Counsel: Consider consulting with an attorney who specializes in ERISA claims. Legal professionals can provide guidance on navigating the appeals process and ensuring compliance with all procedural requirements.
Timely Action: If the deadline passes without a decision, promptly notify the insurer or administrator in writing that you consider your administrative remedies exhausted. This notification should be clear and concise, documenting the failure to decide within the required timeframe.

Once your administrative remedies are considered exhausted due to the insurer’s or administrator’s failure to decide within the ERISA deadline, you may file a lawsuit to have a federal court review the administrative record and provide a decision on your claim.

Conclusion

Timely resolution of appeals under ERISA is crucial for both insurers and claimants. Insurers and administrators must adhere to strict deadlines when reviewing appeals to avoid the claimant considering their administrative remedies exhausted. For claimants, understanding these deadlines and knowing their rights under ERISA is essential for navigating the appeals process effectively. By being aware of these regulations and taking proactive steps when necessary, you can protect your rights to challenge benefit denials obtain the benefits to which you are entitled under your policy.

If your ERISA claim has been denied or you have not received a timely decision, reach out to the experienced ERISA attorneys at McKennon Law Group PC at 949-504-5381 for a consultation at no charge.

Preparing for the Future: The Benefits and Drawbacks of Long-Term Care Insurance

Understanding Pros and Cons of Long-Term Care Insurance

Long-term care insurance is coverage designed to help pay for care if and when you need extended assistance performing everyday activities and caring for yourself. You may need such care due to a disability, a chronic illness, or the natural effects of the aging process. Long-term care policies typically cover assisted living, in-home care, or nursing home care.

As you consider the future, you will likely address matters such as life insurance or estate planning. Included in these matters, you should consider whether long-term care insurance coverage is right for you. Understanding the pros and cons of long-term care coverage can help you make an educated decision.

Common Benefits of Long-Term Care Insurance

The benefits you get from long-term care insurance will be at least partly dependent on your own health condition and financial situation, and the type and extent of coverage you buy. Some common benefits are summarized below.

1. Financial Protection

The expenses involved in receiving extended care at home, in an assisted living facility, or in a nursing home can be prohibitively high.

According to Genworth’s Cost of Care Survey, the median cost for a semi-private room in a nursing home in California is over $11,000 per month. Costs for assisted living care in CA average $6,250 per month, and full-time home health aid services can easily cost over $7,000 per month. Obviously, if at least some of these costs are covered by your insurance policy, your savings and assets can be protected from being depleted by these high costs.

2. Ensuring Access to Care

You can protect your access to care in the future with coverage you purchase earlier in life. With the right long-term care coverage, you will be able to afford a broader range of care than would otherwise be available to you without the coverage. However, it is vital to understand that simply purchasing long-term care coverage now does not guarantee you care in the future. Insurance companies are, first and foremost, for-profit businesses focused on their bottom lines. To this end, insurers regularly deny claims for both valid and improper reasons.

Purchasing long-term care coverage now does not mean that the insurance company will not improperly deny your claim when the time comes that you need care.

3. Ability to Customize Your Coverage

Various types of long-term care coverage are available, which can help you find coverage that suits your needs and your budget. However, you must take care to understand exactly what type of coverage you purchase, as well as how extensive the coverage is. Not understanding this can lead to a situation in which you believe you had bought more than enough coverage for your needs only to find out that the coverage available through your policy does not cover anywhere near all your care costs.

4. Relieves Future Burdens on Loved Ones

When people do not adequately prepare for the possibility they will need care in the future, the burden of care may fall to family members.

All too often, people who need care wind up being cared for by family members who likely had not planned on such an arrangement or may not have the capacity to provide the care needed, which can lead to incredibly stressful situations. The right long-term care coverage can alleviate much of the stress and hardship that would otherwise be placed on family members and loved ones who want to be sure you receive the care you need.

Some Potential Drawbacks of Long-Term Care Insurance

Like any insurance, long-term care insurance has its downsides, including the following:

1. Costs

Long-term care premiums can be expensive. Typically, the older you are, the higher the premiums will be, because the likelihood that you will use the coverage increases as you age. Other factors come into play as well. For example, if you have a pre-existing condition, your premiums will likely be substantially more than if you did not have the condition.

2. Policies Are Complex

Long-term care insurance policies are complex and include many exceptions and exclusions. If you are not aware of exactly the type and extent of coverage your policy provides, you may be in for a world of surprise and frustration when you make a claim for long-term care benefits.

3. You May Never Need It

Anytime you purchase an insurance plan, you may be paying for something that you do not end up needing to use. Purchasing insurance coverage is inherently a gamble. It is important to balance the cost of the plan with factors such as the likelihood you may need coverage, the peace of mind the plan provides, and the potentially catastrophic financial situation you might find yourself in without coverage.

4. Potential Need for Medical Qualification

Depending on your age and the type of plan you purchase, you may need to go through a medical qualification when you apply for the policy.

This could simply require answering some questions, though some insurance companies might also require a medical record review or a physical examination. In such a case, you may find that your options for long-term care coverage are more expensive or somewhat limited if you have pre-existing health conditions.

Work With an Attorney on your Long-Term Care Insurance Claim

If you have long-term care insurance and have had a claim denied or believe your insurance provider is not acting in good faith, you may need to take legal action to protect your rights. Seeking out high quality and experienced attorneys who specialize in handling long-term care policy insurance denials could be the most important action you take. McKennon Law Group PC has the experience and expertise to handle these types of cases. Please call us at 949-504-5381 for a consultation at no charge if you or someone you know or love needs help.

Court Finds That McKennon Law Group PC’s Client Is Entitled to Long-Term Disability Benefits; Rejects Guardian Insurance Company’s Application of Pre-Existing Condition Exclusion

On May 9, 2024, in the matter of Jason Kim v. The Guardian Life Insurance Company of America, 8:23-cv-01579, 2024 WL 2106240 (C.D. Cal. May 9, 2024), the Honorable David O. Carter of the Central District of California ruled in favor of McKennon Law Group PC’s client, Jason Kim, ruling that our client was entitled to long-term disability (“LTD”) benefits under a group disability policy (the “Policy”) governed by ERISA. The insurer, Guardian Life Insurance Company of America (“Guardian”), had denied the claim based on a pre-existing condition exclusionary clause. Judge Carter ruled that Guardian had erred in denying the claim.

For greater context, pre-existing condition exclusions are portions of disability insurance policies that preclude coverage if the insured had the disabling condition, or a condition related thereto, before coverage under the policy began. These clauses are aggressively used by insurers to protect their profit margins. Of note, whereas an insured usually carries the burden of establishing entitlement to coverage under an insurance policy, if an insurer invokes a pre-existing condition exclusion, then the insurer has the burden of establishing that the exclusion applies.

Here, the insurer invoked the clause when it simply did not apply. Before obtaining coverage under the Policy, our client suffered from mild depression, anxiety, and attention deficit hyperactivity disorder (“ADHD”). Of note, these conditions were sufficiently mild that they were borderline subclinical. In January 2021, however, everything changed. Our client developed COVID-19. Shortly thereafter, he developed a wide array of serious symptoms. These included brain fog, cognitive impairments, extreme pacing (our client wore out a pair of shoes in a couple of days), fever, chills, insomnia, panic attacks, restlessness, agitation, “pressure in the head,” loss of the ability to communicate, short-term memory damage, psychosis, and damage to the ability to process information. He was prescribed the medication Zyprexa. Unfortunately, he had a severe reaction to the medication. He developed tardive dyskinesia (“TD”) and tardive akathisia (“TA”). These are severe and disabling neurological/movement disorders.

Our client submitted a claim for LTD benefits under the Policy. Guardian denied the claim. It insisted that our client’s anxiety, depression, and ADHD were pre-existing conditions for the myriad of symptoms he developed in January 2021. Of note, virtually everyone who had knowledge of the claim insisted that the pre-existing condition exclusion did not apply. Even the insurance broker who sold the Policy insisted that the clause did not apply. Guardian, however, refused to listen. It denied the claim.

We sued Guardian for the outstanding benefits under the Policy. The case ultimately went to trial. The parties submitted extensive briefing and the 6,000-page administrative record to the Court. The Court heard over two days’ worth of oral argument and then requested a second round of briefing. Ultimately, on May 9, 2024, the Court ruled in our client’s favor.

Guardian’s case relied almost entirely on a few medical records related Mr. Kim’s prescription of Zyprexa. In particular, the medical records stated that Mr. Kim was prescribed the medication for anxiety and depression. Guardian reasoned that, therefore, ALL of Mr. Kim’s symptoms were related to anxiety and depression, the pre-existing conditions. We, in turn, explained that, per the medical records, his then-treating physician had only spoken to Mr. Kim for five minutes over the phone before prescribing the medication. He had not physically examined Mr. Kim or administered any tests. We also explained to the Court that all of Mr. Kim’s subsequent treating physicians agreed that he was not suffering from common anxiety and depression in January 2021. They attributed his symptoms to COVID-19 or psychosis. The Court concluded that a five-minute phone call was insufficient evidence to rely on. It stated:

Guardian focuses on the fact that the records from Dr. Moldawsky reference pre-existing anxiety and depression. However, medical diagnoses often change over time as symptoms develop and emerge. That Dr. Moldawsky believed at the onset of Plaintiff’s severe symptoms that pre-existing anxiety and depression may have been reasonable at the time, even though it later became clear that Plaintiff’s condition was substantially different. Guardian’s insistence that Plaintiff’s psychosis was simply a more severe form of his prior anxiety and depression is not consistent with the facts or evidence. (Id. at *8)

Other evidence revealed how unreasonable Guardian’s position was. Not only did the agent who sold the Policy argue against the exclusion’s applicability, but even one of Guardian’s own peer review doctors specifically explained that there was no connection between Mr. Kim’s disability and his pre-existing conditions. See id. at *6.

We argued that COVID-19 caused Mr. Kim’s symptoms. Multiple treating physicians had reached that conclusion. However, although Guardian and its physician rejected this conclusion, as the Court explained:

Plaintiff’s medical records demonstrate that COVID-19 has been shown to cause psychosis and could potentially have caused psychosis here. Guardian’s own employee acknowledged this. It is not necessary for Plaintiff’s claim, however, to demonstrate that COVID-19 triggered his health problems in early 2021. Plaintiff must demonstrate that what rendered Plaintiff disabled was not caused or substantially contributed to by a pre-existing condition or its treatment. The prior identified mental health conditions/treatments did not “cause or substantially contribute to” the disability during the lookback period. (Id. at *6)

Having concluded that the pre-existing condition exclusion did not apply, the Court then proceeded to analyze whether Mr. Kim was disabled under the Policy. See id. at *7. The Court explained that Guardian had failed to argue before the Court that Mr. Kim was not disabled. See id. at *7. It further noted that there was significant medical evidence documenting Mr. Kim’s disability. See id. It determined that, in fact, he had been disabled during the time period in question.

Our client has sufficiently recovered that he has returned to work. As such, the Court awarded our client his benefits for a closed-end period.

Insurers tend to be overly aggressive when invoking pre-existing condition exclusions. However, it is the insurer’s burden to establish that the exclusion applies. This case served as yet another example, and warning, to insurers. They cannot carelessly invoke exclusions like the one involved here.

What is the Pre-Existing Condition Exclusion in Disability Insurance Policies and How Does It Work?

Understanding How Pre-Existing Conditions Exclusions in Disability Policies Can Affect A Claim For Disability Benefits

Short- term disability and long-term disability insurance policies are designed to provide peace of mind about your future. If you are injured or become ill to such a degree that you are unable to do your job, disability insurance can help you maintain financial stability.

However, insurance companies commonly deny disability claims based on policy exclusions. After all, the insurance provider exists to make money as a business, and finding ways to avoid paying disability benefits helps their bottom line. Because of this, you may find your claim is denied for any number of reasons, including improper reasons and reasons that are allowable under your policy. One common exclusion found in most disability policies that may allow an insurance company to legitimately deny your claim is the pre-existing condition exclusion.

What Is A Pre-Existing Condition?

A pre-existing condition is defined in a disability policy and typically is defined as any injury, illness, or other health-related condition that was diagnosed and/or treated at a time prior to the policy issuance or the date disability coverage began which later caused you to become disabled. Insurance companies will often establish what is called a “look back period” to determine whether a pre-existing condition existed during that time period. Typically, the disability must occur within twelve months after coverage began in order for an insurer to rely on the exclusion.

For example, say a policy defines the look-back period as 90 days prior to the date coverage began under a disability policy. If the insured is treated for or diagnosed with any injury or illness during that 90-day period and that condition in some way caused a disability, it may be considered a pre-existing condition. It should be noted that the insurance company will interpret “treated” or “diagnosed” as broadly as possible to include even conditions discussed only in passing with your doctor during a visit.

Consider this hypothetical situation: Within the 90-day period before purchasing a disability insurance policy, you are treated by your medical providers three times. First, you are treated for an ongoing heart condition. Next, you are treated for a new complaint of back pain and diagnosed with a slipped disc. Finally, you are treated for strep throat.

Later, you make a disability claim due to a back pain issue that leaves you unable to work. Because you were diagnosed with that slipped disc during the look-back period, your claim might be denied due to a pre-existing condition.

Why Insurance Companies Include Pre-Existing Conditions

Insurance companies include pre-existing condition exclusions in their policies to alleviate risks that people will or may seek coverage under a policy soon after a disability policy is issued or coverage begins. Insurance is not designed to pay for things that have already happened, but to protect you from possible future losses.

How Disability Insurers Use Pre-Existing Condition Clauses Inappropriately

Insurance companies can misuse pre-existing condition exclusions to deny disability claims in a few ways:

Stretching the definition of pre-existing condition: Sometimes, insurers might argue that a seemingly unrelated past condition is somehow connected to the current disability. For instance, if someone with a history of anxiety files a claim for back pain, the insurer might try to link the two, even if there is no medical basis for it.
Misinterpreting the “look-back period”: This is the timeframe before your policy’s effective date that insurers examine to identify pre-existing conditions. They might extend this period beyond what is allowed by the policy.

Exaggerating the severity of past conditions: Even if a relevant past condition existed, the insurer might downplay how well-controlled it was before the disability, exaggerating its role in the current situation.
Failing to consider all evidence: Insurers might focus solely on medical records that support their denial and overlook evidence that suggests that the medical condition is not subject to the exclusion.

Here are some signs that an insurer might be improperly using the pre-existing condition exclusion:

The denial letter is vague about why the condition is considered pre-existing.
The insurer relies on weak evidence to connect a past condition to the current disability.
The insurer ignores your doctor’s opinion on the limitations caused by your disability.

In a recent case our office handled and which was decided under the Employee Retirement Income Security Act (“ERISA”), the Central District of California concluded that a long-term disability (“LTD”) policy’s pre-existing condition exclusion did not apply after the insurer initially denied a claim for benefits based on the exclusion. The insurance company determined that the claimant was disabled but that his disability was caused by pre-existing conditions. The claimant had previously been treated for anxiety and depression and had been able to continue working with those conditions. He had not been treated for his existing anxiety and depression for some time and at the time he made his LTD claim his condition had become substantially more severe than the common anxiety and depression he had previously experienced; he had developed a new onset of psychosis that left him unable to work.

The court determined that the claim was not excluded from coverage because the insurance company could not sufficiently demonstrate that the claimant’s pre-existing condition substantially contributed to his disability. This case highlights the notion that insurance companies improperly invoke exclusions, including a pre-existing condition exclusion, to deny claims. An insurance company telling you that your claim is barred because of an exclusion does not necessarily make it true.

Get Help From an Experienced Legal Team to Fight Insurance Companies

Fighting insurance companies to protect your rights and assert your valid disability claim can be daunting. It may feel like it is you against a giant corporation—and it often is. However, the right legal team can mean the difference between being paid your claim and not being paid.

At the McKennon Law Group PC, we work with clients to understand their needs and insurance policies, especially disability insurance policies. Then we fight to overcome challenges in your claims process, dispute bad-faith insurance claims decisions, and negotiate settlements with insurance companies. If you or someone you love is dealing with a disability insurance denial or claims holdup, call us for a free consultation.

Challenging a Disability Insurance Claim Denial Based on a Peer Review Report

If you suffer an illness or injury that leaves you unable to work, disability insurance can be a crucial lifeline to help you survive financially. However, insurance companies deny a substantial portion of disability claims. A common tool insurance companies use to deny claims is the peer review report, or “paper review” report completed by doctors or nurses who do not examine or talk to the claimant and either directly work for the insurance company or they work for a company that hires such doctors to give opinions for insurance companies. Almost all the income from these latter companies is derived from insurers hiring them. That means that these medical consultants are almost always biased in favor of insurers and against disability insurance claimants.

Appealing a claim denial based on a peer review report can be challenging and understanding the process can be immensely helpful for you to be able to navigate through the disability claim appeals process, and possibly litigation, so you get the benefits to which you are entitled under your policy.

Understanding the Role of Peer Review Reports

Peer review reports are commonly used by insurance companies to evaluate disability claims. These reports are typically prepared by medical consultants who review your medical records and assess the validity of the disability, commenting on medical conditions and restrictions and limitations. The insurance company will provide your medical records to what they assert are “independent” medical consultants but as noted above, they are not. These consultants will review your records and provide a report to the insurance company. Most of the time, these reports are favorable to the insurance company and will assist them in denying legitimate disability claims.

However, peer review reports can contain inaccuracies, misinterpretations, or even biases that may lead to an unfair denial of your claim. It is vital that you address these issues with the insurance company in a timely manner. In ERISA (Employee Retirement Income Security Act) appeals matters, the insurer is required to give you an opportunity to review the report and comment on it before the insurer uses it to deny your disability claim. Properly addressing these issues means you will need to:

Review Your Denial Letter

The first step in the appeals process is to carefully review the denial letter from your insurance company. This letter should outline the reasons for the denial and include a copy of the peer review report. Understanding the specific inaccuracies in the report is essential to building a strong case for your appeal.

Gather All Relevant Documentation

Compile all the relevant documentation related to your disability, including your medical records, treatment history, and any communications with your healthcare providers. This information will help you and your attorney present a clear and comprehensive case.

Consult with a Disability Insurance Attorney

Hiring an experienced disability insurance attorney is one of the most critical steps in this process. An attorney with expertise in disability insurance claims can help you navigate the complex appeal process, assess the inaccuracies in the peer review report, and build a compelling case to challenge the denial.

Request an Internal Review

Most insurance policies require claimants to first go through an appeal with the insurance company, done internally, before pursuing external remedies such as suing in court. Your attorney can help you draft a well-documented and persuasive appeal highlighting any deficiencies in the peer review report. It is essential to follow the specific guidelines and deadlines set by your insurance policy during this process.

Pursue External Remedies

If your appeal is unsuccessful, or if your policy does not require an appeal, you can sue the insurance company in court. The litigation process may provide opportunities for your case to be resolved outside of court, for example through mediation. Your disability insurance attorney will guide you through these steps and represent your interests throughout the process.

Establish the Deficiencies in the Peer Review Report

Your attorney will work to pinpoint and highlight any inaccuracies and other deficiencies in the peer review report. This may include demonstrating that the reviewing physician misinterpreted your medical records, overlooked crucial details, rendered decisions without any evaluation and in a conclusory manner, or made biased assessments concerning your restrictions and limitations. Providing alternative expert opinions and medical evidence that counter the inaccuracies is significant to your case.

Present a Strong Legal Argument

Your attorney will craft a compelling legal argument to demonstrate that the peer review report’s deficiencies were the primary basis for your claim denial. They will show how these inaccuracies directly led to an unfair decision and violated the terms of your insurance policy. Your attorney can also conduct legal research to find cases in which the same biased medical consultants hired in your matter were found to have defective reports or demonstrated clear bias.

Demonstrate Your Disability

In addition to challenging the peer review report, it is important to reaffirm your disability and its impact on your ability to work. Your attorney will work with you to provide clear and convincing evidence of your condition, including medical records, statements from your healthcare providers, and any additional documentation that supports your case. The best way to demonstrate your disability is to have your physician or other medical professional comment on the report and attack it where necessary.

Conclusion

If your disability insurance claim has been denied based on a defective and/or biased peer review report, you do not have to accept this decision as final. With the assistance of an experienced disability insurance attorney like those at McKennon Law Group PC, you can navigate the complex appeals process and build a convincing case to challenge the denial. By following the steps outlined in this article and working closely with your attorney, you can increase your chances of securing the disability benefits you rightfully deserve. Remember, when faced with a wrongful denial, seeking professional legal assistance can make all the difference in your journey toward financial security and peace of mind. Reach out to McKennon Law Group PC to discuss your disability claim denial with an experienced disability insurance attorney.

Your Guide to California Insurance Bad Faith

Insurance Bad Faith and How to Deal With It

When you have health, life, disability, or long-term care insurance, or any other type of insurance policy, you expect your coverage to provide peace of mind. You pay premiums trusting that your insurance company will pay out according to the policy if you experience a covered event. However, if you have ever were involved with an insurance claim, you know that is not always the case.

Insurance companies deny claims for every reason they can attempt to justify. Sometimes the policy language can be so complicated and confusing that it can lead you to believe you have coverage that you do not actually have.

Many insurance company denials are the result of bad faith actions. Understanding whether your case involves what is known formally as a breach of the implied covenant of good faith and fair dealing, less formally known as insurance “bad faith” is vital; if your denial involves bad faith, you may have more options available for seeking compensation for your damages against your insurance company.

What Constitutes Insurance Bad Faith?

Bad faith occurs when an insurance company unreasonably or without probable cause delays payment of your policy benefits or denies your claim for policy benefits. Therefore, not every denial rises to the level of bad faith. Some examples of insurance bad faith conduct are:

Denying a valid claim, even though the policy supports the claim and appropriate appeals and documents have been submitted;
Offering a low settlement for a covered claim that does not reasonably address the benefits and/or damages associated with the claim;
Failing to process a claim according to the reasonable claims handling standards in the insurance industry or as found in state statutes;
Refusing to reasonably investigate a denial or other claims issue without providing an adequate reason for the refusal to honor its obligations under the policy.

First-Party vs. Third-Party Insurance Coverage and Bad Faith Claims

There are two main categories of insurance: first-party and third-party policy coverage.
First-party insurance provides compensation directly to the insured individual or business. For example, disability insurance is first-party coverage because it directly compensates the insured for a loss incurred under the policy. First-party bad faith occurs when the insurance company in first-party coverage situations acts in bad faith regarding your claim. For example, your disability insurer denies your claim for disability insurance benefits unreasonably or without probable cause.

Third-party insurance is a form of liability insurance that covers you when someone makes a claim against you for damages. A common example of this is auto insurance, which will pay another driver who is injured in an accident that you have caused. Another common type of third-party insurance is for property damage. Third-party bad faith occurs when the insurance company in third-party coverage situations acts in bad faith regarding your claim.

What You Have to Prove in a Bad Faith Insurance Case

The laws governing bad faith insurance situations vary by state, and California has an especially complex statutory and regulatory legal framework. To understand whether you have a good bad faith case and how to prove it, it is critical that you speak to attorneys who are very experienced in fighting insurance companies.

Typically, the initial burden of proof falls on the person filing the claim. You must demonstrate two things to succeed in a bad faith lawsuit: 1) Benefits due under the policy were withheld and 2) The reason for withholding benefits was unreasonable or without proper cause.

What Kind of Damages You Can Seek in a Bad Faith Insurance Case

It is important to understand whether you are dealing with a bad faith claim situation or not, as it will determine the types of damages that may be available to you. With a breach of insurance contract claim, you can seek the benefits due under policy. If you have a potential bad faith insurance claim, you may also be able to seek what are known as extra-contractual damages. These damages differ from state-to-state, and include:

Liability for judgments in excess of the policy limits: If your own insurance company acts in bad faith, it may be liable for amounts exceeding the policy limits.
Emotional distress: This is mental distress caused by the insurer’s bad faith actions.
Economic Loss: This involves financial losses incurred because of the insurer’s bad faith actions. For example, your disability or health insurer unreasonably denies a valid claim and his leads you to pay hefty medical bills or causes you to lose your home. You may be able to seek compensation for this type economic loss.
Statutory Penalties: These are penalties enforced by statute when an insurer acts in bad faith.
Interest: This is interest that accrues on unpaid policy benefits. In California, you can get 10% interest on past-due disability benefits.
Attorneys’ Fees: If you sue your insurer for bad faith and win, you may be able to recoup your legal fees. Attorney’s fees can become expensive, especially in complex insurance cases. California has a complicated and unique method of calculating attorneys’ fees.
Punitive Damages: These are damages awarded to punish the insurer for its bad faith behavior. In California, you can prove the insurer engage in bad faith actions and they were done with fraud, oppression or malice.

Work With an Experienced California Insurance Bad Faith Attorney

Insurance law and insurance cases are complex, and you can feel like you are caught up in a machine with very little control over what happens with your claim. You do not have to face this type of issue alone and feeling like you have no way to fight back.

The insurance bad faith attorneys at McKennon Law Group PC are well-versed in fighting insurance companies and standing up for the rights of our clients. We can review your policy and claims situation and help you understand if you have a bad faith claim. Our team of insurance bad faith lawyers also works with you throughout the process, standing up for you in court to help support a positive outcome.

Call McKennon Law Group PC at 949-504-5381 to find out more about how we can help.