A: If Your Policy is Governed by ERISA (Like Most Employer-Sponsored Policies), the Answer is NO.

‘Bad faith’ is defined as an intentional dishonest act in the form of NOT fulfilling legal or contractual obligations OR entering into an agreement with no intention to fulfill it. It may also mean violating basic honesty standards.[1]

Many claimants who file for short or long term disability find that dealing with the insurance company is just one frustration after another. The insurance company asks you to provide information you’ve already sent multiple times. Or they keep contacting your doctor, who is getting fed up repeating the same information. When the end result of that whole process is a claim denial, it can be maddening. Not only is the insurance company wrong, but you have lost countless hours trying to provide the information they said they needed – not to mention the significant stress and financial strain you are now facing because your claim was denied.

The big question is, “Can you make your insurance company pay for the stress and other damage they’ve caused you by their bad faith actions?” Sorry to say, if your policy is governed by ERISA (and most employer-sponsored policies are) then the short answer is, NO. According to the law, you may recover disability payments that are rightfully owed, but you may not sue for additional compensation for bad faith. The insurance company has to pay what they owed you in the first place, but not a penny more.

Q: Can a Bad Faith Lawsuit EVER Be Filed in Short or Long Term Disability Cases?
A: Only if Certain Criteria are Met. See Below.

If your policy is NOT governed by ERISA, it is possible to sue for bad faith in certain circumstances.

Some examples include:

  • The disability insurance company failed to comply with policy deadlines for responding to your claim
  • The disability insurance company failed to conduct a thorough investigation of your claim
  • You can prove that the disability insurance company ignored evidence that you are disabled and wrongly withheld benefits
  • Other unreasonable conduct such as relying on inconsistent or misleading reports as a basis for denying a claim for disability benefits.

Even in such circumstances, bad faith claims are difficult to win. You must prove that the insurance company didn’t just disagree with you about whether you met the policy definition of disability, they went beyond just being wrong and were careless in how they handled your claim. If you can prove that, though, the judge could order the insurance company to pay what they owe you in disability benefits AND MORE, including interest, penalties, and attorney fees. Keep in mind that different states have different definitions of bad faith and different rules for what the insurance company may owe if you win your bad faith case.

Q: What Should You Do if You Feel Your Disability Claim Was Wrongfully Denied?
A: Appeal the Insurance Company’s Decision.

If you are disabled and the insurance company denies your claim, virtually every policy gives you the right to appeal that decision. See:  How to Appeal.

If you are holding a denial letter, the first thing to do is reach out to an experienced ERISA long-term disability attorney and ask whether you have a valid argument to appeal the insurance company’s decision.

If the attorney believes you have a case, he or she will help you gather evidence, plan the appeal, and file before the deadline. Remember that there is a tight window, sometimes as short as 60 days, to file an appeal.

Takeaway

In most circumstances, there is little for a claimant to gain in a bad faith case. Disability insurance companies know that on their worst day, the most they will likely face in court is having to pay you what they owed you in the first place.

Even if your policy is not governed by ERISA and you choose to sue for bad faith, you really will not gain any more than what you are owed.

Even without a Bad Faith case, though, an appeal is usually worthwhile so that at least you can recover the benefits that the insurance company owes you.

How BenGlassLaw Can Help

If you’ve received a denial letter from an insurance company, we’ll review it for free and let you know our thoughts. Any long-term disability insurance denial can be devastating, particularly if you have no other income. If your disability claim was denied, we highly recommend that you contact an experienced ERISA long-term disability attorney to help you understand your options and appeal the decision.

For more information about disability appeals in Virginia, please download a free copy of my book, Don't Try This at Home: A Guide to Your Disability Insurance Appeal, from our website. You can also contact BenGlassLaw by calling (703) 584-7277 or by filling out a form at JustAskBenGlass.com.


[1] Definition from Law.com legal dictionary. https://dictionary.law.com/default.aspx/Default.aspx?selected=21

Ben Glass
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Ben Glass is a nationally recognized car accident and ERISA disability attorney in Fairfax, VA.