Bad Faith Insurance Claims
Carrying insurance is an investment in your family’s security. You pay your insurance premiums, often for many years, to limit the financial harm to your family if you get sick, injured or pass away unexpectedly. Having sacrificed yourself to pay your premiums, you have every right to expect that when the day comes that you need to make a claim, the insurance company will protect you just as it promised to do – just as it was paid to do. You have every right to expect that the company will investigate the claim promptly and fairly, giving you the benefit of the doubt, and pay benefits promptly – just as you have always done with your premiums. This is the definition of “good faith” claims handling. So what is “bad faith”?
What Does “Bad Faith” Mean?
An insurance policy is a contract. Under the law every contract has an implied obligation that the parties must act in “good faith.” It is fundamental part of our society that we need to be able to trust those with whom we do business. We expect each other to honor both the letter and spirit of our agreements, and not to look for ways to get out of our obligations on “technicalities.” It is a fundamental part of living in a civilized society.
Insurance companies are subject to the same duty of good faith as everyone else when we enter into an insurance agreement. If the insurance company violates its duty of good faith, it is guilty of acting in “bad faith,” and this can create a whole different set of legal claims and damages.
As practical matter, “good faith” means that an insurance company should investigate your claim promptly and fairly. The insurance company should help you with the claims process and share information with you about its investigation. It should not treat you like an adversary. It should give you and your doctors the benefit of the doubt, unless there is a specific reason to suspect that you have not been forthright about your claim.
In our home state of Georgia, if your disability or life insurance carrier (or any other insurer) can be shown to have denied your claim in “bad faith,” a jury can award a bad faith penalty of 50% of the benefits plus your attorney fees and expenses of litigation. Proving bad faith is much more challenging (and expensive) than most people realize. It almost always requires retention of a credible and experienced expert to explain to the jury what insurance companies are supposed to do (good faith) and what a particular insurance company did or failed to do that violates acceptable standards of good faith conduct (bad faith).
Some states do not recognize bad faith as a separate legal claim. Others allow a jury to award punitive damages to punish bad faith, sometimes leading to multi-million dollar verdicts.
Individual Disability Policies vs. Employer-Provided Group Policies Covered by ERISA
Whether you have a cause of action for bad faith will depend in part on the kind of policy you have. If you bought your policy privately through an agent, then state bad faith legal obligations and remedies do apply. However, if you only have group coverage provided through your employer as a part of a benefit package, it will be governed by a federal law known as ERISA, the Employee Retirement Security Act. ERISA “preempts” state bad faith remedies, meaning you cannot recover bad faith penalties, compensatory, nor punitive damages over and above the policy benefits.
In short, under ERISA an insurer can deny your claim in bad faith and not be penalized at all. Originally meant to secure employees’ rights to their benefits, ERISA actually works to the employee/consumer’s detriment in many ways, not the least of which is preemption of bad faith remedies.
If you are planning to apply for disability through your employer’s plan, it is a good idea to consult an attorney before you submit your application, and certainly you must do so immediately after a claim has been denied. Under ERISA you don’t have recourse through a jury trial, and your options, if your claim is denied, are limited to an Administrative Appeal. This administrative appeal is your last and only chance to present proof of your claim and when your attorney can best influence the outcome. After the ERISA appeal, the final recourse is a federal lawsuit where a federal judge reviews the insurance company’s claim file and decision for “abuse of discretion” only. ERISA offers no provision for a penalty if bad faith or other abuses are found.
We do not recommend attempting to handle your own administrative appeal. It is the most important step in any ERISA claim, and your last real chance to submit proof.
Punitive Damages for Insurer Bad Faith May Increase Your Disability Award
In some states other than Georgia, courts recognize that an insurance company that denies a claim in bad faith should be deterred from doing it again. Insurance companies that put profits ahead of promises really only understand one thing – money, and so it is money that acts as a deterrent. Some states allow juries to award punitive damages based upon a finding of bad faith to remind the insurance company to do better next time.
Indicators of Possible Insurer Bad Faith
These are a few of the tactics insurers sometimes use to avoid payment of claims. If your disability insurer has reacted to your claim in any of the following ways, it may indicate bad faith:
- Ignoring your claim entirely, failing to affirm or deny coverage, or failing to acknowledge receiving notification of your claim
- Failing to conduct a thorough and objective investigation of your claim, including both the medical component of the condition causing your disability and the occupational component
- Failing or refusing to communicate with you about your claim
- Playing “hide the ball” by not telling you what they need as proof of claim
- Deliberately misrepresenting or misapplying the policy provisions or language of the contract
- Misconstruing the law to the insurer’s benefit and your detriment
- Advising you not to consult an attorney
You will want to hire an attorney who specializes in going up against large insurance companies. Suing an insurance company for bad faith is no small matter. The insurance company has in-house lawyers, doctors, and experts, and is willing to spend hundreds of thousands of dollars for big firm lawyers to defend a large case. You need a comparable team on your side. A bad faith lawsuit almost always requires hiring reputable and often expensive experts in insurance and medicine, and it certainly requires a sophisticated legal team to go up against the insurance company’s lawyers.
Atlanta, Georgia Insurance Bad Faith Attorneys
If you live in Georgia and believe that your insurance company is acting in bad faith, you will find the experienced assistance you need to succeed in your claim by consulting the attorneys at the Atlanta law firm of Robinson, & Warncke, LLP. Our law practice is dedicated to protecting the rights of professionals, workers, and their families. If we believe your claim has been denied in bad faith we will do whatever it takes fight back against insurance company abuses. We have a 95% rate of success in obtaining benefits for our clients in all types of insurance disputes. Our success arises from our detailed understanding of the inner workings of the insurance industry and our willingness to commit our time and resources to winning these complex and labor-intensive cases.
Call today to schedule a free telephone interview to learn how we can help you get the benefits for which you have paid.