Employers purchase group long-term disability policies to provide a benefit to their employees. This benefit is designed to pay a portion of the employee’s lost wages should the employee not be able to work in the future due to injury or illness. What very frequently happens when an employee applies for benefits, however, is that the insurance company will deny the benefits and force the employee to appeal the case. If an appeal (which is decided by the insurance company) is denied, then the employee is left with having to file a lawsuit in federal court.
It may be years between the time that benefits are terminated and the insurance company is finally forced to pay because of its breach of contract. During this time, the employee may have incurred additional damages as they dip into retirement funds, are forced to sell their residence, or are otherwise forced to borrow money to survive.
Can an employee recover for those other items of damage in a case against the disability insurance company?
The answer is that under most group long-term disability insurance company policies, the employee may not recover anything other than his past-due benefits (with a small amount of interest). In some cases, if a Court finds that the insurance company’s decision was in bad faith, the employee may be able to recover a portion of his attorney fees. In no case, however, is he allowed to get the exact back measure of damages for the insurance company’s breach of contract.
This gives the insurance company an incentive to deny claims. They know that there are no punitive damages or emotional distress damages or statutory damages available to the employee whose claim is wrongfully denied. Sadly, this is why the insurance companies will string out a claimant for years and then offer a pittance to settle the claim. Whoever in Congress thought that this was a good idea (most employee long-term disability policies are covered by ERISA) was nuts.
If you’ve received a denial letter from your employer’s insurer, give us a call and we’ll be happy to help.