When a debilitating accident happens, one would expect disability insurance providers to act fast and reimburse payments, as stated in the policy. The reality, however, is that insurance providers, even bigger ones, like Unum and Hartford, have been accused of delaying and unreasonably rejecting claims.
If you’ve recently had an insurance claim denial and have exhausted administrative means to appeal your situation, it’s time to take a drastic step and file a lawsuit. Before taking the plunge, however, it helps to understand how your insurance company acted in bad faith against your claim.
young woman wearing neck brace reading insurance letter
The Unum Lawsuit: A Review
Since decades ago, various claimants have been moving tirelessly to sue Hartford, Unum, and other similar insurance providers. It’s not uncommon to hear or read about lawsuits filed against these companies due to allegations of unjustifiably denying qualified claims, thereby engaging in bad faith practices.
In the 2000s, complaints against insurance companies, particularly Unum, grew exponentially. The main accusation had to do with insurance firms deliberately delaying and denying claims. This common complaint raised by an unusually high number of people living in several states prompted authorities to launch an investigation to evaluate insurance industry practices.
Later, the court treated the numerous complaints as a class-action lawsuit, and Unum was ordered to review over 200,000 rejected claims. The company was later found acting in bad faith by revamping its processing and evaluation claims. Unum had to pay USD$ 15 million in fines to several states following the verdict.
What Is Bad Faith Disability Claim Denial?
As can be gleaned from the Unum class-action lawsuit, a bad faith disability claim denial refers to an insurance provider’s refusal to honor a claim unreasonably or failing to investigate promptly. It’s important to note that the actions that may constitute bad faith vary from state to state.
Generally speaking, bad faith insurance denial occurs when the insurance provider rejects claims unreasonably to keep their costs low.
Below are some real-life examples of bad faith insurance claims:
- Unreasonable denial of a claim
- Excessive delay in acting upon a claim request
- Failure to explain the reason for claim denial
- Lack of transparency on benefits covered
- Misrepresenting policy terms to avoid claims payments
- Non-use of standards in denying claims
- Failing to investigate a claim promptly
- Asking for random requirements to prove loss or disability
Regulations in every state may be slightly different from the Employee Retirement Income Security Act, commonly known as the ERISA law. This set of rules is applicable at federal levels, and it governs the laws involving short-term and long-term disability insurance policies covering most employee groups. ERISA grants policyholders the right to appeal a denial of claims for disability benefits.
Generally speaking, acting in bad faith occurs when the insurance provider deliberately denies and rejects claims without deficiencies. Suppose you’ve suffered from disabilities mentioned in the policy, and you’ve submitted complete documents and medical records to support your claim, and still got rejected for frivolous reasons. In that case, the company may have acted in bad faith.
When an insurer ignores the evidence supporting a policyholder’s claim, it may be considered bad faith. The same thing may be true when the company fails to act on a claim or refuse to explain why they rejected the claim.
3d illustration of a worker compensation claim with a stamp denied. Disability insurance concept.
How Can You Prove Bad Faith Disability Claim Denial?
In most states, the claimant has to prove bad faith by presenting evidence that the insurance company handled the claim unreasonably and deliberately performed the said reckless action. In addition, the beneficiary must be able to present evidence that the company withheld the benefits unreasonably.
So, what does ‘acting unreasonably mean in most cases? It’s crucial to note that not all claim denials can be considered acting in bad faith. Delays caused by loss of records or paperwork, and lack of documents from the claimants’ side, don’t satisfy the legal definition of being unreasonable.
Another crucial element in proving bad faith is if the policies are deliberately confusing and muddled that they’re often used as the main reasons for denying a claim. Simply put, when the company fails to honor its promises as stated in the policy contract, it can be potential ground for filing a lawsuit.
Final Thoughts
Purchasing insurance is a protection–seeking endeavor. It’s an acknowledgment that you have to prepare for the future, not knowing what’s in store for you. You subscribe to insurance, hoping to get covered when the need arises. However, insurance companies are business entities, and their interests often come before their clients. As such, some may resort to acting in bad faith to avoid their obligations.
If a policyholder suspects bad faith, they should file an appeal with their insurance company or consult a lawyer before filing a lawsuit. A skilled legal counsel will help get you every penny you’re entitled to.
