If My Long-Term Disability Insurance Company Unfairly Denies My LTD Claim, Can I Sue?

You may be able to sue your long-term disability insurance carrier if the company acts in bad faith and unfairly denies your LTD claim.

What Is Bad Faith?

When is your insurance company acting in bad faith? A long-term disability company acts in bad faith when it knowingly denies a valid claim for benefits, pays lower benefits than the policy promises, purposely delays a claim for an unreasonable amount of time, or asks for unnecessarily or repetitive information.

How to Sue Your Insurance Company for Bad Faith

If your long-term disability insurance plan is an ERISA plan (a group insurance plan provided by your employer), a set of rules apply to how your lawsuit will play out in court. (See our article on What types of long term disability claims are ERISA?)

First, you’ll first need to ask for an internal review (appeal) before you can sue. If the insurance company again denies you benefits, you can sue in federal court (since ERISA is a federal law).

It can make sense to hire a long-term disability lawyer before you file the internal appeal to protect your federal appeal rights. Also, involving a lawyer can serve to send a message to the insurance company that your LTD claim should receive fair and full consideration. If you have a strong case, and a lawyer, the insurance company may realize it's not worth it to them to escalate their own costs.

What an ERISA Appeal Looks Like

For starters, you won’t be entitled to a jury; a judge will decide your case. The judge will decide your case based only on the administrative record – that is, your claim file. That’s why it’s important to make sure the documents that support your case are in your claim file before you sue. The judge will not look at any new evidence, and you will not be allowed a full trial where you can call witnesses to testify on your behalf.

You will not be able to sue for punitive or consequential damages, though you will be able to sue for the long-term disability benefits that you are owed, along with interest. (You should be able to win retroactive benefits going back to your initial application date, if that’s when the insurance company should have approved your claim.)

On the positive side, you can typically get a trial date sooner than if you filed a non-ERISA lawsuit. And if you win, the insurance company will usually have to pay your attorney’s fees; they won’t come out of your benefits.

Getting Representation

You can be confident that the insurance company will be well represented by an attorney who will argue that the insurance company did not act in bad faith.  Therefore, if you believe that your disability claim was denied in bad faith, it's important for you to be represented by a lawyer, preferably a lawyer with experience in ERISA cases. Your future right to collect disability insurance likely depends on the quality of your legal representation. 

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