Recovering Disability Benefits After a Claim Denial

Recovering Disability Benefits After a Claim Denial

When a disability claim is denied for no good reason, the insurance company may be acting in bad faith. If bad faith is legally proven in court by a disability insurance attorney, the insured party is entitled to recover disability benefits.

Bad Faith Insurance Claims

An insurance company has a duty to its policy holders to provide benefits based on policy guidelines. If an insurance company denies a claimant’s disability benefits for no apparent reason, they may be acting in bad faith. In Nevada, laws allow a claimant who is the victim of bad faith insurance fraud to file a lawsuit with a disability insurance attorney against the insurance company. Common examples of bad faith include:

  • Denial of a valid claim for benefits for no apparent reason
  • Delaying a claim for an unreasonable amount of time
  • Failing to investigate a claim in a time manner
  • Deliberate misrepresentation of policy language to avoid paying claims
  • Paying lower benefits than stated in the disability policy
  • Requiring unnecessary, duplicate, or excessive information

According to Nevada laws, an insurance company is required to properly investigate claims, pay disability insurance claims when warranted, and pay claims in a timely manner. Although not all states allow bad faith lawsuits to recover disability benefits, the Nevada Supreme Court does allow such lawsuits, but bad faith fraud against the insurance company must be proven in court.

ERISA Claims and Benefits

The Employee Retirement Income Security Act (ERISA) was originally enacted to protect employees’ rights to collect employee retirement benefits, particularly pension benefits. Over time, the courts expanded the reach of ERISA to cover other employee benefits such as long-term disability, health insurance, life insurance and other benefits provided by employers. Employees who are insured by group disability plans may fall under ERISA rules and regulations for disability benefits. Because ERISA regulations are federal rather than state, they take priority over all state laws that impact disability benefits.

Federal ERISA claims are different than state law breach of contract claims. Once a lawsuit is filed by a disability insurance attorney, no additional evidence can be submitted in an ERISA claim. The federal court considering the lawsuit must limit its review to the administrative record of the long-term disability claim file.

Under ERISA long-term disability regulations, there are no trials, depositions or hearings. A claimant is not allowed to testify on his/her own behalf, or rely on a treating physician’s testimony. A claimant is not allowed to introduce any evidence that’s not in the original claim file based on information at the time the insurance company issued its final decision. In ERISA disability cases, the court limits its review to the medical and vocational proof already in the claim file.

Proving Bad Faith in Court

If a bad faith lawsuit is filed, a plaintiff must prove that the insurance company acted in bad faith. The fact that the insurance company denied or failed to pay disability benefits is not enough to warrant a bad faith judgment. The plaintiff must prove that the disability claim was denied without good reason, or that the insurance company exhibited bad faith behavior in dealing with the claim. If the insurance company disputes or makes an error in the valuation of the claim, or if involved parties disagree about the valuation of the claim, that does not constitute bad faith insurance fraud. To prove the insurance company acted in bad faith, a plaintiff must show proof such as:

  • The insurance company denied or refused to pay the claim per policy guidelines
  • The insurance company denied the claim without reasonable explanation
  • The insurance company failed to investigate the claim in a timely manner
  • The insurance company intentionally under-payed benefits on the claim
  • The insurance company intentionally misrepresented information, so the claim would be denied

Recovering Damages

When an insurance company is found guilty of acting in bad faith, damages may exceed the original policy limits. In Nevada, damages are not limited to actual losses suffered by the plaintiff. Courts may also award punitive damages to punish the insurance company and deter other insurance companies from acting in bad faith. In addition to recovery of benefits and punitive damages, a claimant may also be awarded damages for: retroactive benefits; loss of income; emotional distress; contract damages; statutory penalties and interest; and attorney’s fees.

Although Nevada upholds certain statutes of limitations to file most lawsuits, a bad faith lawsuit is not barred by these limitations. In Nevada, a one-year statute of limitation applies to breach of contract claims, but this statute does not apply to bad faith or UCPA claims. Since recovering disability benefits after a claim denial can be complicated, a Nevada disability insurance attorney who knows state laws and their impact on bad faith lawsuits can simplify the court process.