Causes Of Action

Long term disability insurance can take on one of two forms:

1. ERISA
If your benefits are a part of an employee benefits plan, you will most likely be covered by the federal Employee Retirement Income Security Act (ERISA). Your lawsuit must be filed in a United States District Court. The provisions of the Act may seem to be stacked in favor of the Plan Administrator, which is usually the insurance company that pays the claim. However, an experienced personal injury attorney will be able to help you through the complicated process of securing the benefits to which you are entitled.

2. Private Policy
When your benefits are obtained through a private insurance policy between you and an LTD carrier, your course of action will differ from someone covered by an employer sponsored plan. Your litigation may proceed through a State Court without the stringent provisions of the ERISA. If this occurs, your case will be decided by state law, and a jury of your peers will decide if you are entitled to your benefits.

After an insurance company denies your claim and you have utilized internal appeals and grievance procedures, you can sue in a court of law under a variety of legal theories. There are two primary legal remedies available in most cases: breach of contract and "bad faith".

Breach of Contract

A breach of contract suit is an effort on the part of the plaintiff to recover the value of the denied benefit and any incidental damages. The plaintiff asserts that the insurer did not "live up to its end of the bargain" when they file a breach of contract claim. A breach of contract suit requires the plaintiff to show a disability was suffered according to the definition of the particular disability insurance policy and that the insurer did not fulfill its obligations under that same policy by refusing to pay benefits. These types of suits often focus on the language of the policy to determine what obligations each party had, and whether the parties fulfilled those obligations.

Though insurance companies may have the advantage in that they draft the language of the policy, courts have remedied this unfair bargaining power through the development of "rules of construction." These rules of construction require that courts interpret ambiguous language in an insurance policy in the manner most favorable to the insured. This reduces an insurance company's advantage in a breach of contract claim.

Bad Faith

"Bad faith," or a breach of implied covenant of good faith and fair dealing, requires that the insurance company unreasonably denied a claim under a disability insurance policy. All insurance policies require that the insurer act in good faith when reviewing a claim for payment of benefits. Good faith obligates an insurance company to fully investigate and consider all circumstances supporting a claim. A company simply looking for reasons not to pay the claim is breaking the law.

If an insurance company attempts to settle a claim for less than it is worth or denies a claim that it should pay, either knowingly or as a result of inadequate investigation, the insured may have a viable bad faith claim. A successful bad faith claim may allow recovery for benefit owed under the contract, interest on out-of-pocket losses, foreseeable, consequential damages, and attorney's fees.

Laws controlling bad faith claims vary from state to state. For example, the law in New York does not recognize a legal action for bad faith denial of a claim, while in New Jersey, where bad faith is a valid claim, punitive damages are generally not available even when a plaintiff establishes bad faith.

Infliction of Emotional Distress and Fraud

Infliction of emotional distress and fraud claims require that a plaintiff first establish a bad faith claim. Emotional distress or fraud cannot be maintained under a simple breach of contract claim. Upon the establishment of these claims, however, a court may award a plaintiff punitive or exemplary damages that can exceed the amount owed under the contract. Though the elements of emotional distress vary from state to state, the claim basically requires:

• (1) extreme and outrageous conduct by defendants
• (2) intent to cause, or disregard of substantial probability of causing, severe emotional distress
• (3) causal connection between conduct and injury
• (4) severe emotional distress

Anything calculated to deceive and resulting in damage to the insured can be considered fraud, including all acts, omissions and concealments involving a breach of trust, confidence or legal duty. The nature of the representation must have been reasonably calculated to deceive the insured and to induce the insured to purchase the policy. In effect, under a claim of fraud, the insured asserts that the insurance company made a claim that it would pay a benefit if the insured became disabled, but the company, through bad faith practices, never intended to pay any benefits to the insured. To sustain an action for fraud, these essential elements are required:

• (1) a representation was presented as a statement of fact, which was untrue and known to be untrue by the insurer or its agent, or else recklessly made
• (2) it was made with an intent to deceive and for the purpose of inducing the other party to act upon it
• (3) the other party did in fact rely on it and was induced thereby to act to his or her injury or damage

If you or a loved one are struggling with a disability insurance dispute, call VanDerGinst Law at 1-866-843-7367 or click here for a FREE online case evaluation. The initial consultation is always free. If we agree to take on your disability insurance case, we will work on a contingency fee basis, meaning we will collect a fee for our services only if, and when, there is a money recovery for you. In many disability insurance cases a lawsuit must be filed before a certain expiration date, known as a statute of limitations. Please call right away to ensure that you do not waive your right to possible compensation.