Long-term disability (LTD) insurance helps employees and employers worldwide go about their business with peace of mind knowing if something happens to them, and they’re rendered disabled, their insurance provider will financially support them. The option to file LTD claims can help workers through a time of financial burden and physical and mental hardship. Many individuals rely on their LTD benefits to help support themselves and their families to overcome the new health challenges they face. But what happens when your LTD claim is wrongfully denied?
It is not unethical for insurance companies to investigate every claim they encounter. Fraud is a huge issue insurance providers face every day that costs them millions of dollars and results in increased insurance premiums. However, insurance companies can take advantage of their right to investigate and sometimes use unethical tactics to avoid approving long-term disability claims. Sometimes, they act in something called bad faith. Insurance companies know the power their multi-billion dollar organizations have, which gives them the confidence to wrongly deny claims, knowing regular people do not have the means or knowledge to take on their deep pockets and resources by themselves.
What is bad faith?
Approving LTD claims does not help an insurance company’s first priority; their shareholders. Paying benefits over many years or even decades can cost an insurance agency a lot of money. To help their bottom line, insurance providers sometimes deny claims even though they have no reasonable basis for the denial and knew the policyholder had a valid claim but decided to deny it away. This is considered bad faith.
Bad faith claims help deter insurance providers from acting in bad faith more often. These claims discourage insurance companies from exploiting the insured’s vulnerability. If the policyholder is exploited, they are compensated for an insurer’s negligent actions.
What is good faith?
For an insurance company to act in bad faith, they must be breaching a duty of good faith. Auto, home, business, or disability insurance contracts are agreements between the insurance provider and policyholder. Between the two parties signing the contract, the covenant of good faith and fair dealing comes into play. This means that both sides agree not to deny the other party’s right to receive the benefits agreed to in the contract and treat each other with respect, fairness, and honesty.
In Canada, a duty of good faith requires insurance providers to act promptly and fairly when assessing claims. Breaching the duty of good faith is what leads to what is known as punitive damages. For punitive damages to be awarded, the court must find that the insurer acted unfairly and ‘delinquently’. If a defendant is acting delinquently, it means they have neglected a duty or obligation, and in this case, that would be the duty of good faith.
What are punitive damages?
Punitive damages are fees that a defendant must pay if found guilty of committing an offense. These fees are awarded in addition to actual damages (compensatory damages). They are awarded when the court finds the defendant’s (the insurance provider) behavior is especially harmful.
To be awarded punitive damages and prove your insurer is acting in bad faith, how the claim was handled from the beginning and what led the provider to the decision to stop benefits or deny your claim must be proven.
Common Bad Faith Tactics
Your insurance provider cannot deny your claim without just grounds. However, there are several ways they may act in bad faith to stop payments or deny claims such as:
- Ignoring substantial medical evidence proving your disability
- Failing to promptly or adequately investigate a claim following the company’s guidelines
- Disregarding the emotional, physical, and financial hardship suffered by the insured
- Making unreasonably low settlement offers and improperly deducting operational costs and legal costs incurred by the insurer from the offer
- Forcing the insured to settle their claim by denying, delaying, or prolonging the settlement
- Failing to disclose policy benefits
- Employing abusive and coercive tactics to force a policyholder to settle their claim
- Deliberately misrepresenting the details of an insurance policy
- Not receiving an update from a doctor appointed by the insurer and terminating benefits as a result
- Requiring compliance with rehabilitation programs that are unsuitable to the insured’s level of ability or not within commuting distance and terminating benefits as a result of non-compliance
- Prolonged denial of benefits, then offering a lump sum settlement, when the insured would have and still would benefit more from long-term payments, as was the insurance contractor’s purpose
- Engaging in the above conduct knowing that the contract covered the policyholder’s claims
- Engaging in the above conduct knowing the devastating effect it was having on the insured’s wellbeing
- Engaging in the above conduct to put financial pressure on the policyholder to lead them to accept an unfair settlement
- Engaging in the above conduct while knowingly concealing or attempting to cover up the misconduct
- Engaging in the above conduct because of the likelihood of profiting from the misconduct
How Do I Prove a Bad Faith in an LTD Claim?
Proving the breach of the duty of good faith by your insurance company is no easy task, a task no one should ever attempt on their own. You need to prove they had no reasonable basis for denying your benefits, but also that your claim was valid and denied anyway.
Gathering all the evidence you can to support your claim like photos, videos, police reports, and especially medical reports, will help build the most persuasive case possible. Keeping records of all the communication you have with your insurance company about your claim can show their misbehavior. Proving that your claim was completely valid is only the first step to establishing bad faith.
To successfully prove bad faith, an experienced long-term disability lawyer will also prepare the evidence that:
- The insurance provider’s misconduct was planned and deliberate
- There was intent and motive for the wrongful denial and bad faith
- The insurer’s negligent behavior persisted over an excessive length of time
- The defendant attempted to conceal and cover up the misconduct
- The defendant was aware that their conduct was wrong
- The defendant aimed to or did profit from their misconduct
Steps to Take If You Think There Was a Bad Faith in Your LTD Claim
Contacting a lawyer will most likely give you your best chance at proving bad faith in your LTD claim. The steps below are similar to what you can expect to follow during any bad faith claims.
- Start the lawsuit
You have the right to hire a lawyer at any stage of your LTD claim. A long-term disability lawyer can even help you apply for LTD benefits, but having an experienced LTD lawyer on your side after the termination or denial of benefits can be especially helpful. A lawyer can commence court action against your insurance provider for you after they have been provided with some details about your claim. Some important information to know is your policy number, claim number, date of when the disability occurred, and the date when your disability claim was denied. The court action is commenced when a document called a Statement of Claim is issued. The legal process officially starts with the issuance of this document.
Outlined by the Statement of Claim is what you are suing for. When there is a case for the insurer acting in bad faith, a section where you plead that the insurer has denied the claim in bad faith is added. This section must explicitly be included in the Statement of Claim to claim bad faith, and the insurance provider must know this type of claim is being issued.
- Exchange documents
Documents will be exchanged between your lawyer and the insurer throughout your lawsuit. The insurer can review any new medical or other information related to your disability and inability to work. Your lawyer will receive a copy of the policy and claim file for their review. This will allow the lawyer to see what happened from the very start of your claim and how your insurer came to the decision to deny your claim.
- Negotiate a fair settlement
After your lawyers have conducted a thorough review of your policy, disability, and case, you will discuss what next steps are possible and the best ways to proceed to resolve your case. Once your lawyer knows every aspect of your case, they will consider the many elements to create an obtainable settlement. Your LTD lawyer will consider what’s owed to you since your claim was denied and how long you will be entitled to future benefits.
The settlement discussion will then move on to involving your insurance provider in the conversation. This discussion could be held at a settlement conference or exchanging offers at a private mediation through written settlements. Having your lawyer represent you and assist your negotiation will help your best interests and likely result in a better settlement.
You will be fully aware of all offers or counter-offers presented to the insurance provider and those made by the insurance provider. Your lawyer can help advise you and judge the fairness of any offers made to you. The final decision to accept or reject an offer is always yours to make.
Contact an Experienced Long-Term Disability Lawyer at Valent Legal
If you think your long-term disability claim was denied in bad faith, it’s crucial to file a lawsuit quickly. Our long-term disability lawyers are ready to review your case and get you the benefits you deserve. We have had plenty of encounters with insurers and proving the bad faith they exhibit to wrongfully deny claims.
Fighting an insurance company alone is not something anyone should have to do. If your LTD claim has been denied or you think you’re a victim of bad faith, contact Valent Legal to schedule a free consultation to review your case and begin fighting for the benefits that are rightfully yours.