Litigation & Bad Faith Claims

Recent stories in the media about lawsuits involving UnumProvident have raised public awareness about litigation. Here are some common sense guidelines for claimants thinking of initiating a lawsuit against an insurance company:

It is never too soon to consult your attorney. A good attorney can often help you get your claim benefits without resorting to litigation.

Your goal should be for the insurance company to step up to its obligation and pay you the benefits you are legitimately due under the contract. That is the ideal resolution. A lawsuit may be necessary eventually, but it should be your last resort. It is easier to get into litigation than it is to get out of it.

If litigation is unavoidable, remember that a lawsuit has the best chance of success if it's based on demonstrable facts. That means you have to abandon any conspiracy theories about the insurance industry, and look only at the facts: the law, your actual insurance policy, the actual facts of your case. Among other things, that means keeping detailed, accurate records.

Sample Bad Faith Cases and Lawsuits
The vast majority of lawsuits against disability insurers are settled in conjunction with confidentiality agreements. However, it is estimated that between 1992 and 2002 as many as 10,000 lawsuits have been brought against the nations' leading disability insurer for denying claims in bad faith.

In general, these cases involve bad faith that is a claim by an insured that they have been wrongfully and improperly denied coverage by an insurance company. Since an insurance policy is a contract between the two parties, the agreement obliges the insurance company and the insured to both act in "good faith." When one of the parties acts in a deceptive or improper way, such as when a company withholds the benefits of the policy it owes to the insured, it is termed "bad faith."

Sample A: A Boston doctor was able to receive a $1 million settlement against his disability insurance company that refused to pay after he was diagnosed and treated for cancer.

The company argued that the doctor an, obstetrician/gynecologist, was not "totally disabled" even though he could no longer perform obstetrical surgery. The insurance company then denied coverage arguing, the doctor could still engage in some gynecological procedures. The insurer stated the policy required that he be unable to perform all of his work in order to qualify for benefits.

The policy in question defined "occupation" as a "recognized specialty." Before getting cancer, the doctor spent saw mainly obstetrical patients. During the course of the cancer's progression, the physician was physically incapable of helping woman deliver babies and related medical duties according to the unanimous opinion of his own four treating physicians.

The insurance company denied the claim saying he could still practice gynecology. However, "gynecology" and "obstetrics" are not recognized medical specialties, the medical profession groups "obstetrics and gynecology" as a single recognized specialty.

The case settled after mediation for $1 million.

Sample B: Horace Mann Class Action Lawsuit Settles: $5 Million
July, 2001

The Horace Mann Illinois insurer has settled a class action suit that was filed against the company from consumers of various disability policies.

The $5 million settlement is based on confusing language in a provision of the policy's offsetting benefits relating to receipt of others means of income. Offset provisions try and account for fact that many people have other forms of income to protect against disability, which includes retirement benefits, social security and added insurance policies.

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