Whether you can rely on state law remedies when you receive a denial of your long-term disability or LTD claims depends on whether the Employee Retirement Income Security Act or ERISA applies to your LTD plan. Most employer-sponsored group insurance plans fall under the authority of ERISA, a federal law that severely limits your potential remedies for the denial of your LTD claim. ERISA preempts state laws that provide remedies for the denial of LTD claims, which means that ERISA provides the exclusive remedies for people trying to get LTD claims under your policy.
However, if you have purchased LTD coverage individually or privately, ERISA likely does not apply to your plan. In this situation, you can take advantage of state law remedies if your plan administrator denies you benefits. You have far more flexibility and options in terms of remedies if you receive a denial of benefits.
For example, California Insurance Code §790.3 prohibits insurance companies from denying claims in bad faith. Insurance companies violate their duty of good faith when they engage in deceptive and unfair practices with consumers, such as unreasonably delaying decisions about a claim, failing to adequately investigate a claim, and deliberately misrepresenting policy language or facts to deny a claim. As a result of this code section, claimants who have received denials of their claims under individual insurance policies can sue their insurance companies directly based on violations of the duty to act in good faith. This is essentially a breach of contract claim, which may allow you to seek attorney’s fees, damages for pain and suffering, and even punitive damages in particularly egregious cases.
Unfortunately, due to ERISA preemption, this insurance code section does not apply in LTD policies governed by ERISA. For instance, if the claimant suspects bad faith on the part of the insurance company, he or she still must exhaust all administrative remedies before becoming eligible to file a lawsuit in state court. Furthermore, even if the claimant qualifies to file this lawsuit, potential remedies for a successful suit are much more limited.
Bonnici Law Group has handled the claims of countless individuals who have encountered difficulties in procuring long-term disability benefits under their employers’ ERISA-governed insurance policies. We will protect your rights and advocate on your behalf throughout every stage of the claims process. Call our office at 619-259-5199 to set up an appointment to speak with us today.