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The Inherent Conflict of Interest for Long-Term Disability Insurers

The Inherent Conflict of Interest for Long-Term Disability Insurers

Most individuals are unaware of the inherent conflict of interest that long-term disability companies have when they both administer their policies and pay out claims. On the one hand, insurers have an incentive to pay out as little as possible on claims or deny claims altogether, since the less they pay out, the more profits they enjoy. On the other hand, however, these same insurers are the decisionmakers about your claims, meaning that they decide whether you are eligible for benefits and how long you will receive them. When companies act as both decisionmakers and the direct beneficiaries of profits or losses that stem from those decisions, claimants may be at a substantial disadvantage when seeking benefits from these companies.

As many courts have pointed out, insurers who administer their long-term disability benefit policies have a fiduciary duty to manage and decide those claims properly. However, if insurers approve claims, they suffer a financial loss. This conflict can make it impossible for individuals to ensure that the insurance company fairly and thoroughly examines and considers their claims.

Nonetheless, this apparent conflict of interest is only one of the various factors that courts must consider when reviewing insurance company decisions on benefits claims for an abuse of discretion. The weight that a court chooses to give this factor depends on the circumstances of the case.

Regardless of the circumstances, claimants should be aware of this conflict of interest and how it might impact the handling and adjudication of their claims. The inherent conflict of interest makes it challenging to believe that they will receive a fair administration of their benefits claims, even if they believe their claims to be legitimate. This conflict of interest may affect not only the initial approval or disapproval of the claim but also whether benefits should terminate under a policy provision at a later date.

We know that you are facing disability-related legal issues that can be crucial to your future. As a result, the attorneys at Bonnici Law Group have the skills and knowledge to advise you of all potential options. We know how vital this support can be to you when you are unable to work. As a result, we are here to represent your interests throughout any dealings that you must have with your insurance company. For legal advice about your claim, please contact Bonnici Law Group at 619-259-5199 or help@bonnicilawgroup.com.

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