When Does An Insurance Company Act In “Bad Faith?”
If your insurance company denies your disability insurance claim and your case is governed by California law, proving “bad faith” is a two-step process.
You must first establish that you are disabled under California law. In other words, you must first establish that, under California law, you are entitled to the disability benefit under the policy. As discussed in a previous blog posting, do not accept that the policy language reflects California law. In disability policies, the policy language may badly misstate your rights under California law — especially the definition of disability.
Once you establish that you are disabled, you must then establish that your insurance company denied your claim unreasonably. An insurance company can act “unreasonably” in a great variety of ways. It may have conducted a very selective analysis of the medical file and disregarded important entries in the medical records that support your disability. It may have seized upon ambiguous entries in medical records and interpreted them to support a denial when it is equally reasonable that they support the payment of benefits. It may have failed to obtain medical or vocational records that are clearly relevant. It may have failed to ask your treating doctor an obvious question that needed to answered before it can reasonably make a claims decision. It may have redefined your occupation to be something it is not — and then denied your claim by considering whether you could perform the wrong occupation. It may not have provided its medical experts with a correct definition of disability under California law and, as a result, the expert may have applied the wrong standard. Your insurance company’s medical expert may be biased, inept or unqualified — and the insurer nevertheless chooses to rely on his opinion.
There are many other ways an insurance company can ask unreasonably in a given case. If your insurance company has failed to fully and fairly investigate and decided your claim, it has acted in bad faith.