MY INSURANCE COMPANY DENIED MY DISABILITY CLAIM. WHAT DO I DO?
If your claim has been denied, you have essentially two options. You can appeal or you can sue your insurer. It is possible that your insurer will wish to enter into a settlement or “buy-out” of your policy — but such an offer from your insurer is far more likely to come only after you have appealed or filed suit.
Whether to appeal or file suit without submitting an appeal depends on a great number of factors. The decision cannot be made without a thorough evaluation of the claim — including whether it is governed by the federal law, the Employee Retirement Income Security Act of 1974 (known as “ERISA”) as opposed to California law, the nature of the evidence you have already submitted to the insurer, and the content of the insurer’s denial.
It is possible that a claim that appears to be governed by ERISA may be governed by the much more favorable California law.
SHOULD I APPEAL THE DENIAL OF MY CLAIM OR JUST FILE SUIT?
If you appeal your insurer’s denial of your claim, you should have realistic expectations and not expect the insurer to conduct a fair or independent review. Nevertheless, there are circumstances where one should submit an appeal.
Although your insurer will likely assert in its denial letter that your appeal will be “independently” reviewed by people who were not involved in the initial denial, such an assertion is highly misleading. Although the insurance company employees who decide your appeal may have different names and titles and work in different rooms in the insurer’s office, they are all required to decide your claim in conformity with the same self-serving and unfair claims practices that caused your claim to be denied in the first place.
Although your insurer will be heavily predisposed to deny your appeal, if your case is governed by ERISA, it is almost always a good idea to submit an appeal within the 180 days allowed and include all information that would undermine the purported bases for the insurer’s denial. You are not submitting your appeal for the insurance company; you are submitting it for the federal judge who will ultimately be in a position to reverse the insurer’s denial. In assembling the materials for your appeal, you need to be sure to provide all the information and appropriate expert opinions that the judge will need to recognize the illogic and unfairness of the insurer’s denial.
If your claim is governed by California law, whether to appeal is a complex decision and depends on many factors, some of which may be unique to your case. You must always also consider whether you are facing the deadline of the statute of limitations and whether you will lose significant rights if you do not file suit promptly. Fortunately, under California law, the insurer has an ongoing duty of good faith and fair dealing — and has the duty to fairly consider new evidence in support of your claim even after it is sued.
WHAT ARE THE DEADLINES FOR APPEALING OR FILING SUIT?
If your case is governed by ERISA, you have 180 days from your receipt of the insurer’s denial within which to submit an appeal. If your appeal is then denied, the period within which you may timely file suit can vary. Although insurers frequently state in policies governed by California law that the insured has 180 days to appeal, there is no such deadline under California law and, to that extent, the policy language advising of the 180 day deadline is misleading.
In ERISA cases, the deadline for filing a lawsuit can be a trap for the unwary. The insurance policy itself may set a deadline that is shorter than the statute of limitations set by California law (and adopted by ERISA) — a statute of limitations that is generally four years from the date of denial of your appeal.
If your case is governed by California law, you must file a lawsuit within two years of the denial or else you will lose the very important right to claim damages for bad faith — for the insurer’s unreasonable denial of your claim. If the two-year statute of limitations is missed, it is generally still possible to file suit to recover the policy benefits within four years from the denial. However, if you file after the two-year deadline, you will be generally be barred from recovering damages for emotional distress and also barred from recovering punitive damages to punish and deter the insurance company from engaging in the same or similar conduct in the future.