Recent lawsuit filings alleging disability insurance bad faith

Insurance companies owe to their policy holders the duty of good faith and fair dealing in claims processing.

A sampling of recent bad faith insurance lawsuit filings provides examples of the kinds of insurance company behaviors that give rise to allegations of bad faith in the disability insurance context.

Disability insurance

A disability insurance policy pays benefits to replace income that stops after a worker's injury or illness prevents him or her from working. Most policies pay only partial wage replacement. Disability insurance may be short term for health problems likely to resolve relatively soon or long term for conditions that will persist over time.

Employers often offer disability insurance as part of their employee benefit packages. A professional or independent contractor can also purchase it individually.

Valid disability insurance benefit claims should be quickly processed and paid because many policy holders cannot continue to meet their personal obligations without swift wage replacement. After wage or salary payments cease because disability interrupts work, if benefit payments do not begin on a timely basis, most people do not have enough savings to make sustained monthly mortgage or rent, car loan, utility, insurance, credit card and other payments. Failure to make these payments can threaten the claimant's home, automobile, credit rating and more.

Insurance company duty of good faith and fair dealing

Insurance companies are required to act in good faith and deal fairly in administering their insurance contracts. These duties are based historically on the unequal power of the two parties to such a contract: a large insurer and an individual policy holder obviously have different economic powers as well as levels of expertise in insurance matters, to the insured party's detriment.

When the insurer violates its duty of good faith and fair dealing, the insured party may decide to file a bad faith lawsuit. An insurance company acts in bad faith when it unreasonably denies a claim, fails to adequately investigate, fails to promptly process it or in other similar circumstances.

Important issues in recent bad faith disability insurance suits

Two informative lawsuits were filed in April 2016 alleging bad faith (along with other claims) on the part of insurers in their handling of disability insurance claims.

In Maliani v. Berkshire Life Insurance Company of America, a California cartoon company executive sued his disability insurer alleging bad faith when after having paid for seven years it abruptly terminated his benefits for major depression that had developed after 30 years in his industry. The insurer claimed that benefits for mental impairment were limited to two years, a provision plaintiff believed was not in the policy. Plaintiff's bad faith claim alleged unreasonable termination and institutional bad faith, meaning part of a pattern of reprehensible, conscious claim-processing practices as opposed to a one-time occurrence.

In Weisberg v. MetLife Insurance Co., a doctor brought his bad faith claim in Alabama state court against three insurers for brain injury and other severe impairments sustained in the Boston Marathon bombings. The plaintiff alleged financial harm and mental anguish for bad faith failure to pay and to investigate his disability claims. He alleged that the insurer "arbitrarily, capriciously and intentionally" refused to pay after voluminous medical evidence of disability.

Because bad faith insurance law can be extremely complex and deadlines may apply, any insured party who suspects that his or her insurance company may be acting in bad faith should speak with an attorney as soon as possible to understand what legal remedies may be available.

The lawyers of Dawson & Rosenthal, P.C., with offices in Sedona, Arizona, and San Diego, California, represent insured parties in insurance bad faith suits as well as in a wide array of other insurance matters.