Bad Faith Insurance: Stall, Delay and Deny

Tampa, FLSay you go to the Winn-Dixie to buy three quarts of milk. You hand over your money at the checkout; the attendant smiles and takes two quarts you've just bought away from you. Your purchase has just been reduced and you leave with one quart, having paid for three. Sadly, that scenario plays out in the long-term-care insurance industry every day when benefits are reduced, delayed or denied outright through bad faith insurance.

It's a tough time for the insurance industry right now and it's only going to get tougher given the advancing age of the baby boomer. More and more people are deciding to err on the side of prudence and purchase long-term care insurance—an excellent product purchased for all the right reasons by careful, responsible citizens.

That's good news for insurers. An uptick in the number of policyholders means an increase in cash flow, which is good for business. And that cash flow is virtually guaranteed, given that policyholders need to continue paying the premiums to ensure their policy remains in force.

The hard part comes when the largest wave of baby boomers reach the point where it's time to collect on that policy. That's when many insurers begin to waffle and stall.

By law, insurers are required to conduct their relationship with policyholders in good faith. A policy, after all is a legal contract—a signed agreement that spells out the obligations of each side.

For the policyholder, the obligation is to be aware of the benefits and limits of the policy and the requirement to faithfully pay premiums on time.

For the insurance provider, the requirement is to collect each premium in good faith in order to ensure the policy remains active, and to provide the agreed benefits in a timely fashion once those benefits are required.

Seems pretty simple. However, given the number of examples of bad faith insurance claims in the long-term care insurance sector it appears as if actual receipt of benefits in a timely fashion is not guaranteed to reflect the timely payment of premiums.

The stories are legion where insurers have attempted to stall the payment of a claim through various means, including but not limited to insisting everything in this electronic age be done by snail mail, sending out the wrong forms, dragging out the claim through various strings of bureaucratic red tape, offering a reduced benefit or the denial of a claim altogether.

Given that most claimants are in advanced age and presumably in poor health, some insurers have been accused of stalling with the hope that a claimant will simply die waiting. Morally, it's reprehensible. Legally, it's fodder for a bad faith insurance claim—and many claims have been advanced, lawsuits filed and settlements won by disgruntled policy holders or their families who refused to remain prone while a multinational insurer steamrolled over them.

Not every insurer operates in bad faith. There are good ones out there. However the purveyors of bad faith insurance have painted the entire industry with a stained brush, and people are understandably suspect of the insurer's motives and conduct when the day of reckoning (read, making a claim) comes for them.

It would be interesting to turn the tables. What would happen if a policyholder suddenly stopped payment of premiums? Or paid them sporadically? Perhaps making an arbitrary decision to reduce the amount of the premium…a reasonable response in a troubled economy where every dollar is hard to come by and job loss is rampant.

The policy would be cancelled in a heartbeat, and the insurer would not stand for it.

Nor should you. If you have paid your premiums for long-term care insurance diligently and faithfully, you should expect conduct in kind when a legitimate claim is made. If you are met with stall, delay or denial that smacks of bad faith insurance, don't buy into it. Contact a qualified bad faith insurance attorney at once.