California Insurance: First-Party and ERISA Explained

February 27, 2013, 2:30PM. By Heidi Turner

San Francisco, CAAnyone with access to the news hears about denied disability insurance claims and allegations of bad faith insurance against insurance companies. Such is the case with California insurance claim denials, as well. And regardless of whether a person has first-party insurance or ERISA-covered insurance, there are ways of fighting back if an insurance company has unfairly denied a legitimate insurance claim.

First-party insurance is insurance that has been purchased by an individual through an insurance broker. In such cases, if an insurance company is found to have unreasonably denied or delayed payment of a claim, the individual can file a lawsuit for punitive damages, and pain and suffering, in addition to medical expenses. Furthermore, in cases of disputes involving first-party insurance, the individual can file a lawsuit as soon as the claim is denied, rather than appealing the decision (as must be done in ERISA insurance claims).

Under ERISA (Employee Retirement Income Security Act (ERISA) insurance - which is insurance provided by an employer - the individual must file an appeal of the denial before a lawsuit can be filed. The claimant can also only file a claim for attorney’s fees and medical coverage. Punitive damages and pain and suffering are not included in ERISA insurance claims.

Policyholders find their claims unexpectedly denied for a number of reasons. Some claimants say the insurance company unreasonably makes them fill out paperwork multiple times, claiming the original paperwork was lost or not received. Others find out after they file a claim that their policy has been canceled because of an incorrectly answered question on the insurance application - even if the question had nothing to do with the current claim.

Sometimes, insurance companies question a medical diagnosis - including a diagnosis of disability - and require the claimant to attend multiple medical appointments. Or, they may dispute the diagnosis saying the patient’s files do not support the diagnosis.

Whatever the reasons or means behind denying or delaying payment of a claim, such situations lead to undue stress and hardship for insurance claimants, not to mention greatly increased expenses to pay for necessary medical attention. Having to fight an insurance company while also dealing with the stress of health issues - and, in many cases, not being able to work - is a lot for any individual to deal with.