Filing Bad Faith Insurance Lawsuits

June 19, 2014, 1:30PM. By Heidi Turner

Oakland, CAAmong the more stressful things a person can go through, having a legitimate insurance claim denied has to be close to the top of the list. After all, the person who submitted the denied disability insurance claim is likely already going through health problems and is probably off work and worried about finances while dealing with health problems. California policyholders who have had their insurance claim wrongfully denied can take action to appeal the decision, which is what some people have done.

Unfortunately, the road to appealing a decision can be long and complicated, made worse by the fact that different types of insurance have different rules for appeals. For example, if the insurance is provided through work, it is covered under ERISA (Employee Retirement Income Security Act) and therefore no lawsuits can be filed until all appeals with the company have been exhausted.

Insurance that does not go through an employer does not require appeals be filed, and therefore a lawsuit can be filed as soon as the claim is denied. Also, unlike insurance covered by ERISA, first party insurance allows claims for punitive damages and pain and suffering.

Of course dealing with an insurance appeal or a lawsuit on top of health and possible financial problems is a daunting prospect. But doing so can get results. In some cases, claims are denied simply because information has been put into the database incorrectly.

Not all insurance claims are as benign as a data input error. Some denied claims are the result of bad faith insurance, where the insurer fails to live up to its end of an insurance contract, or unreasonably denies or delays payment of a claim. There are, naturally, legitimate reasons for denying a claim including seeking compensation for conditions that are not covered in the policy or making a fraudulent claim. But when a condition is covered by the policy and the insurer refused to pay, or only a shallow, cursory investigation is completed before denying the claim, then a bad faith insurance lawsuit may be warranted.

One such lawsuit was filed in Delaware against Geico, alleging the company uses software to reduce or eliminate claims payments without a reasonable justification. The lawsuit, Green v. Geico General Insurance Co., case number 9431, was filed earlier in 2014 and alleges the claims processing system does not consider any factor other than the date of an accident and date and location of medical treatment.