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If you have been injured and have been denied by a disability insurance carrier you may have a legal case. Lawyers representing professionals and workers improperly denied long term disability policies have obtained substantial settlements, exceeding the amount owed under the policy.

When an insurer denies a disability claim, after utilizing internal appeals and grievance procedures the insured can sue in a court of law under a variety of legal theories. The two primary legal remedies available in most cases include breach of contract and breach of the implied covenant of good faith and fair dealing (bad faith).

Breach of Contract

In a breach of contract suit, the plaintiff can recover the value of the denied benefit and any incidental damages. Under a breach of contract claim, the plaintiff asserts that the insurer did not "live up to its end of the bargain." A breach of contract suit requires a showing that the plaintiff suffered a disability, as defined by the particular DI policy, and that the insurer failed to fulfill its obligations under that same policy by refusing to pay the benefit. These types of suits often focus on the language of the DI policy to determine what obligations each party had, and whether the parties fulfilled those obligations.

Though insurance companies may have the advantage in that they draft the language of the policy, courts have remedied this unfair bargaining power through the development of "rules of construction." These rules of construction require that courts interpret ambiguous language in an insurance policy in the manner most favorable to the insured. This reduces an insurance companies advantage in a breach of contract claim.

Bad Faith

A breach of implied covenant of good faith and fair dealing, otherwise referred to as bad faith, requires a claim that the insurance company unreasonably denied a claim under the DI policy. All insurance policies require that the insurer act in good faith when reviewing a claim for payment of benefits. This obligation of good faith obligates an insurance company to fully investigate and consider all the circumstances supporting a claim. An insurance company cannot simply look for reasons not to pay the claim.

If an insurance company denies a claim that it should pay, either knowingly or as a result of inadequate investigation, or attempts to settle a claim for less than it is worth, the insured may have a viable bad faith claim. A successful bad faith claim may allow recovery for benefit owed under the contract, interest on out-of-pocket losses, foreseeable, consequential damages, and attorney's fees.

It is important to note that the law controlling bad faith claims varies from state to state. In New York, for example, the law does not recognize a legal action for bad faith denial of a claim. In New Jersey, where bad faith is a valid claim, punitive damages are generally not available even when a plaintiff establishes bad faith.


If you or a loved one has been improperly denied a disability insurance claim, contact a qualified attorney to help you determine your legal options.

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