When Bad Faith Applies, You’re Better Off.
Use privacy settings on your Social Media accounts and other online forums. Insurance companies monitor
Facebook and other online accounts to and information about your activities. They use activity found there to argue you are not disabled and should be able to work. Avoid having to explain your posts by minimizing your use of Social Media and using privacy settings.
Document ALL communications with the insurance company, including ANY phone calls. Send follow-ups in writing. Ask for and use the email address of your claims adjuster. DO NOT assume the insurance company is your friend, or that any tape recordings made by the
insurance company will be discoverable at a later date. Know your rights in the State of Arizona for communicating with them and protect yourself.
What is Insurance Bad Faith?
In the State of Arizona, insurance companies are subject to the common law duty of good faith and fair dealing when handling disability insurance claims that are not subject to ERISA. This duty is less than the fiduciary duty imposed by ERISA, which requires insurers to put your interests ahead of its own, but only slightly less.
The duty of good faith and fair dealing is implied in every individual insurance policy and requires an insurance company to act reasonably towards you and give equal consideration to the protection of your interests as well as its own.
This duty requires insurers to communicate honestly and to fairly consider short term and long term disability claims. It is bad faith for an insurance company to intentionally deny, delay, or fail to process your claim without a reasonable basis to do so. An insurance company can be liable for bad faith even when it ultimately pays a claim.
You Are Better Off When Insurance Bad Faith Applies
Under Arizona’s Fair Claims Practices Act, insurance companies or their agents are prohibited from engaging in any of the following practices:
The Act does not provide claimants a private right of action for violation of the Act, but the prohibited conduct is illustrative and may rise to the level of bad faith. The insurer continues to be bound by the duty of good faith and fair dealing even after you file a lawsuit to recover disability benefits. In our experience, insurance companies sometimes go to extreme lengths to deny valid claims and engage in multiple bad acts, which often continue during litigation; the examples above are not exhaustive by any means.
Some bad faith insurers will boldly lie and tell you your claim is governed by ERISA when, in fact, it is not. They do this because your rights and the remedies for insurance bad faith under Arizona law are far broader than those that ERISA provides. Generally, ERISA limits to you equitable remedies. Typically these include benefits owed to you and attorney’s fees. But an insurer’s breach of the duty of good faith and fair dealing permits legal remedies including extra-contractual damages, such as compensation for pain and suffering, emotional distress, or economic losses suffered as a consequence of the insurer’s acts of bad faith. In extreme cases, an insurer can even be liable for punitive damages.
How to Know Whether Insurance Bad Faith Applies
Congress exempted some employer provided disability benefit plans from ERISA. Do not assume that ERISA applies to your disability benefits just because they are provided through your employer. Sometimes your employer may not even know whether your benefits are exempt from ERISA because insurance companies may reference ERISA, even when it does not apply. Figuring out whether your claim falls under ERISA or state law is not easy. You cannot always rely on your employer’s human resource department for accurate information. Even attorneys, who do not handle disability benefit cases regularly, sometimes get it wrong. To truly know, you must consult an attorney whose practice is focused exclusively on disability benefits law.
If you aren’t sure or believe your insurance company has engaged in bad faith, contact us to review your claim for insurance bad faith to ensure you aren’t missing out on benefits you rightfully deserve.
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