When you take out short-term disability (STD) or long-term disability (LTD) insurance, you agree with the insurer that both of you will act in good faith. You cannot lodge false or exaggerated claims, and they cannot deny or delay claims without a valid reason.
Yet, because insurers are profit-driven, they sometimes break this code of conduct in an attempt to increase profits. If they do so, you can consider a bad-faith lawsuit.
Not every delay or denial constitutes bad faith
Insurers do get it wrong sometimes, without meaning to. Therefore if they deny your claim, it is crucial to understand their motives. If you think they have misinterpreted the facts or missed looking at essential evidence, you can file an appeal in the hope that they will admit their mistake and change their mind. Yet, if you believe they know they are wrong, you might need to think about a bad faith lawsuit.
Bad faith is not about mistakes. It is about purposeful deceit and refusing to play by the rules. The insurer knows they should pay you a specific amount, but they either refuse outright, refuse to pay the total amount or delay without reason.
Insurers act in bad faith because it works. They know that if they make filing a claim difficult, some people won’t file one. If it works for one in every thousand people who claim, it soon adds to considerable savings for the insurer.
Proving your insurer acted in bad faith is not straightforward, and they are likely to fight hard against you. Yet, with an experienced team on your side, you could end up getting far more money than you would have got if they had paid out promptly.