Insurers’ Bad Faith at Different Steps of the Insurance Claims Process

California law imposes an implied covenant of good faith and fair dealing in insurance contracts under which neither party may act so as to injure the rights of the other to receive benefits under the contract. Insurers whose actions harm the rights of their insureds to receive contracted-for insurance benefits breach this implied covenant of good faith and fair dealing, or act in “bad faith.” An insurer’s bad faith may occur at many stages of the claims process, even after the initial denial. Accordingly, insureds should protect their interests and be mindful of potential bad faith on the part of their insurers, from the claims determination process and in some cases, the insurer’s litigation tactics.

Bad Faith in Determining or Administering Insurance Claims

Most bad faith suits against insurers allege unlawful or improper behavior during the claims administration process. Indeed, insurers often engage in unreasonable behavior in order to deny claims and increase their bottom lines, which effectively places burdens on insureds to challenge these denials. Evidence of bad faith may arise from the affirmative actions of the insurer, such as misinterpreting claims information, conducting biased reviews, attempting to settle claims for unreasonably low amounts or setting unreasonable or impossible standards of evidence in order to avoid approving a claim. Conversely, an insurer’s bad faith may be reflected by its inactions, such as failure to communicate with insureds or failure to conduct reasonable investigations into the circumstances surrounding claims.

Bad Faith Following a Denial of an Insurance Claim

An insurer’s duty to act in good faith toward an insured continues even after it issues a denial. For example, an insurer must provide insureds with a clear and reasonable explanation for its denial decision. In general, this explanation should clarify why the claim was not payable, reference any applicable policy exclusions and in some cases provide guidance of what an insured needs to do to perfect the claim. Failure to do so may be evidence of bad faith.

Bad Faith in Coverage Litigation

The California Supreme Court has held an insurer’s duties of good faith and fair dealing do not end once litigation begins. In White v. Western Title Insurance Co., 40 Cal. 3d 870 (1985) (superseded by statute on other grounds), the Court allowed post-litigation actions, including the insurer’s unreasonable settlement efforts, as evidence to support a claim for bad faith. Although California courts have declined to broaden this holding, the decision still serves to curb abusive conduct by insurance companies. Subsequent cases have held an insurer may be acting in bad faith in failing to fully investigate a claim, even if litigation is pending, and if the insurer engages in unreasonable conduct in addition to litigation, such as by seeking declaratory relief against the insured, threatening baseless litigation and instigating criminal investigations. Although these situations occur less frequently, these examples show an insurer does not have a free pass to engage in bad faith after issuing a denial, or once litigation commences.

Insureds have a legal and contractual right to expect insurers administer claims in good faith and provide coverage when appropriate under the insurance contract. If insurers act unreasonably in order to issue denials, insureds should consult experienced insurance litigation attorneys in order to bring suit for policy benefits and other damages, including consequential damages, compensatory damages, punitive damages and attorneys’ fees and costs.

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McKennon Law Group PC’s Very Recent Success Stories Litigating California Disability Insurance Claim Denials

The dual roles insurers hold, as funding sources and claim administrators of disability plans, often impact their impartiality. Indeed, insurers have the discretion and financial incentive to deny claims and often do so improperly. Claimants may shudder at the thought of an insurer’s access to nearly unlimited resources, trained claims personnel and attorneys, and stop fighting for their benefits in light of their insurer’s seeming decided advantage. Although recovering long-term disability insurance benefits can be an uphill battle, pursuing a denied claim for benefits is very often well worth the effort.

If insurers deny insurance claims in bad faith or by abusing their discretion, claimants may be entitled to recover past-due policy benefits plus future benefits, consequential damages, emotional distress and punitive damages (for individual policies) and attorneys’ fees and costs and interest (for employer-sponsored policies governed by the Employee Retirement Income Security Act of 1974 (“ERISA”)). Accordingly, claimants should consult with an attorney experienced in handling disability/ERISA insurance claims before forfeiting their claims for disability benefits. Experienced attorneys can help evaluate claims, communicate with insurers and preserve litigation rights. Below are a few cases in which we have helped clients recover their disability benefits:

  • Following a field engineer’s an on-the-job accident, examining doctors determined he was over 50% functionally impaired and unable to compete in the job market. The insurer terminated his long-term disability benefits after about a year, stating he was capable of working “any occupation.” Less than three months into litigation, McKennon Law Group PC convinced the insurer to reinstate his benefits and pay interest on the past due benefits. In addition, McKennon Law Group PC is currently pursuing a bad faith claim against the insurer for attorneys’ fees, consequential damages, emotional distress and punitive damages worth several million dollars.
  • When a dental hygienist purchased two individual disability policies, the insurer’s agent negligently misrepresented her income on her applications. Based on this misrepresentation, the insurer issued, and the hygienist paid for, policies with higher premiums and benefits than it otherwise would have. When the hygienist filed for disability benefits, the insurer accused her of fraud and denied the claims. McKennon Law Group PC convinced the insurer to pay all of the past-due and ongoing benefits under the policies as issued and obtained a large six-digit settlement against the agent. McKennon Law Group PC is currently pursuing a bad faith claim against the insurer for attorneys’ fees, consequential damages, emotional distress and punitive damages worth several million dollars.
  • An escrow officer was diagnosed with a variety of debilitating conditions. The insurer terminated her long-term disability benefits after one year, based on its paid physician’s determination that her medical diagnoses, evaluated individually, did not render her disabled. McKennon Law Group PC convinced the insurer to reverse its decision, reinstate the escrow manager’s full benefits without a mediation and pay interest on her past-due benefits. A motion for attorneys’ fees and costs is pending.
  • A courier was forced to stop working after her arthritis caused severe hip and abdominal pain such that she could not tolerate the extensive driving, bending and lifting required for her occupation. The insurer ignored evidence of multiple surgeries and other serious medical issues, and denied the claim. McKennon Law Group PC challenged the insurer’s denial and the insurer placed the courier back on claim and paid all past-due benefits and is paying all future benefits. In addition, the insurer paid her substantial attorneys’ fees.
  • After an attorney became disabled, she worked another part-time job. Her insurer denied her claim, stating improperly that she was capable of working at this second job. McKennon Law Group PC convinced the insurer reverse its decision and pay a six-digit settlement to buy out her policy.
  • A senior analyst at Bank of America stopped working due to severe arthritis. The insurer paid some short-term disability benefits then terminated the disability insurance claim. McKennon Law Group PC contacted the insurer, and the insurer conducted another review of the senior analyst’s claim, overturned its initial denial, paid back the past-due short term benefits and approved his long term disability claim.
  • A software developer was unable continue working following postoperative complications which caused persistent pain. McKennon Law Group PC subsequently filed a complaint and argued the insurer misinterpreted the medical evidence. While the case was pending, McKennon Law Group PC convinced the insurer to place the software developer back on claim and to pay all past-due disability benefits and to pay on-going disability benefits. McKennon Law Group PC then obtained a court order requiring the insurer to pay the software developer’s attorneys’ fees and costs.

All of these clients came to our firm desperate to have their disability insurance benefits paid. While your case may be different, these success stories show how the attorneys at McKennon Law Group PC have helped a variety of policyholders who had their disability insurance claims denied receive the benefits they deserved. If you are in need of highly experienced and qualified attorneys to handle your ERISA or individual disability insurance claims denials, call us for a free consultation.

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Robert J. McKennon Named “2014 Top Attorney” By the Orange County Register’s OC Metro Magazine

McKennon Law Group PC founding partner Robert J. McKennon was named as a 2014 “Top Attorney” by the Orange County Register’s OC Metro Magazine. This prestigious list identifies the top attorneys practicing in Orange County, California. Mr. McKennon was recognized for his work handling insurance coverage claims and litigation.

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Components of an ERISA Disability Insurance Claim

Under your employer-sponsored disability policy, you are entitled to income replacement benefits if you are disabled and unable to work due to an injury or sickness. However, recovering on the policy may involve navigating a multistep process. Below is a summary of different components to a claim for disability benefits.
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Components of an Individual Long-Term Disability Insurance Claim

When you purchase an own occupation individual disability insurance policy, the insurer promises to pay for total disability or residual disability in the event you are unable to perform the substantial and material duties of your occupation due to an injury or sickness. However, recovering under your disability policy may entail a multistep process as summarized below.
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About Directors and Officers Liability Insurance

Directors and officers liability insurance, also called D&O, covers a company’s former and current directors and officers, as well as the corporate entity, against defense fees, costs, and damages in connection with a lawsuit alleging that they committed certain wrongful acts or omissions while acting as directors and officers for the company.

Directors and officers liability insurance is liability insurance payable to the directors and officers of a company, or the company itself, as reimbursement for losses related to defense costs as a result of loss related to the legal action taken alleging the insured committed wrongful acts in their capacity as directors and officers.

D&O insurance policies may cover defense fees and costs in connection with criminal and regulatory investigations and lawsuits. D&O insurance claims potentially cover claims made by individual and company shareholders in customers, regulators, shareholder-derivative actions, and competitors.

D&O policy forms often increase legal fees and costs necessary to resolve disputes between those insured and their D&O insurers since they vary from insurer to insurer and industry to industry.

We are well suited to litigate your D&O insurance claims.We are nationally recognized experts in insurance bad faith law and litigation, and also have experience litigating D&O insurance claims. We will aggressively litigate your case to achieve success. Contact us today to learn how our Los Angeles and Orange County Attorneys can help you with your D&O insurance claims.

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LINA Ordered to Pay the McKennon Law Group Attorneys’ Fees and Costs

On May 13, 2014, a respected Central District of California Federal Court Judge, Margaret M. Morrow, issued an Order granting Plaintiff’s Motion for Attorneys’ Fees and Costs.  In the Order, Life Insurance Company of North America (“LINA”) was ordered to pay the McKennon Law Group PC approximately $50,000 in attorneys’ fees and costs following the successful resolution of a dispute over long-term disability insurance benefits due pursuant to an ERISA-governed group policy.  LINA reinstated the plaintiff’s claim for long-term disability benefits shortly after the McKennon Law Group PC filed the Complaint.  In the Order, Judge Morrow approved Robert McKennon’s hourly rate based upon Mr. McKennon’s experience and skill, which appears to be the highest hourly rate ever allowed for an attorney in an ERISA case filed in Southern California.

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Los Angeles Business Litigation Lawyers

McKennon Law Group PC specializes in litigating and resolving all types of business disputes. Our aggressive advocacy and our regional reputation as a leading business litigation firm, enables us to achieve maximum settlements and judgments/verdicts at trial. We have over 25 years of experience litigating business disputes.  Our firm handles all types of complex corporate, commercial, and business litigation, including:

  • Breach of contract or license agreements
  • Breach of implied or express warranties
  • Breach of oral agreements
  • Fraud and misrepresentation claims
  • Unfair competition claims and trade secrets
  • Tortious interference cases
  • Intellectual property infringement
  • Breach of fiduciary duty
  • Insurance coverage and bad faith litigation relating to business disputes

Sone of our consumer and business litigation cases are taken on a contingency fee basis. You pay nothing and we recover nothing unless we win your case.

There are no other attorneys in California better suited to litigate your business disputes. McKennon Law Group PC’s founding partner, Robert J. McKennon was named in the Business Edition 2012 Thomson Reuters/Super Lawyers annual list of the nation’s top attorneys in business practice areas. We will aggressively litigate your case to achieve maximum success.

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Robert J. McKennon Published an Article in the Los Angeles Daily Journal

McKennon Law Group PC’s founding partner, Robert J. McKennon, published an article entitled “New liability for claims adjusters the right move” in the Los Angeles Daily Journal on April 21, 2014, a new case which exposes insurance adjustors to negligent misrepresentation and intentional infliction of emotional distress claims by policyholders.

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Leaders in Long-Term Disability Insurance, Life Insurance and ERISA Insurance Litigation

We founded McKennon Law Group PC for one purpose: to provide our clients effective representation targeted to get the best results possible. With single-minded focus, we aim to achieve our client’s objectives in an aggressive, yet professional manner.

We have arbitrated, tried, appealed, and resolved hundreds of insurance disputes, including but not limited to the following: long-term disability insurance, property/casualty, commercial general liability insurance, life insurance, health insurance, professional liability, officers and directors liability insurance, employment practices liability insurance, homeowners and business owners property and liability insurance. We have litigated disputes involving but not limited to: insurance and real estate agent/broker liability and other consumer and general business matters. We have recovered millions of dollars in both judgments and settlements for our clients.

When you need an attorney, choosing the right law firm is the most important decision you will make. We are counted among California’s leading  long-term disability insurance, life insurance, insurance coverage, ERISA, business, and consumer attorneys. Our attorneys are nationally recognized in  long-term disability insurance, life insurance and health insurance and ERISA/Employee benefit insurance litigation, and are frequent authors and speakers at national and local conferences on these topics.

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