It is not unusual for an insurance company to deny a claim for long-term disability insurance benefits on flimsy grounds. It may continue to deny the claim on review even if the claimant has submitted clear and persuasive evidence of disability. When this happens, it comes as no surprise that the claimant, who may be suffering from a significant physical or mental impairment that is preventing her from working, will also experience serious anxiety and stress because of the LTD insurer’s egregious denial.
After all, the claimant is not only facing the loss of her job, but is also dealing with a serious, disabling condition. When the insurer wrongfully denies income replacement benefits under the LTD policy, it usually does not take long for bills to become seriously overdue, thereby creating a financial crisis.
When an insurance company causes this kind of mental anguish, it is natural to want to recover against it in a lawsuit for the distress that has been caused. Unfortunately, in many situations, these kinds of damages are not available.
ERISA does not allow noneconomic damages
Almost all LTD policies available through employers are governed by ERISA, a complicated and rather rigid federal law that does not allow a claimant to recover noneconomic damages against an insurer, no matter how bad the carrier has behaved in its denial or termination of benefits.
Noneconomic or nonpecuniary damages means those that are not financially measurable like a medical bill or a wage amount are. Noneconomic damages may include:
- Emotional distress
- Pain and suffering
- Loss of enjoyment of life
- And similar harm to a claimant that is a personal, but not a financial loss
Private LTD policies governed by state law may allow noneconomic losses
Normally if a person does not procure his or her LTD policy through an employer, he or she might buy it on the open market as a private purchase. In such a case, the terms of the insurance contract and state law will normally govern the policy and legal remedies available for breaching it. In many states, if the claimant can show that an LTD claim was denied by the insurance company in bad faith, he or she may be able to recover noneconomic damages like those for emotional distress and the others listed above.
In some situations, under a private policy, if the insurer’s behavior has been particularly bad, punitive damages may even be available as a form of punishment.
Talk to an LTD lawyer to understand what law governs your policy and what damages may be available to you if you experience an improper claim denial.