CDI Tells LINA To Fix Bad Faith Practices & Revisit Disability Claims

The California Department of Insurance (CDI) has reached a settlement agreement with disability insurance carrier Life Insurance Company of North America (LINA) over bad faith insurance practices. The carrier, who also operates under Cigna Insurance, will pay a $600,000 fine, change its claim handling processes, resolve allegations of disability insurance claims handling violations from February 2005 to June 20, 2006 and reassess all denied disability claims from January 2005 to December 2007.

California bad faith insurance practices

According to a press release from the CDI and Insurance Commissioner Steve Poizner, the Department recently performed an on-site investigation of LINA's records and found that the insurer had engaged in numerous bad faith insurance practices such as making claims determinations prior to requesting medical records and ignoring substantial new information after a claim had initially been denied.

Insurance settlement details

The settlement between CDI and LINA requires the insurer to:

  • Pay $600,000 in fines
  • Cease and desist from engaging in any acts or practices in violation of California law
  • Implement changes in its policies, procedures and practices
  • Reassess all denied disability claims from January 2005 to December 2007 using an agreed upon quality standards which are outlined in the settlement

Are bad faith insurance practices simply a way of doing business?

If it seems like you've heard about these types of settlements before, you have. Bad faith insurance lawyers say that insurance companies continually find new ways to delay and deny claims in order to increase their bottom lines. Their bad faith practices may seem like that's the way they really do business – despite their television ads and claims of customer service and loyalty. Luckily, more and more insurers are getting caught. Here are two examples of a recent disability settlement and disability verdict:

  • $676M Unum Group settlement. Disability insurer Unum Group settled a multi-state investigation over its bad faith insurance practices. It will provide policyholders in 48 states and the District of Columbia with over $676 million in additional disability benefits – which accounts for a shocking 42% of its previously denied disability claims.
  • $60M Paul Revere Life Insurance Co. verdict. The Paul Revere Life Insurance Company was ordered to pay a Nevada man $60 million for denying his disability claim. Most of that award consisted of punitive damages.