Disability Insurance: What You Can Do To Protect Your Interests

Protecting your interests when purchasing any type of insurance, especially disability insurance, is crucial. Consumers often trust their insurers or agents more than they should. In order to protect your interests, it’s important to understand why insurers deny claims in the first place.

We posed this question to Arizona attorney Charles Surrano who has practiced insurance law for 30 years and member of the Advocate Law Group network. He said, “Well, sometimes, [insurers deny claims] because they’re supposed to. Insurers don’t always get it wrong. Often times, claims simply aren’t covered under a policy and the insurer is perfectly within its rights to deny a claim, as long as it has done an adequate and appropriate investigation into the facts behind the claim. After having done so, if it rightfully concludes that there is no coverage for the claim, it’s within their legal rights to deny the claim and they should deny the claim.”

While insurers have the right to deny claims for valid reasons, the truth of the matter is that many often deny claims for invalid reasons such as meeting arbitrary internal objectives or turning a blind eye towards relevant claim information.

Meeting arbitrary objectives

Insurance companies are business and every business has objectives to meet. However, when those objectives infringe upon an insured’s right to collect on their policy, Surrano says that goes too far. As an example, he explained that “if an insurance company has instituted institutional claim objectives, whether they’re severity goals, reserve reductions or what they insurers call, ‘reserve takedowns,’ this will create artificial pressure on insurance adjustors and claims supervisors to underpay or deny what may be valid claims simply to meet these artificial and arbitrary objectives. That’s a wrong thing to do and can result in a lot of otherwise valid claims being improperly denied.”

Turning a blind eye

In addition to internal pressures, Surrano told us that he’s seen insurance companies deny claims because they haven’t conducted a full, fair and prompt investigation. He explained that “An insurance company cannot say that it has reasonably denied a claim if it has failed to conduct an investigation. Yet sometimes, even absent any institutional evidence of claim objectives, claim goals or reserve reductions, I’ll see evidence in claim files where it is quite clear that the one thing the insurance company was doing was, as I like to call it, turning a blind eye toward evidence that would support the claim and simply looking at evidence that they would use to deny it.

That’s wrong. It’s an improper claim denial in that case and doesn’t give equal consideration to the insured’s interests because, quite obviously, the insurance company is only looking for information that favors a claim denial when there may be evidence, literally underneath its nose, that would support payment of the claim.” Quite simply, “It’s not allowed to do that. That’s a bad reason to deny a claim.”

Consumer task number one: get the claim file

Regardless of why an insurance company has denied a claim, Surrano explained that in any case where you feel that you have a valid claim that has been denied, you need to get the claim file. “The claim file is, or should be at least, like a little history book of what’s happened in the claim and what the insurance company has done regarding the investigation and the claim decisions that go into it.

When you get that little book, that archive, it can sometimes tell an experienced attorney in bad faith matters that there were other forces at work or other decisions that were being made that really lacked a reasonable basis, and thus might be bad faith. So sometimes, you’re not even aware of the full extent of why a claim was denied until you’ve actually reviewed the file from the insurance company. You may be able to make educated guesses, but you won’t really know the full extent of it until you’ve reviewed that claim history.”

Difficulties in getting the file

Although Surrano says that the claim file will be provided in almost every case, he warns, “Sometimes, insurance companies will claim that parts of it are privileged. That may well be the case where attorneys are involved and have been giving advice to the insurance company. However, in the ordinary sense of the insurance company going about its business, doing its job of investigating the claim, having the adjustor do what he or she is supposed to do everyday of the week, gathering the facts, evaluating the evidence or deciding whether or not to pay the claim, that information is almost invariably at the disposal of the insured by request.

Sometimes, it depends upon the legal jurisdiction you’re in, by way of affirmative disclosure requirements in that particular jurisdiction. For example, here in Arizona, I wouldn’t even have to request the claim file if I were in state court; they would have to produce it, and they do.”