Private Investigator Surveillance Methods and Terms
Private investigators use a variety of tactics to produce evidence that may be used to deny your disability insurance claim. Below is a list of different private investigator surveillance methods and terms.
Disability Surveillance – refers to the monitoring, recording and documenting of activities or behavior of another. In the disability context, this surveillance is called sub rosa surveillance. Sub rosa, a Latin phrase which translated means “under the rose,” denotes the secretive and clandestine nature of private investigator actions.
Disability Stake outs – according to Shannon Detective Service, Inc.—a private investigation company whose client list includes Arizona Counties Insurance Pool, CNA Commercial Insurance, Danielson Insurance, Farmers Insurance, Federated Mutual Insurance Company, Hartford Insurance, Insurance Company of the West, Liberty Mutual Insurance, Nationwide Insurance, Progressive Insurance, Seabright Insurance Company, Sedgwick Claims Service, Travelers Insurance and Westfield Insurance—this is a stationary surveillance method by which a private investigator documents and records a claimant’s activities. The hallmark feature of a stake out is that the private investigator does not move or follow the disabled claimant. In a typical stake out operation the private investigator may station in front of your home or office and record you as you come and go. The goal of the stake out is to produce evidence that will enable the insurance company to deny your disability insurance claim. An ABC News story shows how an insurance company successfully denied a doctor’s disability claim with evidence produced during a stake out.
Disability Pretexting – the Federal Trade Commission (FTC) defines pretexting as “the practice of getting your personal information under false pretenses.” Private investigators are engaging in illegal conduct when they use pretexting to obtain your personal information from a financial institution. See 15 U.S.C. § 6801, et seq.
Here’s an example of how this works: someone pretends to be you and calls your bank. The person claims to have forgotten your checkbook, account number, social security number or other sensitive information. He then tries to get this information from the bank. Such conduct constitutes pretexting and violates federal law. Id.
Although private investigators claim to use only “appropriate” pretexting methods, methods which are not illegal per se, these are the same techniques which are used to facilitate identity theft and consumer fraud. Check out the FTC website for more information about pretexting and how you can protect yourself.
Disability Tracking Devices and GPS – this area of the law is still evolving. In a recent Supreme Court case, United States v. Jones, the Court held that attaching a GPS device to a vehicle constitutes a “search” under the Fourth Amendment; therefore, law enforcement officials need a warrant before installing the device. 132 S. Ct. 945, 949 (2012). Although the Court did not address the attachment of GPS devices in the private investigation context, its decision largely turned on the physical trespass involved in attaching a GPS device to another person’s vehicle. Id. The Court stated:
It is important to be clear about what occurred in this case: The Government physically occupied private property for the purpose of obtaining information. We have no doubt that such a physical intrusion would have been considered a “search” within the meaning of the Fourth Amendment when it was adopted.
Id. Therefore, this ruling may be used to argue against private investigator installations of GPS devices since such installation would also constitute a physical trespass. Private investigation companies, such as Shannon Detective Services, Inc. (SDS), are now looking how to bypass the physical trespass issue altogether through implementation of other technologies that do not require physical attachment. Here are two examples of other technologies cited from the SDS website:
- Disability stingrays (a device that can triangulate a cell phone signal to locate a user) will become popular in the future as a way to skirt around the new GPS laws for law enforcement.
- Disability ping of cell phones (by accessing a user’s cell phone GPS chip) will also fill the gap created by GPS legislation since the FCC has mandated GPS chips to be installed in all new cell phones by 2018.
Your Most Valuable Financial Asset
What is your most valuable financial asset? According to Chicago Tribune columnist, Gregory Karp, for most people “the answer isn’t in their golden eggs, but in the goose that laid them.” That is, their most valuable financial asset is not their car, house or retirement account, but their ability to make money.
When you suffer from long-term or short-term disability, you will likely be unable to continue working and, therefore, will lose your most valuable financial asset – your ability to earn money. For many Americans without disability insurance, this financial blow can be devastating.
For this reason, in his article entitled Disability Insurance Primer, Karp stresses the importance of long-term disability insurance and provides a basic overview of what disability insurance is, what it is not, and how to find an appropriate plan. The article is a good source for those seeking disability insurance or looking to change their current disability benefits plan.
Ed Comitz, disability insurance attorney in the greater Phoenix area, Tucson, and Flagstaff, also provides answers to frequently asked disability insurance questions. For example, in his blog post, Disability Insurance Policies: Which type do you own?, Mr. Comitz describes fundamental differences between individual, group and employer-sponsored disability insurance policies. In another post, How to Get a Copy of Your Disability Insurance Policy, Mr. Comitz explains the process of obtaining a copy of your policy from the insurance company. Finally, in How Specific is Your “Own Occupation”?, Mr. Comitz provides understanding about key terms within your policy and how insurers may try to classify these terms in a way to deny your disability insurance claim.
Unum’s CEO Gets a $750,000 Increase in Pay for an Annual Income of $12.2 million
While some disabled Unum insureds struggle to make ends meet while fighting unfair claim denials or termination of their benefits, the Times Free Press reports that Tom Watjen, the President and CEO of Unum, received a pay increase of $750,000.00 in 2011 — for a total annual income of $12.2 million — in reward for “delivering strong results in a difficult environment,” according to Unum’s compensation committee.
Watjen receives a base salary of $1.1 million, with the remaining $11.1 million tied to performance-related cash and stock incentives. In 2011, Unum had after-tax earnings of $887.6 million, an 11% return on equity, and $10.2 billion in revenue.
Unum Plays Semantic Games in Denying Benefits for a “Heart Attack”
We have previously blogged that even Unum’s U.K. CEO agrees that Unum’s policies contain confusing language. Recently, Unum took advantage of its unclear disability policy language — in this case, a policy containing the layman’s term “heart attack” — to deny benefits to the widower of a policyholder who had died, in medical terms, of “atheroscopic coronary artery disease.”
Annette Frie’s disability insurance policy from Unum stated that a $30,000.00 benefit would be paid to her spouse if she were to die from a “heart attack.” However, because “heart attack” is not a medical term likely to be used on a death certificate, her husband Jim Frie suspects Unum deliberately used that term on its policy in order to deny claims by splitting semantic hairs.
When Mr. Frie submitted his claim, Unum sent him a letter offering its condolences but denying the claim on the basis that it “didn’t meet the definition of the specified illness covered by the policy.” The medical examiner who had signed Mrs. Frie’s death certificate then sent two letters to Unum explaining that Mrs. Frie’s coronary artery disease had caused the heart attack. In response, Unum denied the claim two more times.
The Minnesota State Commerce Department subsequently opened an investigation, but when Mr. Frie became impatient with the pace of the state’s investigation, he contacted FOX-9 investigators. Within 24 hours of being contacted by the news station about their investigation to expose this “fist-pounding outrage,” Unum called Mr. Frie with the news that the decision had been made to pay the claim.
Even commonly-used words and phrases can take on unexpected meanings within the context of a disability insurance policy, so it is important to consult an experienced disability insurance attorney to interpret the policy language when filing a claim.
Questions to Ask When Choosing
a Disability Insurance Attorney
For those looking for help with their disability insurance claims, choosing an attorney is an important step. However, it can often be difficult to determine whether a particular disability insurance lawyer is the right one for you to work with. Here are some general questions to ask to help you evaluate a potential lawyer or law firm.
1. How many cases does the attorney take on each year?
2. What percentage of the attorney’s practice is devoted to disability insurance claims?
3. Does the attorney exclusively work with individual policy claimants, or does he/she handle ERISA and Social Security cases?
4. Has the attorney published any articles or been interviewed about disability insurance topics?
5. What insurance companies has the attorney dealt with?
6. Does the attorney offer comprehensive representation or short term assistance?
7. Does the attorney’s fee structure work for you?
8. What does the attorney expect to accomplish with your claim?
Selecting the right disability insurance attorney to help with your claim is a decision not to take lightly. You should never be afraid to ask questions, and the attorney will be glad to answer them.
Out of Contract Demands:
When You Can Tell Your Disability Insurer “No”
Every disability insurance policy is a contract. With this contract come certain rights and obligations on the part of the disability insurance company and on the part of the policyholder. The insurer promises to pay you disability benefits and you promise to fulfill certain conditions. One of the most important things to remember about this contractual relationship is that if it’s not in your policy, you don’t have to do it.
Often, disability insurers will ask a person filing for disability benefits to do certain things or provide certain information in order to qualify for benefits. What every policyholder needs to realize is that the disability insurer cannot force you to do something that is not outlined in your policy. There are many examples of disability insurance companies’ demands that may not be required under the terms of the policy, such as:
• That you see a certain type of doctor
• That you undergo surgery for your disabling condition
• That you get a particular treatment or therapy
• That you provide your Social Security or workers’ compensation claim file
• That you attend a certain type of examination
• That you complete detailed descriptions of your daily activities
• That you allow a private investigator into your home
The bottom line is that a policyholder filing for disability insurance benefits should know what their policy requires and what it doesn’t. The best way to be sure an insurer doesn’t get away with making extra-contractual demands is to have a disability insurance attorney review your policy and advocate with the company for your rights.
Even Unum CEO Admits Their Insurance Policy Language Is Confusing
As we have blogged many times, even seemingly straightforward terms like “total disability” or “appropriate medical treatment” in your disability insurance policy may have different meanings in the context of a disability insurance claim than they do in everyday English. In a video posted on YouTube, Jack McGarry, CEO, Unum UK, is surprisingly candid in addressing how their insurance policy language is confusing.
Insurance is so confusing, in large part because we’ve made it that way, the insurance companies. We use acronyms instead of words, we use lingo instead of language. We’ve made it easy for us to communicate with each other, but we’ve made it very, very difficult for consumers to understand what we’re saying, and we need to change that.
[Consumers] are confused by our products, they don’t understand the choices, they don’t understand the coverage, and one of the reasons they don’t understand it is because the language we use to describe it, they find it confusing, and a little scary, so we’re partnering with Plain English to help simplify the language we use to describe what we do so everybody can understand it.
While Unum is apparently taking steps to clarify the language in its policies in the United Kingdom, it is of little help to American insureds who purchased policies written in language that is, in the words of Unum’s UK CEO, ”very, very difficult for consumers to understand.” The help of an experienced disability insurance attorney to interpret the language of your policy can be critical in ensuring you receive the benefits to which you are entitled.
Will New Demands on Healthcare Professionals Lead to More Disabled Doctors?
A recent article by health insurance writer Allison Bell explains, from an insurance industry perspective, why the new administrative demands on health care professionals might lead to an increase in doctors facing disability:
[I]t seems reasonable to ask whether, for example, the new pressure to convert to electronic health records will lead to some physicians at small or understaffed practices to develop carpal tunnel syndrome and blurry vision from trying to enter, or at least, check, many of the records themselves. Will sleep deprivation related to an increase in workload cause or aggravate objective conditions, such as lack of exercise, obesity and high blood pressure, that will, in turn, lead to an increase in the number of doctors with disability insurance who suffer heart attacks. strokes and disabling car accidents?
Healthcare professionals: Do you think the push for electronic health records and the Patient Protection and Affordable Care Act will lead to an increase in disabled doctors?
Timing Is Everything: When to Discuss Your Potential Claim with a Physician
When it comes to disability insurance, your treating physician’s support can be critical to getting your legitimate disability claim approved. If your doctor can’t provide adequate documentation of your condition or is reluctant to get involved, there is a much higher chance that your claim will be denied. However, fully discussing your condition with a professional, compassionate treating physician will help ensure supportive medical records. When you are involved in a disability insurance claim, it is important to understand how to approach your treating doctor so that he or she can help you.
When to discuss your potential claim with a physician is an important timing issue. Instead of trying to enlist your doctor’s help at the very first visit, you should wait to talk to your treating physician until after he or she knows you and your condition well enough to opine accurately as to your ability to work. It is vital that you develop a relationship of trust and confidence with your doctor before inviting him or her to assist you in your claim. Physicians are often reluctant to support claims for disability insurance benefits if they question the motivations behind the claims. A physician who has treated, without success, the policyholder making a legitimate disability claim will be more willing to cooperate with the extensive process.
AzMedicine publishes “Can Your Disability Insurer Dictate the Terms of Your Care?” article by Ed Comitz and Michael Vincent
Disability insurance attorney Edward O. Comitz and Michael Vincent had their article Can Your Disability Insurer Dictate the Terms of Your Care? published in the Winter edition of AzMedicine, the publication of the Arizona Medical Association. The article is excerpted below.
Can Your Disability Insurer Dictate the Terms of Your Care?
By Edward O. Comitz, Esq. and Michael Vincent
Imagine that you are a surgeon who has submitted a disability insurance claim after failed cataract surgery left you with halos, starbursts, and even temporary blindness under bright lighting. While you are dedicated to your profession, you realize that continuing to operate on patients puts them in danger. Your disability insurance company, however, will not pay your claim. It insists that you can keep performing surgeries, alleviating any occupational hazards by wearing sunglasses and using matte-finish instruments in the operating room. This scenario may sound absurd, but it is an actual example of some of the difficulties faced by many doctors seeking legitimate policy benefits. Fortunately, the surgeon in question had the common sense to cease performing surgeries rather than follow her insurer’s suggestions. Her decision did affect her financially, as benefits were denied for almost two years, and only paid after litigation ensued.
Insurance company treatment mandates are commonplace and based on their interpretation of the terms of your policy. In some cases, the insurance company goes so far as to demand surgery, invading your privacy and leaving you with the choice of either undergoing an operation involuntarily, bearing all of the medical risks and financial costs yourself, or waiving your right to collect disability insurance benefits. The decision can be difficult, but understanding your rights and obligations beforehand can help alleviate much of the worry.
Whether or not insurers can legally condition payment of your disability insurance benefits upon you following their suggested treatments depends on the specific terms in your policy. The various policy types fall into three general categories: “regular care” policies, “appropriate care” policies, and “most appropriate care” policies.
The oldest policies typically contain provisions conditioning benefits on being “under the regular care and attendance of a physician.” These “regular care” policies provide the most protection for insureds, as courts have repeatedly found that these provisions only create a duty for the insured to undergo regular monitoring by a physician to determine if the disability persists. Even if a proposed surgery is usually successful and very low risk, an insurance company cannot force it upon you. Under a policy requiring only regular care, courts will not enforce any particular course of treatment, no matter how vehemently an insurance company objects. Continue reading “AzMedicine publishes “Can Your Disability Insurer Dictate the Terms of Your Care?” article by Ed Comitz and Michael Vincent”
How to Get a Copy of Your Disability Insurance Policy
Many of the questions surrounding a disability insurance claim depend on the language in your policy. Thus, the first step to a successful disability claim is getting a copy of that policy. Though it is always important to keep a copy of your disability insurance policy and any related documents, sometimes policyholders forget to do so, they lose the document, or the papers become accidentally damaged.
The simplest way to get a copy of your policy is to call or send a letter to your insurance company directly. You can search for your disability insurer’s phone number and address on the Arizona Department of Insurance website. The insurer may require you to pay a minor fee, but they will send you a copy.
Once you receive your copy, check to make sure it is actually yours and that no pages are missing or damaged. If you have questions about the provisions in the disability insurance policy or filing a claim for benefits, you can bring your copy to a disability insurance attorney who can help interpret it and guide you through the disability claims process.
Working with Disability Claim Managers
– Know Your Rights and Be Vigilant
Even though disability insurance companies have a duty under Arizona law to give your interests equal consideration to their own, insurers rarely act for the policyholder’s benefit. Claims benefit managers are frequently taught how to approach disability claimants to get a desired result, usually a denial or termination of disability benefits. From our years of experience with the disability insurance industry, we have learned some of the tactics claims personnel use. The following is a list of strategies to beware of. Though not every disability claim manager engages in these practices, it is always a good idea for claimants to be vigilant in order to protect their rights under their policy.
- Treating claims like a unit of production. Disability insurance companies often don’t care to know how being disabled and filing for benefits affects you personally. Don’t expect that they will understand or be sympathetic to the personal toll the entire process takes on a claimant, especially a doctor or dentist who has spent years in study and practice to achieve professional success. To disability insurers, each claim is a unit of production being channeled towards an end goal.
- Misinterpreting policy provisions. Disability insurance claims managers are not lawyers, and just like most people, often have trouble properly interpreting complicated insurance policies. For example, claims personnel might inform an insured that her claim is an “any occupation” policy when in fact it is an “own occupation” policy.
- Claiming rights that don’t exist under the policy. Claims managers will also frequently indicate that the disability insurance company can make claimants do certain things or provide certain information that is not actually required under the individual policy. For instance, an insurer might tell a claimant he needs to complete a detailed daily activity report, when there is actually no such requirement to do so in his policy. Make sure you know what your policy does and does not actually allow.
- Acting like your friend. Employees of disability insurance companies often try to act like your friend or partner in the process, when they are actually channeling your disability claim towards denial or termination of benefits. Often, claims managers will call an insured for a friendly chat, all the while peppering the insured with seemingly innocuous questions meant to provide evidence for claim denial. Policyholders should understand the questions being asked, and not get distracted by the congeniality of the caller.
- Sending “field investigators” to talk about your claim. Another common practice in the disability insurance industry is to schedule an in-person interview in the claimant’s home with a “field investigator.” These interviewers will spend hours asking about your symptoms and activities in excruciating detail, taking copious notes and even asking to photograph you. What they may not make clear is that the field investigator has no authority over the disposition of your claim. Rather, he or she is a private investigator hired by your insurance company to gather evidence against your claim and provide a starting point for surveillance.
The best way to make sure that these claims management practices aren’t used to take advantage of you when making a claim for disability benefits is to enlist a disability insurance attorney who knows the tactics used and how to guard against them. Nevertheless, every insured should understand their insurance company’s approach to claims management and be cautious in their interactions with claims management personnel.
What is a Reservation of Rights?
When a disability insurance company is fighting a claim, it will often agree to pay benefits – but with a “reservation of rights.” What is a reservation of rights and how can it impact a legitimate disability claim?
When an insurer pays a disability claim under a reservation of rights, it is essentially providing a provisional payment. Though the insurance company may be sending you a check, it is not admitting that it actually has any liability under the policy. Instead, it is “reserving the right” to stop paying your disability claim if it can find evidence to deny it later. Once the company denies your disability claim, they can also demand you to repay them whatever proceeds they have distributed to you.
This practice is good for the insurance company, as it buys it extra time to investigate – and often later deny – a claim without putting it at risk of violating the laws against undue delay in payment. However, because the insurance company can still investigate the claim and then demand full repayment at any moment, the reservation of rights provides no peace of mind for the policyholder. Fortunately, a disability insurance attorney can protect you from this uncertainty by properly presenting your claim and thoroughly monitoring the insurance company’s actions to reach a beneficial result.
Surveillance of Disability Claimants: When Are Private Investigators Watching?
As we have discussed in the past, surveillance is a tool commonly used by disability insurance companies to analyze – and often deny – legitimate disability claims. When surveillance is taken out of context or misconstrued, it can lead to unfair disability denials.
All too often, disability insurance companies expect people with disabilities to stay at home, in bed. What they fail to realize is that most doctors actually encourage disabled claimants to try some activities of daily living, light physical therapy, or social interaction. Just because a disabled person can eat chips at a restaurant with family doesn’t mean he can perform all of the duties of his former occupation. Nevertheless, disability insurers often try to get any physical activity on camera and use it as proof that the claimant is not disabled.
Many people filing for private disability wonder when private investigators are watching them. After years of dealing with disability insurance detectives, we have recognized the five most popular times for surveillance of policyholders:
- During holidays. This is when policyholders are likely to be out of the house enjoying time with family and friends.
- On the claimant’s birthday. Just as on holidays, a disabled claimant is likely to push themselves to get out and enjoy the day.
- Over weekends. During weekends, insureds or more likely to attempt minor errands or go outside with family.
- Any time they have a chance of catching a claimant engaged in physical activity, based on information provided by the claimant on activity logs and in interviews. For example, if the claimant wrote on an activity log that he takes his dogs out in the morning, the private investigator will be there with a camera to document the insured walking in the yard.
- Near the end of fiscal quarters, when the insurance company is under pressure to save money by denying or terminating claims.
Don’t Toss the Policy: Important Documents for a Disability Insurance Claim
If you are a doctor, dentist, or other professional considering filing a long-term disability claim, there are some key disability insurance documents to collect and keep in order to properly understand and document your claim, including:
1. Your disability insurance policy
2. The insurance application
3. Notes or letters from meetings with the insurer’s sales agents
4. Notes of telephone conversations with your insurance company employees
5. Letters to and from your insurance company
6. Emails to and from your insurance company
7. Medical records
8. Billing records from your practice
9. A daily pain journal, if necessary
Make sure to keep all of your disability insurance papers and notes in an organized file, and if you have to file a claim, contact an experienced disability insurance attorney who can help you interpret your policy, present your claim, and communicate with your insurer.
Disability Insurance Bad Faith: Different States – Part 7 (Washington)
A disability insurance company may be subject to a lawsuit for bad faith when it wrongly denies a claim. There are differences from state to state in what constitutes insurer bad faith. In previous posts in this series, we outlined the standards of Arizona, California, Colorado, Nevada, New Mexico, and Texas. In today’s post, we outline the bad faith law of Washington.
Insurance companies who use unfair claim settlement practices can be found to have committed bad faith under Washington’s tort law or under the Washington Consumer Protection Act. According to Washington law, an insurance company’s violation of the consumer protection statute constitutes an automatic unfair trade practice violation, and also a breach of the duty of good faith and fair dealing. If a policyholder brings a claim under the Consumer Protection Act, he or she will have to show economic (monetary) damages, but if he or she brings a tort bad faith claim, the injury need not be economic and can include emotional distress or other personal injuries.
The Statutes: R.C.W. 48.01.030 and Wash. Admin. Code § 284-30-330
The Rules: Washington regulations define the following as unfair or deceptive practices for settlement of insurance claims:
- Misrepresenting pertinent facts or policy provisions.
- Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies.
- Refusing to pay claims without conducting a reasonable investigation.
- Failing to affirm or deny coverage within a reasonable time after fully completed proof of loss documentation has been submitted.
- Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.
- Compelling an individual disability claimant to initiate or submit to litigation, arbitration, or appraisal to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in such actions or proceedings.
- Attempting to settle a claim for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material accompanying or made part of an application.
- Asserting to a disability insurance claimant that the company has a policy of appealing arbitration awards in favor of insureds for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration.
- Delaying the investigation or payment of claims by requiring a first party claimant or his or her physician to submit a preliminary claim report and then requiring subsequent submissions which contain substantially the same information.
- Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.
- Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.
- Failing to expeditiously honor drafts given in settlement of claims.
- Failing to adopt and implement reasonable standards for the processing and payment of claims after the obligation to pay has been established—normally within 15 business days after receipt by the insurer or its attorney of properly executed releases or other settlement documents.
- Negotiating or settling a claim directly with any claimant known to be represented by an attorney without the attorney’s knowledge and consent.
The Tort Law Standard: An insurance company’s actions can be considered bad faith if its breach of the insurance contract was unreasonable, frivolous, or unfounded.
Disability Insurance Bad Faith: Different States – Part 6 (Texas)
The latest installment in our series of blog posts outlines the insurer bad faith law of Texas. Previous posts covered similar laws in Arizona, California, Colorado, Nevada, and New Mexico.
The Texas statutes and bad faith tort law are closely related. An insurance company’s bad faith gives rise to a violation of the Deceptive Trade Practices-Consumer Protection Act and Texas Insurance Code. If an insurance company has not acted in bad faith, it cannot be liable under the statutes. Ultimately, a private individual whose disability insurance claim was unfairly denied can bring an action against the insurance company under either the statute or the state tort law.
The Statute: Tex. Ins. Code Sec. 541.060
The Rules: It is considered by law to be an unfair or deceptive act or practice for an insurance company to engage in the following unfair settlement practices:
- Misrepresenting a material fact or policy provision to the person making the claim.
- Failing to bring about a fair, prompt, equitable settlement when the disability insurer’s responsibility to pay has become reasonably clear.
- Failing to provide a claimant with a prompt and reasonable basis, grounded in the policy or the applicable law, or the denial of the claim or a settlement offer.
- Failing to affirm or deny coverage or submit a reservation of rights.
- Refusing a settlement offer on the basis that other coverage may be available, except as specifically provided in the claimant’s policy.
- Refusing to pay a disability insurance claim without conducting a reasonable investigation.
- Undertaking to enforce a full and final release of a claim from a policyholder when only a partial payment has been made, unless the payment is a compromise settlement of a doubtful or disputed claim.
The Standard: A disability insurance company is liable for bad faith if it knew or should have known that it was reasonably clear that the claim was covered. An insurance company cannot escape bad faith liability merely by failing to investigate a claim so that it can contend that its obligation to pay was never reasonably clear.
Disability Insurance Bad Faith: Different States – Part 5 (New Mexico)
Over the past several days, we have been outlining the different standards that apply from state to state in determining whether a disability insurance company has acted in bad faith in wrongly denying a claim. Previous posts have outlined the standards for Arizona, California, Colorado, and Nevada. Today we look at the bad faith law of New Mexico.
New Mexico created a statute governing insurance company practices, called the Trade Practices and Frauds Act, in order to promote ethical settlement practices within the insurance industry. Anyone who has suffered damages as a result of a violation of that statute by a disability insurance company can bring an action to recover his or her damages. A policyholder can also bring a suit based on the same wrongful conduct under New Mexico’s tort law.
The Statute: N.M. Stat. § 59A-16-20
The Rules: Any and all of the following practices by an insurance company are defined as unfair and deceptive practices and are prohibited:
- Falsely representing pertinent facts or policy provisions relating to coverages at issue to insured.
- Failing to acknowledge and act reasonably promptly upon communications with policyholders.
- Failing to have reasonable standards in place for prompt disability claim processing and investigation.
- Failing to affirm or deny coverage of claims of insureds within a reasonable time after proof of loss requirements under the policy have been completed and submitted.
- Not attempting in good faith to come to prompt, fair and equitable settlements of claims in which the disability insurance company’s liability has become reasonably clear.
- Compelling insureds to institute a lawsuit to recover amounts due under their policy by offering substantially lower amounts than those ultimately recovered when the insureds have made claims for amounts reasonably close to the amounts they ultimately recover at trial.
- Attempting to settle a disability claim for less than the amount to which a reasonable person would have believed he was entitled by reference to written or printed ads accompanying or made part of a disability insurance application.
- Trying to settle claims on the basis of an application that was altered without the policyholder’s knowledge or consent.
- Delaying the investigation or payment of claims by requiring unnecessary, duplicative information.
- Failing to promptly provide an insured a reasonable explanation of the basis the insurance company relied on to deny a disability claim.
In our next blog post about Insurance Bad Faith, we will outline the standards that apply in the State of Texas.
Disability Insurance Bad Faith: Different States – Part 4 (Nevada)
Having outlined the tort law and statutes covering an insurers wrongful claim denial in the states of Arizona, California, and Colorado, we now take a look at the bad faith law of Nevada.
In Nevada, a disability insurance policyholder can bring a lawsuit for bad faith under tort law, or may bring a claim based on the Unfair Claim Practices statute, which was enacted as part of a comprehensive plan to regulate insurance practice in Nevada.
A policyholder can only sue for bad faith under tort law if his or her claim has been denied, but can bring suit under the Unfair Claim Practices statute whether or not the disability insurance claim is denied.
The Statute: Nev. Rev. Stat. § 686A.310
The Rules: Engaging in any of the following activities is considered to be an unfair practice for disability insurers:
- Misrepresenting to insureds or claimants pertinent facts or insurance policy provisions relating to any coverage at issue.
- Failing to acknowledge and act reasonably promptly upon communications with respect to disability claims.
- Failing to adopt and implement reasonable standards for the prompt investigation and processing of disability insurance claims.
- Failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the policyholder.
- Failing to effectuate prompt, fair and equitable settlements of claims in which liability of the insurer has become reasonably clear.
- Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds, when the insureds have made claims for amounts reasonably similar to the amounts ultimately recovered.
- Attempting to settle a disability claim for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material accompanying or made part of an application.
- Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured, or the representative, agent or broker of the insured.
- Failing, upon payment of a claim, to inform insureds of the coverage under which payment is made.
- Making known to claimants a practice of the insurance company of appealing from arbitration awards in favor of claimants for the purpose of compelling them to accept settlements or compromises less than the amount that was awarded in arbitration.
- Delaying the investigation or payment of claims by requiring a claimant or his or her doctor to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information.
- Failing to settle claims promptly, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.
- Failing to provide a prompt, reasonable explanation of the basis for the denial or settlement offer.
- Advising a claimant not seek a disability insurance attorney.
- Misleading an insured or claimant concerning any applicable statute of limitations.
The Tort Law Standard: An insurer fails to act in good faith and breaches the covenant of good faith and fair dealing when it refuses without proper cause to compensate an insured for a loss covered by the policy.
Disability Insurance Bad Faith: Different States – Part 3 (Colorado)
In this series of blog posts, we have been outlining the first-party insurance bad faith law of Arizona, California, and other states. Today’s post examines the bad faith law of Colorado.
Although the Colorado statute regarding unfair or deceptive acts or practices provides for state regulation of insurance companies and not for private lawsuits for damages, an insured can still bring a bad faith action against a disability insurer under Colorado tort law. Nevertheless, in determining whether an insurance company’s delay in paying benefits or its denial of disability benefits was reasonable, the court or jury can consider evidence that the insurer’s conduct violated the Unfair Claims Settlement Practices Act statute.
The Statute: Col. Rev. Stat. § 10-3-1104
The Rules: An insurance company must:
- Not misrepresent pertinent facts or policy provisions.
- Acknowledge or act reasonably promptly upon communications.
- Adopt and implement reasonable standards for the prompt investigation of claims.
- Conduct a reasonable investigation based upon all available information before refusing to pay a disability insurance claim.
- Affirm or deny coverage within a reasonable time.
- Attempt in good faith to effectuate prompt, fair, and equitable settlement of claims in which liability has become reasonably clear.
- Not compel insureds to institute litigation to recover amounts due under their policies by offering substantially less than the amounts ultimately recovered in legal actions brought by the insureds.
- Not attempt to settle a claim for less than the amount that a reasonable person would have believed he or she was entitled to based upon the insurer’s advertising or policy application materials.
- Not delay investigation or payment by requiring submission of multiple forms containing substantially the same information.
- Promptly provide a reasonable explanation of the basis in the policy or law for a claim denial or compromise settlement offer.
The Tort Law Standard: Disability insurance companies can be liable for first party bad faith if they act unreasonably and with knowledge of or reckless disregard of their unreasonableness.
In our next post, we will review the insurance bad faith standards for the State of Nevada.
