Legal Requirements for Denial Letters: What Your Insurance Company Has to Tell You When It Denies or Terminates Your Claim
If your claim for disability insurance benefits is denied or terminated (i.e., if the insurance company discontinues benefits they were once paying), the insurance company will send you a letter notifying you of that denial or termination. Depending on the state you live in and the type of policy you have, the insurance company’s denial or termination letter has to include certain information. Most doctors have individual (a.k.a. private) disability insurance policies governed by state law. Below are some examples of denial letter requirements in several states.
Arizona: Under Arizona law, the denial letter should reference any specific policy provision, condition, or exclusion upon which the denial or termination was based. The letter should also provide a reasonable explanation why, given the facts of your claim and/or the applicable law, the insurer believes you do not qualify for benefits under the terms of your particular policy.
California: In California, insurers must advise claimants of the acceptance or denial of a claim within 40 calendar days of receipt of proof of claim, unless they provide written notice of a need for additional time within that 40 days. All denials must be in writing (as opposed to simply given over the telephone), and the denial or termination letter must state reasons for the decision, including reference to specific policy provisions. Like in Arizona, denial or termination letters from California disability insurance companies should provide a reasonable explanation of the basis the insurer relied on in the insurance policy, in relation to the facts or applicable law, for the denial.
Nevada: Nevada disability insurers have 30 working days after receiving properly executed proofs of loss to advise claimants of the acceptance or denial of the claim, unless the insurer advises otherwise within the 30-day period. Nevada law requires that denials be in writing, and it must include whatever specific policy provision, condition or exclusion upon which the insurer based its decision. Just like Arizona and California, Nevada law indicates that disability insurance denial letters should provide a reasonable explanation of the basis the insurer relied on in the insurance policy, in relation to the facts or applicable law, for the denial of the claim.
Utah: Utah follows the same 30-day rule as Nevada with respect to the time the insurer has to provide a claims determination. In Utah, the insurance company must not only put the basis for the denial or termination of the claim in a letter to the claimant, it must also record that basis in its claim file. Consistent with the other states mentioned, insurers are prohibited from denying a claim on the grounds of a specific provision, condition, or exclusion in the policy unless they reference that provision, condition or exclusion in the denial letter.
We always recommend contacting a disability insurance attorney if your claim is denied or terminated. If your denial or termination letter does not include the required information, be sure to let the attorney know, as you may have additional legal rights that you need to enforce.
 A.R.S. § 20-461(15).
 Cal. Code Regs. tit. 10, § 2695.7(b).
 Cal. Code. Regs. tit. 10 § 2695.7(b)(1).
 Cal. Ins. Code § 790.03(h)(13).
 Nev. Admin. Code ch. 686A.675(1), (3).
 Nev. Admin. Code ch. 686A.675(1).
 N.R.S. § 686A.310(1)(n).
 Utah Admin. Code. R590-190-10(2).
Comitz | Beethe has been named the #1 Arizona Law Firm with 24 or fewer attorneys by Ranking Arizona: The Best of Arizona Business for the second year in a row.
Ranking Arizona is an annual publication of Arizona Business Magazine. Every year, Arizona Business Magazine compiles a list of the top companies in the state in various categories, including professional services such as accounting, real estate, and law. The final rankings in each category are selected by Arizona residents, who vote for the firms they most recommend.
In addition, Edward Comitz, head of the firm’s healthcare and disability insurance practice, and Patrick Stanley, another Comitz | Beethe member that focuses his practice on disability insurance claims, were both named Top Healthcare Attorneys in Ranking Arizona‘s individual rankings.
Edward O. Comitz, Esq., head of Comitz | Beethe’s disability insurance practice section, has been named a Top Valley Insurance Lawyer by North Valley Magazine, a publication serving the Greater Phoenix metropolitan community.
Each year, North Valley Magazine partners with Avvo, Inc., to publish a list of the area’s leading legal professionals. Check out the full article here.
Disability insurers have a duty to fully investigate claims for benefits, as the insurance companies are well aware. Unfortunately, some claims departments may focus their efforts on looking like they are investigating and considering information rather than actually doing so.
Berkshire, a disability insurance company that sells own-occupation policies to dentists and doctors, has garnered criticism from at least one state’s insurance commissioner for this very practice.
In Berkshire Life Insurance Company v. Maryland Insurance Administration, 142 Md. App. 628, 791 A.2d 942 (App. 2002), Berkshire attempted to claim that its insured was only partially disabled, and therefore it was only obligated to pay a fraction of the total benefits that were payable under the policy. In finding that Berkshire’s conduct was “arbitrary and capricious” in violation of Maryland’s insurance statutes and ordering it to pay restitution to the policyholder, the Maryland Insurance Commissioner also found:
Overall, Berkshire’s actions here represent what may be termed as “artful neglect.” Berkshire gives the appearance of investigating a claim in order to render a good faith claims determination. As part of this appearance, Berkshire timely requests financial information from its insured and then timely requests more information from its insured. In direct contrast to this “appearance,” however, Berkshire does not analyze the information at all, much less use an analysis in a cogent and rational way to support a proper claims determination.
In a more recent Arizona case, Nunley v. Berkshire Life Insurance Company of America, 2009 WL 529901 (D. Ariz. 2009), Berkshire tried to have the United States District Court rule that it could not be subject to punitive damages in a case involving a disabled dentist’s total disability claim. The Court, however, denied Berkshire’s motion, finding that Berkshire might have to pay punitive damages because it did not investigate the dentist’s claim adequately or in a timely fashion.
This “artful neglect” is unlawful, and may subject a disability insurance carrier to bad faith liability. A disability insurance claimant who thinks her insurer is not adequately investigating the claim should contact an attorney to help protect her rights.
Get it in Writing – Why Verbal Communications with Your Disability Insurance Company Can Be Dangerous
We often advise doctors and dentists facing a disability insurance claim to handle communications with their insurance company via mail rather than on the telephone. There are several reasons why written letters are better than verbal communication. For example:
• Claims handlers are trained to ask loaded questions. While the questions they ask may seem routine or mundane to the policyholder, the answers they elicit can have serious consequences that can help the insurance company deny a legitimate claim. For example, a claims administrator might call and ask what you have been doing that day. If you answer that you went out to pick up a prescription, the claims administrator can misconstrue your response as proof that you are not disabled from your occupation. No matter how short or how unavoidable your errand may have been, the insurance company can argue that if you are able to leave the house and perform limited activities, you can still perform your job. If the same question is posed in a letter, you can take the time to carefully consider the question and its consequences, preferably having a disability insurance lawyer help you to answer in a way that won’t be misconstrued.
• Telephone conversations may not be documented accurately. When a claims handler calls a policyholder to discuss his or her disability benefits, the handler will normally write a memo of what was said during the call for the claim file. These memos are used as evidence for disability benefit determinations, and potentially for later litigation. The primary problem is that the memos are written by the claims handler for the benefit of the insurance company, so whether intentionally or not, they are one-sided and biased towards the company’s interests. Another problem occurs when the claims handler doesn’t write a call memo at all; important conversations can be lost entirely. On the other hand, if a policyholder exchanges letters with the insurance company (and keeps copies), the insured can document his or her side of the story without worrying that something will be lost or misreported.
• Insurance companies use jargon that can be hard to understand. As Unum’s UK CEO has admitted, insurance companies use language that is indecipherable to most policyholders. If a claims handler calls you to talk about an elimination period, reservation of rights, ERISA, or the own-occupation definition of disability, you may not be able to completely process what he or she is telling you on the spot. This can cause you to miss important details or inadvertently waive important rights. If the same information comes to you in writing, however, you have time to research the terms and/or get advice from a disability insurance attorney.
For these reasons and more, it is crucial to get communications with your disability insurance company in writing. At the very least, a person filing for disability insurance benefits should take detailed notes of every conversation with an insurance company representative.