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.[1]  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.[2]

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.[3]  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.[4]  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.[5]

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.[6]  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.[7]  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.[8]

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.[9]  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.[10]

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.


[1] R20-6-801(G)(1)(a).

[2] A.R.S. § 20-461(15).

[3] Cal. Code Regs. tit. 10, § 2695.7(b).

[4] Cal. Code. Regs. tit. 10 § 2695.7(b)(1).

[5] Cal. Ins. Code § 790.03(h)(13).

[6] Nev. Admin. Code ch. 686A.675(1), (3).

[7] Nev. Admin. Code ch. 686A.675(1).

[8] N.R.S. § 686A.310(1)(n).

[9] Utah Admin. Code. R590-190-10(2).

[10] Id.

Ranking Arizona Names Comitz | Beethe #1 for the Second Year in a Row

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 Comitz Named Top Valley Lawyer for Insurance

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.

Berkshire Criticized by Maryland Insurance Commissioner for “Artful Neglect”

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.

Arizona Ranks #3 at Providing Caregiver Support

A new state-by-state scorecard on long-term care recently released shows which states are the best at providing services and support to the elderly and people with disabilities. According to the Commonwealth Fund,

The report’s researchers say it is the first that takes a multidimensional approach in measuring performance in long-term care at the state level. It’s designed to “begin a dialogue among key stakeholders so that lagging states can learn from top performers and all states can target improvements where they are most needed,” says the report.

The scorecard, developed by AARP, The Commonwealth Fund, and The Scan Foundation, ranks Arizona at number 3 for support of family caregivers and number 15 overall, but at 39 for affordability and access. So while Arizona excels at supporting the family members caring for people with disabilities, the state has room for improvement when it comes to controlling costs and helping lower-income individuals gain access to long-term healthcare.

To find out more, check out Arizona’s State Scorecard or review the entire report here: Raising Expectations: A State Scorecard on Long-Term Services and Supports for Older Adults, People with Physical Disabilities, and Family Caregivers.

Insurance Bad Faith: Different Standards for 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 ArizonaCaliforniaColorado, 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.
The Tort Law Standard:  A disability insurance company that fails to pay a claim has acted in bad faith where its reasons for denying or delaying payment on the disability claim are frivolous or unfounded.

In our next blog post about Insurance Bad Faith, we will outline the standards that apply in the State of Texas.

Insurance Bad Faith: Different Standards for Different States – Part 3 (Colorado)

In this series of blog posts, we have been outlining the first-party insurance bad faith law of ArizonaCalifornia, 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.

Insurance Bad Faith: Different Standards for Different States – Part 2 (California)

In this series of posts, we are outlining what constitutes insurer bad faith from state to state. Our previous post outlined Arizona’s standards, and today, we look at the bad faith law of California.

In California, the Unfair Trade Practices Act of the Insurance Code statute dealing with unfair claims settlement practices is merely a codification of its bad faith law.  A policyholder can bring a suit in California against its disability insurance company under the tort law, but not under the statute itself.

The Statute: Cal. Ins. Code § 790.03(h)

The Rules:

An insurance company’s duties include the following:

  • To investigate disability claims thoroughly.
  • To not deny coverage based on unduly restrictive policy interpretations.
  • To use standards it knows are improper to deny disability claims.
  • To not unreasonably delay processing or paying claims.
  • To give as much consideration to the insured’s interests as it does to its own.

An insurance company is not allowed to:

  • Misrepresent pertinent facts or policy provisions.
  • Fail to acknowledge or act reasonably promptly on communications about a disability insurance claim.
  • Fail  to adopt and implement reasonable standards for prompt claims investigation.
  • Fail to make a decision on coverage within a reasonable time after a policyholder has submitted complete proof of loss.
  • Tell claimants the company always appeals arbitration awards in favor of claimants to get them to accept lowball settlement offers.
  • Not attempt to make prompt, fair, and equitable settlements in which it has become reasonably clear that the disability insurance company must pay a claim.
  • Force an insured to litigate to recover under the policy by offering an unreasonable settlement.
  • Delay investigation or payment of claims by requiring an insured to submit multiple forms containing the same data.
  • Withhold a reasonable explanation of the basis relied on in the insurance policy for the denial of a disability claim or for the offer of a compromise settlement.
  • Directly advise a disability claimant not to obtain the services of a lawyer.
  • Deceive a claimant as to the statute of limitations that applies.

The Tort Law Standard:  A disability insurer can be found to have acted in bad faith if it withholds benefits unreasonably and without proper cause, whether or not the insurance company had a conscious awareness of wrongdoing or intent to harm the policyholder.

Obtaining an Arizona Disability License Plate or Arizona Disability Placard

In Arizona, drivers with disabilities may be eligible to receive a license plate with a disability symbol—at no extra fee—or a disability placard allowing them to park in spaces reserved with the International Symbol of Access.

Arizona Motor Vehicle Division form application #96-01014 must be completed and signed by a physician or hospital administrator. In order to receive the disability plate or placard, the applicant must have at least one of several disabling conditions, including the inability to walk 200 feet without rest, inability to walk without assistance, lung disease, or severely limited ability to walk due to an arthritic, neurological or orthopedic condition. Further details are available at the Arizona Motor Vehicle Division’s website.

A disability plate is assigned to one vehicle and remains valid for as long as the medical condition continues. The applicant must be an owner on the title of the vehicle.

A disability placard is assigned to the applicant, for use in any vehicle, and may not be transferred to, or used by, another person.