Not all denied claims automatically go to a lawsuit. The ability to file a lawsuit or appeal is based on the type of insurance the individual has. People who have "first-party" insurance—meaning they purchased the policy through a broker rather than having their insurance through their employer's plan—may be eligible to file a lawsuit if their insurance claim is denied for illegitimate reasons. Insurance that is provided through a person's employer is covered by ERISA (the Employee Retirement Income Security Act), which means that person must first file an appeal of the denial.
"In first-party insurance, the individual can sue for pain and suffering and punitive damages, if the insurance company's conduct is outrageous," Kingsley says. "In a group plan, all you can recover are your coverage and attorney's fees. If it is a group plan, we want clients to call as soon as their claim is denied. If you're turned down in a group plan, you have 180 days to appeal. Under ERISA, you can't testify in court. The decision is based entirely on the claimant's file and what's written to the insurance company in the appeal, so the appeal is really important. Once the appeal is closed, we might not be able to help."
There are a variety of ways insurance companies illegitimately deny claims. These methods are similar for both first-party and group insurance, although Kingsley says because a claimant cannot sue for bad faith insurance under ERISA, denials in group coverage tend to be more arbitrary, such as an insurance company claiming there is not enough objective evidence to show the claimant is disabled.
"The most prevalent denial is when the insurance company says the claimant did not tell the truth on an application but the question that was answered incorrectly is insignificant, or the insurance company hasn't done the proper research," Kingsley says. "I've had a case where the claimant had cancer and one of the questions was, 'Have you taken medications in the last six months?' A doctor had given the patient a prescription for cholesterol but then changed his mind and said the patient could simply watch his diet and exercise, so the claimant did not take the prescription. But the notation for the prescription was still in the patient's file, so the insurance company denied his claim without checking if he ever actually took the medication. That case wound up having a seven-figure settlement against the health insurance company."
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Kingsley says if claimants receive a letter of denial from their insurance company, they should then contact his law firm, which has extensive experience in insurance claims and is able to file claims in state and federal court.
"Claimants may not know what to do when they receive their letter of denial," Kingsley says. "We've done hundreds and hundreds of appeal letters, so we know what to do. Personally, I've been doing insurance work for more than 30 years and have handled multiple million-dollar settlements on disability cases. We've also been successful in class action lawsuits against health insurance companies that have wrongfully denied certain types of medical procedures, even though the procedures are accepted by the FDA."