Insurance Bad Faith Law – Can I Sue My Health Insurance Company?
Legally Reviewed and Edited by: Terry Cochran
The primary goal of health insurance is to provide financial protection and coverage for medical expenses during health-related issues or emergencies. However, receiving a denial for a medical claim or facing bad faith insurance practices can be a distressing ordeal.
You may ask yourself questions such as, “Can I take legal action against my insurance providers for causing me emotional distress?” or “Is it possible to sue a health insurance company for negligence?”
In Michigan, bad faith laws cover many issues, including negligence and emotional distress. A skilled personal injury lawyer can help you avoid bad faith insurance claims, protect your rights, and ensure you receive the compensation you deserve as quickly as possible.
What Is a Bad Faith Insurance Law?
A bad faith insurance law is a set of legal rules and principles requiring insurance companies to act in good faith and treat their policyholders fairly. If an insurance company unjustly denies claims, fails to properly investigate, or otherwise avoids fulfilling its obligations, it may be operating in bad faith. In this case, the policyholder may initiate a bad faith insurance claim against them.
Examples of situations where a policyholder may file a bad faith insurance claim include:
- Denial of coverage. If the insurer denies a claim without a valid reason or fails to provide a satisfactory explanation, it can be considered bad faith due to unreasonable denial.
- Delay in handling claims. The insurance company unnecessarily delays processing a claim or responding to a policyholder’s inquiries. Common examples include ignoring calls or failing to speak with individuals involved in your claim.
- Unreasonable payment delays. Insurance providers may sometimes delay payments or hold onto payouts after approved claims. If the delay is too long or unjustified, it can affect your ability to pay medical bills, making it a case of bad faith.
- Inadequate investigation. If the insurer does not thoroughly investigate the claim, it may result in an unfair or biased evaluation, creating a bad faith case.
- Insufficient payout. An insurance provider may act in bad faith if it pays less than what is covered under the policy or refuses to pay and has no reasonable basis for either.
- Changing policy terms after a claim. Given the complexity of a typical insurance contract, altering the policy’s terms or coverage can be an act of bad faith if it puts policyholders at a disadvantage.
- Accusations of fraud against you. Insurance providers may sometimes attempt to wrongfully accuse policyholders of fraud by delaying or denying payouts. It can also be done to coerce policyholders to provide more evidence than necessary to prove their claim’s validity.
Threatening a policyholder with legal action is an act of unlawful intimidation, which is illegal in itself and can be done in bad faith.
When an insurance company acts in bad faith, it breaches the implied covenant of good faith and fair dealing expected in insurance contracts. Policyholders who face these issues may have the right to file a bad faith claim against their insurer, potentially recovering compensation beyond the original value of the policy. This can include damages for emotional distress, attorney’s fees, and, in rarer cases, court-ordered exemplary damages intended to penalize the insurer for their misconduct.
In Michigan, state laws known as unfair claims practices acts are specifically tailored to safeguard policyholders from insurers who act in bad faith. Their purpose is to prevent insurance companies from unjustly denying claims or reducing the amounts of claims.
What Can I Recover?
What you recover will depend on the facts of your case and proving your insurance company failed to meet its obligation as your insurer. Damages could include:
- Economic losses, including medical bills, legal fees, out-of-pocket expenses related to the denied claim, lost wages or other earnings, and lost interest.
- Non-economic losses, such as pain and suffering, anxiety, emotional stress, and even loss of consortium.
If you can prove that you were misled when purchasing your policy as to the level of coverage provided, the court may order the company to pay all your losses in full, even if it’s more than your coverage is worth. In addition, the court may order the company to pay penalties or exemplary damages if they are found to have acted in bad faith.
In 1980, a significant bad faith claim case involved Kewin v. Massachusetts Mutual Life Insurance Company (409 Michigan 401, 1980). This case set a legal precedent for the limits imposed on the damages awarded to a plaintiff who successfully sued their insurance company for failing to adhere to the terms of the contract.
How to Sue a Health Insurance Company
Suing a health insurance company in Michigan is a complex, multi-step process. Don’t go at it alone; seek the assistance of a knowledgeable Michigan attorney. They will help you through the following:
- Review your policy. Knowing your health insurance policy’s terms and conditions is crucial to determining whether your provider has acted in bad faith. A knowledgeable attorney can help you understand your policy’s jargon and complex terms and get a clear picture of any breaches your insurers may have committed.
Eileen Kroll is a registered nurse and personal injury trial attorney at Cochran, Kroll & Associates, P.C. Eileen has a unique understanding of personal injury laws and health insurance coverage, which positions her to help you avoid a bad faith claim.
- Gather evidence of bad faith. Compiling documentation to prove your insurance provider’s bad faith is critical for your case. Examples include your policy documents, denied claim forms, copies of communications with insurers, and recorded phone calls and meetings.
- Try resolving the situation with the insurers. Before you consider filing a lawsuit, always attempt to resolve your situation internally first. You may need to file an appeal for a denied claim or use the insurance provider’s internal dispute resolution process. Consider taking further action if the insurance company denies or refuses to resolve the matter with you.
- Explore your legal options: A knowledgeable health insurance attorney can review the situation and all available evidence to determine if you have a viable case. They will then explain your legal options. If you initiate a lawsuit against your insurance company for bad faith, your attorney can guide you through the legal process.
- Suit resolution: Many lawsuits are settled out of court following negotiations. Your attorney can negotiate on your behalf, ensuring the insurance provider makes a fair and worthwhile settlement offer.
If negotiations break down, your case may go to trial, in which case your attorney will present the case, argue in your favor, and defend your interests. A judge or jury will then decide on your case and whether to award and issue exemplary (punitive) damages.
Can I Sue My Insurance Company for Emotional Distress?
When dealing with an insurance company, unreasonable denials, payment delays, and other acts of bad faith can cause significant emotional distress. You can initiate a lawsuit against your insurance providers for the emotional distress, anxiety, and emotional harm they have caused you.
Emotional distress is a form of non-economic damage for which a knowledgeable attorney can help you evaluate and obtain a reasonable compensation amount. They can also help you get evidence linking your emotional distress to your insurance provider, including recommending mental health professionals to provide expert testimony.
How a Personal Injury Attorney Can Help You Avoid a Bad Faith Claim
A personal injury attorney can be instrumental in helping you avoid a bad faith insurance claim by providing several key services:
- Reviewing your insurance policy. An attorney can thoroughly review your insurance policy to ensure you understand the coverage and any potential limitations or exclusions. This understanding can help prevent disputes over what the policy covers.
- Guiding you through the claims process. Personal injury attorneys are experienced in navigating the insurance claims process. They can advise you on how to file a claim and what documentation is needed, reducing the chances of a claim being denied due to procedural errors.
- Negotiating with insurance companies. Attorneys are skilled negotiators who can communicate effectively with insurance companies. They know how to present your case in a way that emphasizes your right to fair compensation, minimizing the likelihood of a bad faith situation.
- Identifying bad faith practices. Personal injury attorneys are familiar with insurers’ tactics to deny or unfairly reduce claims. They can identify these practices early on and advise on the best course of action. Examples include filing a complaint with the Michigan Department of Insurance and Financial Services (DIFS) or taking legal action.
- Legal representation in disputes. If an insurer denies your claim without a valid reason or engages in other bad faith practices, your attorney can represent you in legal proceedings to challenge the insurer’s actions and seek appropriate compensation.
- Providing legal advice and strategy. An attorney can provide legal advice tailored to your specific situation, helping you understand your rights and the best strategies to protect those rights, whether in negotiations, arbitration, or court.
- Documenting communications and decisions. Attorneys help document all communications with the insurance company. This documentation can be crucial if you need to prove that the insurer acted in bad faith.
Choose Cochran, Kroll & Associates, P.C.
A skilled personal injury lawyer on your side is an invaluable asset when dealing with an injury caused by another person’s negligence. Don’t let bad faith insurance companies affect your recovery and future. Our attorneys will fight to maximize your compensation and ensure you receive it on time.
Our contingency fee basis means we only get paid if we win your case, so there is no financial risk to you to get started. Contact us today online or call our 24-hour toll-free number at 1-866-MICH-LAW to schedule a no-obligation free consultation.
Disclaimer : The information provided is general and not for legal advice. The blogs are not intended to provide legal counsel and no attorney-client relationship is created nor intended.