Not all claim denials warrant a lawsuit — but does yours?
A denied Long-Term Disability claim can feel like the end of the road—but in many cases, it’s just the beginning. While insurers have the right to review and deny claims, they don’t have the right to do so unfairly or in bad faith. If you’ve exhausted your appeal options or suspect your insurer acted improperly, you may be able to file a lawsuit to fight for the benefits you deserve. Understanding your legal rights, the different paths available depending on your policy type, and the process of taking legal action can significantly impact your ability to recover benefits.
Understanding Your Rights After an LTD Denial
Not all claim denials warrant a lawsuit, but many do. The key is identifying whether your insurer’s decision was based on a reasonable evaluation of your claim or whether it was improperly handled. The legal framework governing your policy determines your rights and options for challenging a denial. LTD claims generally fall under two legal categories.
The first is ERISA (Employee Retirement Income Security Act), which governs most employer-sponsored LTD policies. ERISA imposes strict rules on the claims and appeals process and limits the types of damages you can seek in a lawsuit. The second category is individual or private LTD policies. If you purchased your LTD policy independently and not through an employer, ERISA likely does not apply. This distinction is crucial because private policyholders have broader legal rights, including the ability to sue for bad faith and seek punitive damages.
When You Can (and Can’t) Sue Under ERISA
If your LTD policy is governed by ERISA, you cannot immediately file a lawsuit after a denial. First, you must complete the insurer’s internal appeals process. The courts require claimants to exhaust all administrative remedies before litigation can begin. The first step in this process is filing an administrative appeal. Generally, you have 180 days from the date of denial to submit your appeal with the insurer. During this period, it is critical to provide all supporting evidence because, in ERISA cases, courts only review the administrative record.
This means that any new evidence not submitted during the appeal process cannot be introduced in court later. Once the final administrative appeal is denied, you can sue your insurer. Legal action may also be possible if the insurer unreasonably delays the appeals process or violates ERISA procedures, such as failing to provide necessary documentation, ignoring medical evidence, or misinterpreting policy terms.
In an ERISA lawsuit, the compensation available to claimants is limited. If successful, you may be able to recover back pay for denied LTD benefits, interest on unpaid benefits, and attorney’s fees and court costs. However, ERISA does not allow for punitive damages or compensation for emotional distress, which significantly restricts the financial recovery available in litigation.
Suing for Denied Benefits Under Private or Individual LTD Policies
If your LTD policy was purchased independently outside of an employer-sponsored plan, you typically have more legal options. Unlike ERISA cases, there is no requirement to complete internal appeals before suing. Additionally, claimants with private LTD policies can pursue bad faith lawsuits if the insurer’s handling of the claim was unfair, deceptive, or fraudulent.
There are several grounds for suing a private insurer. One of the most common is breach of contract, which occurs when the insurer fails to pay benefits as outlined in the policy. A lawsuit may also be warranted if the insurer engaged in a bad faith denial, such as ignoring clear medical evidence, conducting biased reviews, or unreasonably delaying payment. Additionally, if the insurer misled you about your policy’s terms or misrepresented facts about your claim, you may have a case for negligent misrepresentation.
A lawsuit against a private LTD insurer allows claimants to pursue a broader range of damages than an ERISA case. If successful, you may recover full payment of LTD benefits, interest on past-due benefits, attorney’s fees, and legal costs. In some cases, compensation for emotional distress may be available. If the insurer’s actions were particularly egregious, courts may award punitive damages, which serve as a penalty against the insurer for wrongful conduct.
When Insurance Company Actions Constitute Bad Faith
Insurance companies are legally required to handle claims fairly and in good faith. If they fail to do so, they may be subject to additional legal liability. Certain actions by insurers may indicate bad faith practices, including unreasonably delaying the claims or appeals process, denying valid claims without proper investigation or explanation, ignoring or misrepresenting medical evidence, using biased independent medical examiners (IMEs), failing to provide clear reasons for denial, or offering lowball settlements that do not reflect policy benefits. If your insurer has engaged in any of these tactics, you may have grounds for a lawsuit.
The Process of Suing Your Insurance Company
The first step in taking legal action is consulting an experienced LTD attorney. A lawyer will review your denial letter, policy, and medical records to determine whether you have grounds to sue and whether ERISA rules apply. If your claim falls under ERISA, you must ensure that you have exhausted all administrative remedies before filing suit. If you have a private policy, your lawyer may be able to file a lawsuit immediately.
Once it has been determined that you have grounds to sue, your attorney will draft and file a formal complaint against the insurer. The insurer will have an opportunity to respond, and in many cases, this leads to settlement negotiations before the case goes to trial. If the case proceeds, both parties will enter the discovery and evidence-gathering phase. In ERISA cases, the court will review only the administrative record, meaning no new evidence can be introduced. In private policy cases, both sides can present new evidence, including depositions, expert testimony, and additional medical records. Introducing new evidence in a private policy lawsuit can be a significant advantage for claimants.
Many LTD lawsuits settle before reaching trial, as insurers often prefer to avoid the risk and expense of litigation. If a fair settlement is not reached, the case will proceed to trial for a final decision. A skilled LTD lawyer will analyze the strength of your case and make strategic settlement demands based on your policy, medical evidence, and the insurer’s conduct.
How an LTD Lawyer Can Improve Your Chances of Winning
Filing a lawsuit against an insurance company is a complex process, and having an experienced LTD attorney on your side significantly improves your chances of success. LTD policies are filled with fine print designed to limit payouts, and a knowledgeable lawyer understands how to challenge unfair provisions.
A lawyer will also gather medical evidence, expert reports, and vocational assessments to present a compelling argument in your case. Insurers use many strategies to undermine claims, such as biased IMEs, surveillance, and lowball settlement offers, but a lawyer knows how to counter these tactics.
If your LTD policy is a private plan, an attorney can also help you pursue the full range of damages available, including emotional distress and punitive damages. In ERISA cases, where litigation options are more restricted, an attorney ensures that your administrative record is as strong as possible before the lawsuit begins.
Conclusion
A denied LTD claim is not the end of your fight for benefits. Whether your policy falls under ERISA or is a private plan, you have legal options to hold your insurer accountable. Knowing when and how to sue can make the difference between walking away empty-handed and securing the benefits you deserve. If your LTD claim has been unfairly denied, don’t navigate the appeals and litigation process alone. An experienced LTD attorney can evaluate your case, handle the legal complexities, and fight for the benefits you’re owed.