Insurance companies lose money when policyholders file claims. The bigger the claim, the more incentive the company has to deny it. Bad faith insurance laws protect those who paid for coverage by giving them away to push back against an insurance company. If they deny a valid and appropriate claim, the claimant can take them to court for more than their claim is worth.
Not all insurance policies and coverage fall under the same laws. Your employer-sponsored disability benefits will likely be subject to requirements from the Employee Retirement Income Security Act of 1974 (ERISA). Coverage governed by ERISA has different rules than most other kinds of insurance. What rights do you have when you think the denial of an ERISA claim was in bad faith?
You have the right to challenge the denial but not to seek a punitive award
Part of what ERISA does is help support those in need of benefits funded through their employer. Your appeal rights will theoretically give you an opportunity to fight back if you wind up unfairly denied after filing a claim.
If someone with a homeowner’s policy can show the court that the denial of their coverage was an act of bad faith insurance by their provider, the courts may order not just the payment of the claim but also award additional compensation to the claimant as a way of punishing the company involved.
Such punitive awards are not an option for ERISA-governed policies. While you can push back and ask for the approval of the claim itself, you will not receive any monetary compensation beyond the value of the claim itself. Your attorney can provide valuable guidance as you pursue your case.