We all know that dealing with insurance companies can often be stressful, frustrating and downright unpleasant but things can get even worse when an insurance company acts in bad faith by denying or delaying claims under a policy. According to a study by the U.S. Government Accountability Office, as many as 25 percent of insurance claims are denied and a U.S. Congressional investigation revealed that the nation’s four largest for-profit health insurers denied coverage to more than 651,000 people over a three-year period. Many of these insurers are acting in bad faith by denying benefits.
In Colorado, to bring a bad faith claim, an insured party must prove that: (1) the insurer’s conduct was unreasonable under the circumstances; and (2) the insurer either knowingly or recklessly disregarded the validity of the insured’s claim. If an insurer intentionally denied, failed to process or failed to pay a claim without a reasonable basis then they may have acted in bad faith. Unreasonable conduct exists where the insurer delayed or denied authorizing payment of a covered benefit without a reasonable reason for that action.
According to a report from the American Association for Justice, some of the nation’s biggest insurance companies, enjoying profits of more than $30 billion a year, have denied valid claims in an attempt to boost their bottom lines. These companies have rewarded employees who successfully denied claims, replaced employees who would not, and when all else failed, engaged in outright fraud to avoid paying claims.
To help you understand your course of action when a claim is denied, the National Association of Insurance Commissioners offers consumers these helpful tips.
- Read and understand your policy. Your policy should indicate the procedures to follow to appeal a claims denial. There are typically two levels of appeal required: a first-level internal appeal administered by the insurance company and a second-level external review administered by an independent third-party.
- What to do if your claim is denied. If you receive notice from your insurer that your claim was denied, make a list of questions you have about the claims denial and start gathering important documents, such as your policy, the plan’s Summary of Benefits and Coverage, and the denial letter. You will find contact information on the denial notice, which will also contain instructions for appealing the denial.
- Keep notes of all conversations you have with company representatives. When calling the insurance company, take notes of your call, which should include the name of the person you spoke to, as well as the date and time of the conversation. Ask for the person’s phone extension so you can contact them directly if you need to call again.
If you believe an insurer acted in bad faith you may be entitled to compensation. Contact an experienced Colorado bad faith lawyer who can review your case and help recover the insurance benefits owed to you.