Long Term Care Insurance

The population of the United States is rapidly aging, with the share of Americans aged 65 and older expected to increase from 17% in 2022 to 23% by 2050.  Inevitably, a large number of these individuals will need assistance with their activities of daily living, such as dressing, bathing, eating, toileting, and transferring.  

Such assistance can be provided by in-home aides or at elderly residential homes, but either way, it is expensive, and only getting costlier.  Unfortunately, health insurance, Medicare, or Medicaid do not typically cover such care.  Accordingly, individuals’ families must either rely on whatever nest eggs they were able to save during their lifetime or on financial assistance from their children or other family members.

However, there is a third option for those lucky enough to have secured long-term care insurance coverage.  Long-term care insurance is designed to pay for the costs associated with assistance for activities of daily living, and promises to pay and/or reimburse policyholders up to a set daily amount for the services.  

Long-term care insurance is offered by numerous insurance companies, including, but not limited to Mutual of Omaha, New York Life Insurance Company, Genworth Life Insurance Company, Brighthouse Life Insurance Company, Nationwide Insurance, Transamerica Corporation, Berkshire Life Insurance Company of America, Bankers Life and Casualty Company, John Hancock, Lincoln Financial Group, MassMutual, LifeSecure Insurance Company, Metropolitan Life Insurance Company (MetLife), Thrivent Financial, Aetna Life Insurance Company, Allianz Life Insurance Company of North America, Allstate Life Insurance Company, American Family Life Assurance Company (AFLAC), Northwestern Mutual, One America, Pacific Life and National Guardian Life.

Unfortunately, when some of these companies began selling long-term care insurance policies, they underestimated the number of claims that would be made and the cost of the assistance, and thus underpriced the policies.  As a result of failing to properly underwrite the policies, some insurers are issuing improper claim denials, which are unsupported by the available evidence. 

When the insurance company improperly denies a valid long-term care insurance claim, typically the only way for the insured to get the benefits to which they are entitled is to file a lawsuit alleging breach of the insurance policy.  However, even if an insured prevails on such a claim, they would only be entitled to the money promised by the policy, plus some interest.  However, in this situation, the insureds are rarely made whole because they must pay attorneys’ fees.

Thankfully, in California, an insured can also assert a cause of action for breach of the implied covenant of good faith and fair dealing, more commonly known as insurance bad faith.  If an insurance company is found to have acted in bad faith when denying an insurance claim, the insured can collect damages beyond simple policy benefits, including emotional distress damages, attorneys’ fees, and punitive and exemplary damages to punish and set an example for the insurance company.

However, because it can be difficult for a non-lawyer to know what actions constitute insurance bad faith and which simply constitute a breach of contract, below are five signs that the insurance company’s claim denial decision was in bad faith.

1. When the insurance company denies the claim without a full investigation.

One of the most serious breaches of the covenant of good faith and fair dealing is the failure to thoroughly investigate a claim.  While an insurance company is not required to approve and pay every claim, it must take every claim it receives seriously.  That means the insurer cannot deny the claim without fully investigating the grounds for its denial.  In fact, the insurer is required to fully inquire into any possible bases that might support the insured’s claim before denying it.  

If the insurance company failed to fully, fairly, and thoroughly investigate your claim before it was denied, that claim denial decision could be found to be in bad faith.

2. When the insurance company ignores evidence supporting the claim.

When a claim is made, the insurance company is required to consider all of the evidence offered by the insured in support of the claim.  That includes not only medical records, but all representations by the insured, witness statements in support of the claim, and any other evidence the insured sends in.  Sometimes, in order to support a denial decision, the insurance company will essentially ignore evidence that supports the claim.  This is improper, and evidence that the insurance company acted in bad faith.

If the insurer failed to consider and address important evidence that supports your claim, a Court or jury could find that the insurance company’s denial constitutes bad faith.

3. When the insurer fails to give equal consideration to the insured’s physicians’ opinions and instead places wholesale acceptance on its own physicians’ opinions.

Insureds are required to provide insurance companies with copies of and access to their medical records.  That makes sense, of course, since the basis of every long-term care claim is that the insured is physically and/or mentally limited in a way that prevents them from fully taking care of themselves.  The insurance company is well within its rights to confirm, through a review of the medical records, that the insured’s doctors agree that the person is limited in some way.  Typically, what insurance companies do is take those medical records and give them to their own doctor.  That physician then offers an opinion on whether the insured needs assistance with one or more of the activities of daily living.

As you would expect, the physician hired by the insurance company quite often declares that the insured is not as limited as they claim, and is physically or mentally able to perform the activities of daily living.  When that happens, the insurance company is not permitted to just blindly accept and follow the opinions offered by its hired physician.  Rather, it must give equal consideration to the opinions offered by the insured’s doctors, and evidence that it failed to do so is confirmation of bad faith.

4. When the insurer failed to seek out a medical examination to ensure the insured’s interests were placed at least equally to its own.

Most long-term care insurance policies give the insurance company the right to have the insured examined by a physician of its choosing.  Often, though, either in an attempt to keep costs down or out of fear of what the examining doctor will find, the insurance companies fail to exercise this right.  When this happens, the insured can argue that this failure to seek out an examination constitutes bad faith because the insurance company is purposefully ignoring an avenue to obtain additional information that can support the claim.

5. When a company fails to follow its own internal procedures.

Each insurance company has a claims manual, which is a written set of guidelines for its employees to follow when reviewing a claim.  However, the employees do not always follow those guidelines when reviewing a claim.  Failing to do so is evidence that the claim was not properly handled, and therefore, any denial would be in bad faith.

If your claim for long-term care benefits was improperly denied, call Donahue & Horrow LLP at (877) 664-5407 for a free consultation.  Our dedicated team is standing by and ready to fight for the benefits you deserve.