Indiana Long Term Disability Lawyer Blog

Over the years, we have represented numerous employees of Indiana colleges and universities who have become disabled because of serious illnesses such as diabetic neuropathy, lyme disease, degenerative disk disease, multiple sclerosis and lymphoma. A large number of those clients were disabled Purdue employees who had worked for Purdue University for many years, some even decades, before reaching the point where they were no longer able to work because of their medical conditions. Purdue has a very generous employee benefit package so our clients were very surprised and extremely disappointed when their disability claims were either denied outright or prematurely terminated by the insurance company.

Prudential Insurance Company previously insured Purdue's long term disability program and now Cigna is the insurance carrier for the Purdue long term disability program, or more specifically Cigna's subsidiary Life Insurance Company of North America. Many Purdue employees have contacted our office after Cigna denied their claim upon their initial application or when Cigna terminated the benefits before the individual was truly able to return to work.

Cigna typically hires consulting physicians, who never examine our clients, to review the person's medical records and conclude, contrary to the treating physicians, that the client does not have any restrictions or functional impairments. Cigna then relies upon the conclusions of the consulting physicians to deny legitimate disability claims.

The consequences of Cigna denying a Purdue employee's claim for disability benefits are severe. Under the Purdue employee benefit program, disabled Purdue employees continue to receive medical coverage, life insurance coverage, tuition reimbursement for their kids that attend Purdue and retirement annuity deposits. When Cigna wrongfully denies a Purdue employee's disability claim, all of those benefits immediately disappear. The disabled Purdue employee will no longer have the medical coverage they need for treatment, they will lose their life insurance coverage, be required to pay full tuition for their kids and lose retirement contributions. As a result, Cigna's denial can have a dramatic impact on the life of a disabled Purdue employee.

The O'Ryan Law Firm has successfully handled the appeals and lawsuits of Purdue employees against Cigna when Cigna has wrongfully denied their disability benefits. If you have received a denial letter from Cigna, or Life Insurance Company of North America, please contact us so that we may discuss your best strategy for moving forward with your disability claim.

The most basic answer is that the insurance company or claims administrator contends that you do not meet the definition of "disabled" or "disability" under the disability policy or plan. There are numerous technical reasons why claims are denied such as you are ineligible for benefits or you have not provided the information requested by the insurance company. As far as being ineligible, many disability policies require that you work so many months for your employer before you become eligible for the short or long term disability coverage. Also, you may no longer be eligible if your employment has been terminated and you have not already applied for the benefits. We encourage our clients to contact the Human Resources department immediately to obtain an application for short term and long term disability benefits when they know that they are no longer able to function at their job. Additionally, make sure that you send the insurance company all of the information and documents that they are requesting so that your claim is not tossed out because they didn't receive a specific form or medical record. We know that at times it is frustrating dealing with their seemingly endless requests, but you don't want to be denied because you "weren't cooperating" with them, which is a requirement in the policy.

Once you have made it over the eligibility hurdle, the insurance companies find all sorts of reasons to deny disability claims: your medical records don't support impairment, your doctor's statement of disability doesn't comport with the medical records, you worked for a long time after you were diagnosed, surveillance shows that you remain active, if you can work on a computer at home then you aren't disabled, if you can shop at Wal-Mart then you can go back to work, you quit because you didn't like your boss and their absolute favorite: our doctors (who never speak to you or examine you) say you can work. All of the insurance companies, including Cigna, Prudential, Hartford, MetLife, and Lincoln Financial, like to use their doctors to review and deny claims.

This is why the appeal process is so important and why an experienced lawyer can make all of the difference. This is no game to the insurance companies. They know that if they successfully deny your claim, they keep every penny of your disability payments. As a result, they are very aggressive at denying claims and making sure the denial sticks. We take the appeals process very seriously because this most likely is your last chance to respond to and rebut all of the bad information that the insurance company has stuffed into your file, some of which you may have never seen.

Continue reading "Why was my claim denied?" »

Indiana law has long recognized that there is a legal duty implied in all insurance contracts that an insurance company must deal in good faith with its insured. Vernon Fire & Cas. Co. v. Sharp, 349 N.E.2d 173 (1976). The Indiana Supreme Court in Erie Ins. Co. v. Hickman, 622 N.E.2d 515 (Ind. 1993) expressly acknowledged the breach of this duty as an independent cause of action under Indiana law. The Court in Erie recognized that a special relationship exists between an insurance company and its insured because of the unique character of an insurance contract, specifically, the insurance company acts as a fiduciary to the insured. "Easily foreseeable is the harm that proximately results to an insured, who has a valid claim and is in need of insurance proceeds after a loss, if good faith is not exercised in determining whether to honor that claim." The Court in Erie held that "[A]n insured who believes that an insurance claim has been wrongly denied may have available two distinct legal theories, one in contract and one in tort, each with separate although often overlapping, elements, defenses and recoveries." The Court in Erie explained that a cause of action for the tortious breach of an insurer's duty to deal with its insured in good faith arises when the insurer:

1. makes an unfounded refusal to pay policy proceeds;
2. causes an unfounded delay in making policy payments;
3. deceives the insured;
4. exercises an unfair advantage to pressure the insured into settling a claim.

Since the Indiana Supreme Court's decision in Erie, bad faith has been recognized in Indiana as an independent cause of action. Besides the Erie factors, Indiana Code Section 27-4-1-4.5 provides a list of unfair claims settlement practices any one of which may be considered as evidence of the duty of good faith and fair dealing:

1. Misrepresenting pertinent facts or insurance policy provisions relating to coverage at issue;
2. Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
3. Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
4. Refusing to pay claim without conducting a reasonable investigation based upon all available information;
5. Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.
6. Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear;
7. Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;
8. Attempting to settle a claim for less than the amount to which a reasonable person would have believed they were entitled to by reference to written or printed advertising material accompanying or made part of an application.

Ansert v. Adams, 678 N.E.2d 839, 842 (Ind.Ct.App. 1997); transf. denied. 678 N.E.2d 839 (Ind. 1997).

In order to prove bad faith, the plaintiff must show by a preponderance of the evidence that the insurance company breached the covenant of good faith and fair dealing. Lummis v. State Farm Fire and Cas. Co., 2005 WL 1875771 at *1 (S.D. Ind. Aug. 8, 2005). Some confusion has arisen regarding the standard for proving bad faith due to the fact that oftentimes plaintiffs asserting a claim of bad faith also seek punitive damages. The burden of proof for damages arising from bad faith is separate and distinct from the burden of proof to recover punitive damages, as explained by Chief Judge Hamilton: "In Erie, the Supreme Court of Indiana explained that "in most instances, tort damages for the breach of the duty to exercise good faith will likely be coterminous with those recoverable in a breach of contract action." 622 N.E.2d at 519.

Oftentimes, however, plaintiffs will seek punitive damages on the bad faith claim in addition to tort damages. In Indiana, "the mere finding by a preponderance of the evidence that the insurer committed the tort will not, standing alone, justify the imposition of punitive damages." Erie, 622 N.D.2d at 520. Punitive damages on a bad faith claim require "clear and convincing evidence that the insurer knew there was no legitimate basis for the denial." Freidline v. Shelby Ins. Co., 774 N.E.2d 37, 40 (Ind. 2002); see also Erie, 622 N.D.2d at 520 (stating that proof of bad faith by "clear and convincing evidence" is needed to support punitive damages); McLaughlin v. State Farm Mut. Auto Ins. Co., 30 F.3d 861, 870 (7th Cir. 1994) (reversing jury award of punitive damages where evidence of bad faith was insufficient to meet clear and convincing standard of proof, but noting that "[t]he jury could, on the other hand, have found that the denial of coverage was unreasonable and therefore tortious"). Lummis v. State Farm Fire and Cas. Co., 2005 WL 1417053, *6 (S.D.Ind June 16, 2005).

Following Judge Hamilton's entry in Lummis I, the plaintiff moved to reconsider and the defendant moved for clarification, both of which were denied by Judge Hamilton in Lummis v. State Farm Fire and Cas. Co., 2005 WL 1875771 (S.D.Ind.) ("Lummis II"). In Lummis II, Judge Hamilton affirmed: "[T]he court concluded that different standards of proof applied to whether an insurer acted in bad faith (a preponderance of the evidence is sufficient), and whether an insured can win punitive damages for bad faith (clear and convincing evidence is required). This distinction is clear in Erie..."

In Lummis II, the defendant suggested that language from Friedline raised the standard of proof for the bad faith tort (apart from the issue of punitive damages) to "clear and convincing evidence." The court rejected this argument and unequivocally held "This court did not and does not read Freidline as having silently modified Erie in this respect. First, Freidline did not directly address any contested issue concerning the standard of proof. Second, Freidline cited Plummer Power Mower to support the key sentence. The cited discussion from Plummer Power Mower was a discussion of punitive damages (and the case was decided before the Supreme Court decided Erie). See 590 N.E.2d at 1093. Third, when the Indiana Supreme Court intends to modify its prior holdings, it ordinarily does so explicitly. Erie addressed the question of burden of proof directly and separately for the bad faith tort and the additional relief of punitive damages."

Accordingly, a plaintiff need not meet the "clear and convincing" standard required for the imposition of punitive damages in order to recover damages on a bad faith claim. The jury in a bad faith case need only find by a preponderance of the evidence that the insurance company's denial of coverage was unfounded in order for an insured to recover damages for bad faith. McLaughlin v v. State Farm Mut. Auto Ins. Co., 30 F.3d 861, 870 (7th Cir. 1994); Lummis II, 2005 WL 1875771 at *1; see also Sieveking v. Reliastar Life Ins. Co., 2009 WL 1795090, *1 (S.D.Ind.) (Following the standard in Erie for bad faith, Judge Hamilton found that "an insured may recover for the tort of bad faith upon a showing that the insurer engaged in practices such as '(1) making an unfounded refusal to pay policy proceeds; (2) causing an unfounded delay in making payment; (3) deceiving the insured; and (4) exercising any unfair advantage to pressure an insured into a settlement of [her] claim. ") .

The O'Ryan Law firm has successfully represented numerous plaintiffs in bad faith actions against insurance companies for wrongfully denying disability benefits including the case of Combs v. Lumbermans where the jury awarded $1,500,000 in bad faith damages against Lumbermens for wrongfully terminating Combs' disability benefits.