Articles Posted in Bad Faith

The University of Notre Dame is a Catholic research university located near South Bend, Indiana. Notre Dame’s Catholic character is reflected in its commitment to the Catholic faith, numerous ministries funded by the school, and the architecture around the campus. Notre Dame rose to national prominence in the early 1900s for its Fighting Irish football team, especially under the guidance of the legendary coach Knute Rockne and is well known for “Touchdown Jesus.”

Cigna is an American worldwide health services organization, whose policies are underwritten by Life Insurance Company of North America (“LINA”). Cigna’s insurance subsidiaries are major providers of medical, dental, disability, life and accident insurance and related products and services, the majority of which are offered through employers and other groups.

In June 2015, U.S. health insurer Anthem Inc. announced an offer to acquire Cigna for more than $47 billion in cash and stock. Anthem confirmed it had reached a deal to buy Cigna on July 24, 2015.

Cigna/LINA provides disability coverage to Notre Dame University employees. Cigna disability claims by Notre Dame employees are exempt from the Employee Retirement Income Security Act because the disability plan is considered a “church plan”; therefore, the lawsuit is filed under state law with breach of contract and bad faith counts.
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The O’Ryan Law Firm, on behalf of the Plaintiff, Doug. S., filed a lawsuit in Marion County Indiana against the Indiana State Teachers Association Insurance Trust (“ISTA”) for unpaid disability benefits. The Plaintiff, Doug S., was employed as a shop teacher with the Michigan City Area Schools for many years, which made him eligible for disability benefits under the Long Term Disability Income Benefit Plan sponsored by ISTA.

In Douglas S. v. Indiana State Teachers Association Insurance Trust, the Plaintiff filed a lawsuit to gain the long-term disability benefits he deserved under the terms of the Plan.

Facts of the Case Against ISTA

Plaintiff was employed by the Michigan City Area Schools until he became disabled in 1993 due to the disabling effects of complications from hip fusion reversal, spinal stenosis, scoliosis of the lumbar spine, and cervical spondylosis. When he first became disabled, Doug S. filed an application for long term disability benefits and was paid disability benefits by the ISTA Insurance Trust for 20 years.

ISTA Terminates Long-Term Disability Benefits

On August 1, 2013, ISTA wrongfully terminated the Plaintiff’s long-term disability benefits claiming that the Plaintiff had miraculously recovered from his degenerative issues after 20 years. The Plaintiff then filed an administrative appeal challenging this denial. With this appeal, Plaintiff included significant medical evidence to prove his condition and disability including a report from an Independent Medical Examination by a physician board certified in Occupational Medicine. This report confirmed that Doug S. was disabled. Despite this information, ISTA denied the appeal and the Plaintiff was forced to file a lawsuit to obtain the rest of his disability benefits.
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O’Ryan Law Firm, on behalf of Plaintiff, Pamela H., recently filed a federal lawsuit against Life Insurance Company of North America (LINA) (a subsidiary of Cigna). The Plaintiff was employed by Purdue University, which made her eligible for Purdue’s long-term disability plan, which was insured by LINA.

In Pamela H. v. Life Insurance Company of North America, the Plaintiff filed a disability lawsuit to gain the long-term disability benefits she deserved under the terms of the LINA policy.

Facts of the Case Against LINA

Plaintiff was employed by Purdue University from December 2004 until she became disabled on July 6, 2014 and unable to work. This was due to lumbar radiculopathy and rheumatoid arthritis. Plaintiff’s treating physicians provided objective medical proof that the Plaintiff was unable to continue working due to these ailments.

Plaintiff filed an application for long-term disability benefits and LINA denied her claim on November 3, 2014.
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The Prudential Friendly Society was founded by insurance agent John Fairfield Dryden in a basement office in downtown Newark, N.J., in 1875. It was the first company in the U.S. to make life insurance available to the working class. In business for 137 years, it boast 48,000 employees worldwide.

At the O’Ryan Law Firm, we receive numerous calls a year from individuals who have become disabled, have disability coverage through Prudential, their doctor has reported to Prudential that they cannot work and Prudential denies the claim. One of Prudential’s favorite reasons for denying claims is what they call a lack of “objective medical evidence.” Many conditions, such as fibromyalgia or migraine headaches, result in symptoms, such as pain and fatigue, which are hard to prove objectively. There are no lab tests or diagnostic testing that are able to establish the severity of chronic pain or fatigue. Yet Prudential in these types of claims will insist on objective medical evidence to prove the disability thus making it nearly impossible to get the claim approved.

The courts have made clear in numerous cases that an insurer’s refusal to honor a claim for lack of scientific data such as lab tests and x-rays is an abuse of discretion where no such data exists in medicine for the conditions at issue and where licensed physicians have provided professional opinions that the conditions are genuine and credibly disabling the claimant. See Holmstrom v. Metropolitan Life Insurance Company, 615 F.3d 758, 769-772 (7th Cir. 2010); Leger v. Tribune Company Long Term Disability Benefit Plan, 557, F.3d 823, 834-835 (7th Cir. 2009); Hawkins v. First Union Corporation Long-Term Disability Plan, 326 F.3d 914, 919 (7th Cir. 2003).

In Holmstrom, the claimant suffered from Complex Regional Pain Syndrome (“CPRS”), a condition recognized by the medical community but for which there is no specific diagnostic test. 615 F.3d 758, 768. In that case, the plan acknowledged “Holmstrom’s claims of intractable pain, significant physical limitations, and cognitive deficiency as identified by [claimant and her treating physician],” but found “that the lack of objective findings to support ongoing total disability prevented [the plan] from determining whether [claimant’s] disability was genuine.” Id. at 764. In finding the Holmstrom plan’s denial arbitrary and capricious, the court stated that the plan “gave undue weight to the absence of objective measurements for [claimant’s] impairments,” reasoning that:

Subjectively painful conditions like CPRS and fibromyalgia pose difficult problems for private disability insurance plan administrators and the Social Security Administration, who understandably seek to make decisions based on the most objective evidence available. But we have rejected as arbitrary an administrator’s requirement that a claimant prove her condition with objective data where no definitive objective tests exist for the condition or its severity.
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We have represented numerous clients in short term disability and long term disability claims after Lincoln Financial, also known as Lincoln National, has denied or prematurely terminated the client’s disability benefits claim. Lincoln traces its origin to June 12, 1905, in Fort Wayne, Indiana, as the Lincoln National Life Insurance Company. Perry Randall, a Fort Wayne attorney and entrepreneur, suggested the name “Lincoln,” arguing that the name of Abraham Lincoln would powerfully convey a spirit of integrity. In August, 1905 Robert Todd Lincoln provided a photograph of his father, along with a letter authorizing the use of his father’s likeness and name for company stationery and advertising.Lincoln 3.jpg

Lincoln National Corporation is a Fortune 250 American holding company, which operates multiple insurance and investment management businesses through subsidiary companies. Lincoln Financial Group is the marketing name for LNC and its subsidiary companies. LNC was organized under the laws of the state of Indiana in 1968, and maintains its principal executive offices in Radnor, Pennsylvania In 1928, LNC president Arthur Hall hired Dr. Louis A. Warren, a Lincoln scholar, and in 1929, LNC acquired one of the largest collections of books about Abraham Lincoln in the United States. The Lincoln Museum in Fort Wayne was the second largest Lincoln museum in the country. The Abraham Lincoln Presidential Library and Museum in Springfield, Illinois is now the world’s largest museum dedicated to the life and times of Abraham Lincoln, after the closing of the Fort Wayne Lincoln Museum June 30, 2008.

Lincoln National issues group disability policies, and individual disability policies, to provide income replacement benefits to residents of the State of Indiana who are forced to stop working due to injury or illness. At O’Ryan Law Firm, we have received numerous calls from individuals who were promised disability benefits under a Lincoln National policy yet those benefits were denied by Lincoln despite medical proof establishing that the definition of “Disabled” had been met under the terms of the policy. Several of our clients who are insured by Lincoln National were teachers who had taught for many years until reaching the point where they were no longer able to keep teaching because of medical conditions.

We have successfully resolved disability claims with Lincoln Financial, either during the appeal stage, or if we are forced to file a lawsuit, after the lawsuit is filed with the court. We have developed a good working relationship with the legal staff at Lincoln Financial and have settled several cases with them after a lawsuit was filed. If you have a disability claim against Lincoln Financial, or their subsidiary Lincoln National, and they are refusing to pay your monthly disability benefits, contact the O’Ryan Law Firm at (855) 778-5055 or visit our website at to find out more information about our services.

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When disabled clients first call the O’Ryan Law Firm, one of the first questions they ask is whether they can obtain punitive damages for the wrongful denial of their disability claim. No doubt, many of our clients have suffered incredible financial and emotional damages as a result of the insurance company either denying their claim outright or terminating the claim before the client can actually return to work. We have had clients suffer terrible financial losses, such as the loss of a vehicle, loss of their credit rating or even the loss of their home through foreclosure, due to the insurance company wrongfully denying their disability claim. Unfortunately, if the client’s disability claim falls under the Employee Retirement Income Security Act, commonly known as ERISA, the courts have found that punitive damages are not awardable when the disability claim is subject to ERISA.

ERISA is a federal statute that was passed in 1974 by Congress in order to protect participants of employee benefit plans. Most individuals receive medical coverage, life insurance coverage and disability coverage through their employer. Most employer sponsored benefit plans are governed by ERISA. There are two exceptions: governmental entities and church plans. If your employer is a governmental entity, such as a public university or school corporation, or a church plan, then you would not be covered by ERISA; instead, your claim is subject to state law. Under state law, you may be able to recover damages in excess of what the disability policy provides in the way of monthly disability benefits.

However, most disability claims are governed by ERISA. Unfortunately, the courts have found that ERISA preempts any state laws that allow for compensatory or punitive damages in excess of the policy benefits. For example, in the case of Midwest Security Life Ins. Co. v. Stroup, 730 N.E.2d 163 (Ind. 2000) the Indiana Supreme Court denied the Stroups’ request for punitive damages finding that their health insurance claims were preempted by ERISA. In this case, Patrick and Theresa Stroup received a group health insurance policy from Midwest Security Life Insurance Company as a result of Patrick’s employment and the policy was governed by ERISA because it was an employer sponsored health insurance plan. In January, 1993, Theresa sought predetermination of benefits for surgery to correct congenital problems with her jaw and Midwest approved the surgery. About four months after Theresa’s surgeries, in August 1994, Midwest amended its plan to exclude coverage for orthognathic surgery. In October 1995, she awoke in considerable pain to discover that her jaw had broken. One week later, Theresa underwent bone graft surgery to repair her jaw. In January 1996, Theresa was forced to undergo another surgery because of continued pain and muscle spasms in her jaw.

The Stroups filed suit against Midwest after the later surgery claims were denied and alleged that Midwest Security had breached Indiana’s covenant of good faith and fair dealing entitling them to compensatory and punitive damages. Midwest argued that the Stroups’ claims were preempted by ERISA which does not allow punitive damages. The trial court held that the Stroups’ state law claims were not preempted by ERISA, their request for punitive damages was not preempted by ERISA, and the claims were triable to a jury. On interlocutory appeal, the Court of Appeals reversed holding that the Stroups’ state law claims were preempted by ERISA. The Indiana Supreme Court agreed. The Supreme Court found that ERISA provides for broad preemption of state law claims in 29 U.S.C. § 1144(a) which reads: “[e]xcept as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan….” The Indiana Supreme Court concluded that “[t]he United States Supreme Court has examined the legislative history surrounding § 1144(a) to determine that “the words ‘relate to’ in [114]4(a) [were used by Congress] in their broad sense.”Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) (quoting Representative Dent that “the crowning achievement of this legislation [is] the reservation to Federal authority [of] the sole power to regulate the field of employee benefit plans”). Based on this broad reading of ERISA, the Court found that the Stroups’ claims were preempted by ERISA which does not allow for compensatory or punitive damages.

Consequently, if you have a health insurance, life insurance or disability insurance claim that is governed by ERISA, the law unfortunately does not allow you to seek compensatory or punitive damages in excess of the policy. However, ERISA does allow for the recovery of your attorneys fees. If you are employed by a governmental entity or church then your claims are exempt from ERISA thus allowing you to seek damages for the emotional and financial distress caused by the wrongful denial of your health, life or disability claim.

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.

stock-photo-3175050-bell-tower.jpgPrudential 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.
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952313_gavel.jpg 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.