How Much is My Claim for Individual Disability Insurance Worth in a Lawsuit?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Dec 16, 2019

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You’ve won your case against your long-term disability insurer and the insurer must ante up the retroactive amount of your policy benefits (plus interest). What more can be collected?

Simply, you may be entitled to money for pain and suffering, emotional distress, bad faith and punitive damages. But which “extra” damages are available depends largely on a “bad faith” claim. The rules on what is and what is not a bad faith claim in insurance cases vary from state to state. You will need to check with your bad faith attorney.

Attorney fees

Recovery of your attorney fees depends on your state law. Under California law, for example, you may recover attorney fees incurred in obtaining your contractual benefit. Attorney fees may be awarded on a per-hour worked basis or contingent fee basis. A common argument is that the fees should be awarded based on a percentage of the contractual benefits recovered.

Emotional distress damages

Long term disability income insurance benefits have been purchased by you specifically to provide you with peace of mind and a sense of security should you become injured or ill and unable to earn an income and provide for yourself and your family–the very risk you have insured yourself against (loss of income). Your financial commitment to purchase this insurance presumes that if and when you submit a legitimate claim you will have the income protection you need. The financial risk you are exposed to when you are unable to work and your lack of technical expertise regarding the ins and outs of insurance claims procedures make you especially vulnerable to nefarious tactics by an insurance company.

That said, to bring “an infliction of emotional distress claim” requires that you first establish a bad faith claim. If successful, you should also have a valid basis for an award of emotional damages. It is strongly urged as soon as possible to seek the advice of a lawyer who is experienced in bad faith insurance litigation who will know how to prove that your insurance company acted in bad faith in handling your claim.

Future benefits

Some courts have ruled that in the case of an unreasonable denial of disability benefits, the insurance company will payout a lump sum of the present value of future benefits. This is a remedy that, depending on the circumstances of your case, might be imposed by the court or negotiated between you and the insurance company as a final resolution of the matter and as a way to end any further need for you and your insurance company to have to deal with each other. This may be something you wish to consider with your attorney.

Punitive damages

Punitive damages are a powerful tool for the policyholder, but they are rare and usually reserved for truly horrific occasions.

Punitive damages are intended to punish the losing insurance company and to deter it, and other insurers by example, from future conduct of a similar nature. In order to obtain punitive damages, you have to show that the insurance company acted with outrageous conduct, such as by fraud, oppression or malice in denying your claim. As said earlier, this award intended to punish the losing insurance company is difficult to win. Though you will benefit as the recipient of the award, the purpose is to punish the insurance company for its bad behavior. Punitive damages have been awarded when the insurance company intentionally conceals, withholds or distorts information it has in its file that is favorable to you, fails or refuses to thoroughly investigate your claim or uses its superior bargaining position to threaten or intimidate you.

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