Suing Disability Insurers for Bad Faith Claims Explained

Author: Disability Attorneys Dell & Schaefer
Published: 2010/09/21 - Updated: 2026/01/11
Publication Type: Informative
Category Topic: Claims - Related Publications

Page Content: Synopsis - Introduction - Main - Insights, Updates

Synopsis: This information provides authoritative legal guidance from disability insurance attorneys on the complex question of pursuing bad faith or punitive damage lawsuits against long-term disability carriers. The article breaks down critical distinctions between ERISA-governed policies, which prohibit such lawsuits entirely, and individual disability policies, where legal options vary significantly by state jurisdiction. For people with disabilities who face claim denials or suspect improper handling by their insurance companies, understanding these legal boundaries proves essential before investing time and resources in potential litigation. The straightforward explanation of ERISA's limitations and state-specific requirements helps disabled individuals and their advocates make informed decisions about their legal options when dealing with challenging insurance situations - Disabled World (DW).

Introduction

The answer to this question depends upon whether or not you have a claim governed by ERISA or you have an individual disability policy.

Main Content

Let's start with the easy one and probably the most unfair one.

If you have a policy governed by ERISA, the answer is that you absolutely cannot sue your disability insurance carrier for either bad faith or punitive damages.

I didn't make the law, I don't agree with it.

I think the ERISA laws are very unfair, and there's no indication that those laws are going to change any time soon.

With regard to individual disability policies, in some states, you can sue your disability carrier for bad faith and punitive damages, and obviously in others, you can't.

The facts of the case in order to qualify for a bad faith claim have to be very specific.

There are only a few states that allow you to sue for bad faith or punitive damages.

So if you have any facts in your case that you believe would warrant a claim for bad faith or punitive damages, we encourage you to contact us at your convenience regarding your disability claim.

Insights, Analysis, and Developments

Editorial Note: The stark reality that ERISA completely bars bad faith and punitive damage claims stands in sharp contrast to the protections available under individual disability policies, creating a two-tiered system where workplace benefit recipients have fewer legal remedies than those who purchase private coverage. This disparity means that disabled workers whose claims are mishandled may have no recourse for insurance company misconduct beyond appealing the underlying denial itself. Given the significant variations in state laws governing individual policies and the technical complexity of determining which legal framework applies to your situation, anyone considering legal action against a disability insurer should consult with an attorney experienced in disability insurance law before their appeal deadline expires - particularly since ERISA cases typically impose strict 180-day filing requirements that, once missed, eliminate your right to pursue any legal remedy whatsoever - Disabled World (DW).