The doctrine of “bad faith” by an insurance company does not apply to every long term disability insurance claim. In fact, it only applies to state law claims against an insurance company based on the company’s conduct in handling a claim for individual disability insurance benefits. In other words, bad faith laws apply only if ERISA regulations do not apply. As described in other areas of this website, ERISA rules and regulations apply to most group disability plans. Because ERISA regulations are Federal regulations, ERISA regulations trump all State laws that relate to employee fringe benefits. This is the legal doctrine of preemption, and it means that ERISA regulations preempt most bad faith laws in ERISA claims.
According to Black’s Law Dictionary, “bad faith” is defined as: “The opposite of ‘good faith,’ generally implying or involving actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one’s rights or duties, but by some interested or sinister motive.”
What Florida State Law Says About Bad Faith
Florida Statute 624.155 specifically defines bad faith in Florida state law claims. Statute 624.155 defines “bad faith” as any of the following acts by the insurance company:
- Not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests;
- Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which payments are being made; or
- Except as to liability coverages, failing to promptly settle claims, when the obligation to settle a claim has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.
Because the determination as to whether state laws or federal regulations apply can be difficult, you should seriously consider obtaining a free consultation from an experienced disability attorney. Mr. Ortiz has years of experience in handling disability insurance claims. Call him at (888) 321-8131 for your free consultation.