Purchasing a long-term care (LTC) insurance policy should provide peace of mind in the face of future care needs. Yet, for many policyholders, this peace of mind shatters when the time comes to file a claim, and they are met not with support but with delays, confusing communications, or outright denials. While some denials may stem from genuine misunderstandings or incomplete information, many arise from what can only be described as bad-faith insurance company tactics.
At Sandstone Law Group, we understand the profound frustration and distress that insurance companies cause when they fail to honor their promises. Our approach is direct, compassionate, and unwavering—we stand firmly against insurers who engage in bad faith.
What Is Insurance Bad Faith?
Insurance bad faith occurs when an insurance company violates the covenant of good faith and fair dealing. Insurance bad faith occurs when an insurer unreasonably denies, delays, or mishandles a claim without a proper basis, placing its own interests above the rights of the policyholder.
Bad faith refers to an insurer's unreasonable or unfair conduct in handling a claim.
Insurance bad faith occurs when an insurer engages in unreasonable or unfair conduct in handling a claim, going beyond a simple mistake or an honest disagreement over policy interpretation. It arises when the company fails to treat its policyholder fairly and honestly, often prioritizing its own financial interests over its contractual obligations.
An insurer that cherry-picks evidence, delays payment without cause, misinterprets policy language, or ignores clear proof of eligibility may be acting in bad faith. Importantly, proving bad faith does not require showing malice or immoral intent; it is enough to demonstrate that the insurer lacked a reasonable basis for its actions and failed to engage in fair claims handling.
In both Arizona and California, courts recognize that policyholders can establish bad faith by showing the insurer acted unreasonably and either knew or recklessly disregarded the fact that it lacked a reasonable basis for its conduct. We know what to look for when assessing such conduct.
The companies that sold these long-term care policies decades ago are now often reluctant to honor them, recognizing that fulfilling these obligations can affect their bottom line and stock value. This financial motivation can underpin many of the bad-faith tactics policyholders encounter.
Common Bad Faith Tactics in Long-Term Care Insurance Denials
Long-term care insurance is distinct from other insurance, with benefits typically triggered by functional impairment—such as the inability to perform activities of daily living—or by cognitive impairment.
1. Misrepresenting Policy Terms and Benefit Triggers
Insurers may deliberately misinterpret their own policy language or even apply standards that are not relevant to LTC insurance. A classic example is narrowing the definitions of Activities of Daily Living (ADLs) or cognitive impairment to exclude your needs, even when it clearly meets the policy's intended triggers. While policies do not generally impose an additional requirement that care be deemed ‘functionally necessary,’ insurers sometimes use this argument as a bad faith tactic, creating hurdles that disregard the policy’s fundamental purpose.
It is unreasonable to deny benefits based on a standard that does not apply or by twisting the clear intent of the policy's eligibility criteria.
2. Unreasonable Delays and "Death by Paperwork"
Insurers often implement strategies designed to wear down policyholders in violation of their duty of good faith. This can include:
1. Excessive Information Requests: Demanding the same documents multiple times to delay the process.
2. Irrelevant Requests: Requesting irrelevant information, especially when liability is otherwise clear or enough supportive documentation exists to approve, and using the lack of that irrelevant information as a reason to prolong the process.
3. Slow Communication: Taking an unreasonably long time to respond to inquiries or process submitted documents.
Deliberately stalling a claim, especially when the policyholder needs care urgently, is unreasonable and in violation of the law in many states. The goal is often to frustrate the policyholder to the point of giving up or accepting a reduced settlement. Arizona and California, for example, prohibit such conduct.
3. Denying Legitimate Claims Without Proper Investigation:
An insurer has a duty to conduct a thorough and fair investigation of every claim. Bad faith occurs when they:
1. Ignore or Disregard Medical Evidence: Overlooking or downplaying detailed statements and Chronically Ill Certifications (CICs) provided by your treating physician, even when they clearly document your functional limitations.
2. Rely on Biased Reviews: Using their own in-house reviewers or hired consultants whose opinions consistently contradict your treating doctors, without sufficient medical justification.
3. Fail to Obtain All Relevant Information: Denying a claim for "lack of information" when they have not made a reasonable effort to gather all necessary records.
An insurer cannot simply close their eyes to favorable evidence or prioritize their own consultants' opinions without a strong, objective basis. They must perform a comprehensive and impartial review.
4. Cherry-Picking or Misconstruing Evidence
This involves selectively focusing on specific parts of your medical records or other submitted documents that might support a denial, while ignoring or minimizing other evidence that clearly supports your claim. For instance, highlighting a period of temporary improvement while disregarding the overall decline in your condition. We also see insurers focus on the “review of systems” section of a medical record to deny claims, even when that part of medical records is often irrelevant or copy and pasted from prior visits. We also see insurers misconstruing testing results, like the MMSE, to argue a lack of “severe” cognitive impairment.
An insurer has a duty to review the claim file as a whole, not just to find snippets of information or medical evidence that allow them to deny paying benefits. Such conduct does not provide equal consideration to their insureds and demonstrates a clear intent to deny rather than to fairly evaluate claims.
5. Unjustified Provider/Facility Qualification Denials:
Many policies have requirements for who can provide care (e.g., licensed professionals, approved agencies) or what type of facility is covered, but those provisions are often ambiguous at best. Insurers may use self-serving interpretations of these policy provisions to deny claims for home care, assisted living, or nursing home services, even if the care being provided should be permitted and was originally contemplated under the policy.
If the insurer misrepresents policy terms, such conduct can constitute bad faith.
6. Coercing Policyholders and Misleading Communications
Insurers might pressure policyholders to surrender a policy, suggesting it is their best option in the face of denied coverage, even if more benefits are due. They may also provide vague, confusing, or misleading reasons for a denial, making it difficult for policyholders to understand what additional information is truly needed or how to appeal effectively.
This undermines the policyholder's ability to make informed decisions and often preys on their vulnerability during a difficult time.
Contact Sandstone Law Group Today
If your insurer has wrongfully denied your disability or long-term care claim, you may have a case for insurance bad faith.
These cases are about more than money. They are about dignity, justice, and accountability. At Sandstone Law Group, we are not intimidated by large insurers.
Contact us today at (602) 615-0050 to schedule a consultation. Let us uncover the truth, enforce your rights, and make sure your insurer delivers the protection they promised.