What is Health Insurance Negligence?
Negligence refers to a failure to provide competent medical care, its legal definition being "the failure to use reasonable care to prevent harm to oneself or another." A health insurance company is considered negligent if they deny a claim – and therefore the services a physician has prescribed – without valid justification. Health insurance companies are required to have a complete a thorough and reasonable review in order to approve or deny a claim. They must consider the appropriate information, including your medical history and the services your physician has ordered.
If a health insurance company is negligent, not only could it face damages that may be awarded to you should you decide to sue, but it can also face repercussions from the state insurance commissioner. The insurance commissioner can decide if a health insurance company was negligent. If the commissioner believes a health insurance company was negligent, it can fine the company for practice violations, including not timely approving or denying legitimate claims, delaying decision-making, unfair claim practices, or misrepresentation in the evidence of coverage.
An example of negligence would be if you visited your doctor , who ordered a brain scan because he thought you may have experienced a stroke. When the results came back, it was determined that you had indeed suffered from a stroke and were in danger of suffering from additional strokes in the future if you did not undergo the necessary treatment. Your physician prescribed conservative treatment, but you submitted a claim to your health insurance company and were told that the treatment was not covered. When you appealed the denial and asked for a formal internal review, you were denied again. Not fully understanding your legal rights, you decided to pay out-of-pocket for the treatment your doctor prescribed.
Under this scenario, you would have grounds for a lawsuit against your health insurance company. If a provider has prescribed treatment, it is the insurance company’s responsibility to at least explore the option of covering the treatment before denying it outright. If a company denies a claim when a doctor has ordered treatment, it must explain the reasons for denying it. If it was due to a lack of evidence, it should then ask for more information. If a health insurance company has acted negligently, you may be able to recover damages that were caused as a result of the negligent denial of coverage.
Legality of Suing a Health Insurance Company
A policyholder can file a malpractice lawsuit against a health insurance company in which they sue for negligence because it failed to establish or follow procedures for the prompt processing of reimbursement or payment of claims. Courts have held that when an insurance company takes a claim "under consideration," the insurer assumes a duty toward the claimant. Little v. Blue Cross & Blue Shield, 800 F. Supp. 1566 (D. Utah 1992). Thus, insurers that "assume responsibility for the execution of obligations owed to their insureds" may be liable for the negligent failure to perform those obligations. Gedeon v. State Farm Mut. Auto. Ins. Co., 872 P.2d 1126 (Utah 1994).
No matter the legal ground for the policyholder’s action, the insurer cannot escape liability if it breaches the obligation to act without delay and in accordance with the intentions of the parties. An insurer that prepares its internal claims handling guidelines to permit adequate time for claims handling is not enough; what is required is the proper implementation of the guidelines. Mead v. Am. Title Ins., 251 P.3d 180 (Utah 2010). It also should be noted that a failure to follow the insurance policy terms, or a departure from the policy in some way, may constitute negligence per se because it relies on the assumption that the insurer will act with "reasonable care and diligence." Little v. Blue Cross & Blue Shield, 800 F. Supp. 1566 (D. Utah 1992).
The policyholder must establish the commission of a wrongful act or omission that caused injury. In determining whether damages are recoverable, the first step in valuing damages is to calculate the plaintiff’s loss of net earnings, or income. Utah Code Ann. § 78-27-40(3). Then, the plaintiff must prove future economic loss, using factors such as those mentioned in the Utah Supreme Court case of Sherwood v. Monarch Transp. Corp., 770 P.2d 936 (Utah 1989).
Recovery for emotional distress as a result of insurance company actions has been permitted in some cases, providing the necessary elements are established. See Taylor v. American Family Life Assur. Co., 14 F. Supp. 2d 1260 (D. Wyo. 1998).
A plaintiff suing an insurance company in Utah under either a tort or a contract theory must establish that the defendant’s conduct purportedly caused the plaintiff damage. Key to obtaining a recovery is proof that a reasonable relationship exists between the insurer’s conduct and the plaintiff’s claimed injuries. Riodan v. Nationwide Ins. Co., 754 P.2d 19 (Utah 1988).
What Steps to Follow Before Pursuing Legal Action
Before you file suit against your health insurance provider, you will want to make sure you’ve taken certain steps to protect your case. This all starts with thorough documentation and the collection of important information. While the specific circumstances for each person are different, here is a general list of actions you may need to have completed before pursuing legal action:
• Records of all phone conversations you have had with your insurer, including notes on any instructions or advice they give, as well as details about the date, time, name of the person you spoke with, and any other relevant information about the interaction.
• A copy of your original insurance policy, including any amendments or changes that have been made to your coverage over the years.
• All documentation explaining decisions made by the insurance company, including written denials of coverage or refusals to pay claims.
• Copies of bills related to your medical care.
• Records of all communications you have had with your medical providers about issues related to your medical and/or dental care, including denials of coverage or refusals to cover expenses for necessary care.
• A record of any actions you have taken to appeal decisions made by your health insurance provider.
Difficulties in Lawsuits Against Health Insurers
One immediate challenge of suing your health insurance provider is cost. As a general rule, the longer your lawsuit takes to get resolved the more expensive it is for both sides. The prevailing party is entitled to fees and costs, so the longer a case takes the higher the risk is of having to pay your own legal fees as well as the opposing attorney’s fees if you lose. There are alternative payment arrangements that can help alleviate this financial blow, but it needs to be discussed with your lawyer before filing the suit.
Another challenge of suing a health insurance provider is proving negligence. It may not seem that hard – they issue cards, collect payments, and are expected to come through when you need them. However, the courts take a pretty dim view of suits merely based on bad faith.
To prove negligence, a plaintiff must show: If you believe that you have a good case of negligence against your insurance provider you will want to reach out to a skilled lawyer who has plenty of experience suing insurance companies.
Other Options to Consider
The presence of a contract does not always mean that the aggrieved party has to file a lawsuit to get the issue resolved. There are several alternatives to filing a lawsuit that can be resolved outside of court. Here are two:
Mediation
Mediation is a non-binding, voluntary process in which an impartial third party (the mediator) meets with you, your attorney and your health insurance company (or it’s attorney) to learn more about the situation. After listening to each party, the mediator seeks to offer more than one solution that can help resolve the problem between the parties. If your agreement allows for mediation, your health insurance company may be obligated to attend mediation if you request that a mediator be assigned to your case.
It is up to each involved party to determine if the resolution proposed by the mediator will be considered. Either party can reject the findings, or accept it. However, keep in mind that it is simply a recommendation provided by the mediator, and no party will be held legally accountable for resolving the issue in accordance with the proposal .
Arbitration
Arbitration is different than mediation. Here, the arbitrator has the authority to make a decision and issue a "binding" ruling on the matter. The binding ruling indicates that each party (i.e., you and your health insurance provider) must abide by the decision rendered by the arbitrator. If either party rejects the ruling, they can file a claim against the other seeking damages.
The arbitration decision is also generally final. So, once the decision is rendered, neither party has the right to renegotiate the solution. However, if the final decision is to your advantage, and your health insurance company refuses to abide by it, you can potentially choose to file a lawsuit against your health insurance company.
The good news about both mediation and arbitration is that your case will likely get resolved much faster. In addition, these options are often less formal than filing a lawsuit. Reduced time and formality means you will spend fewer resources on attorneys’ fees, so it could save you thousands of dollars by opting for mediation or arbitration over litigation.
Examples and Case Law
Consider the case of Leeds v. Blue Cross Blue Shield of Michigan, which was filed in Wayne County Circuit Court in Michigan in 2017. The plaintiff, a retired public school teacher, required knee surgery for an injury that occurred in the summer of 2016. The surgery was to be performed by a particular surgeon who specialized in that type of work.
The plaintiff’s former mother-in-law, who was familiar with the situation, recommended the Health Alliance Plan of Michigan (HAP). The HAP reviewed the Medical History and Treatment form submitted by the plaintiff which included the recommendation of the particular surgeon. It also had a history of treating the plaintiff’s knee injury since then. Based on this information, the HAP approved the health insurance request for a consultation with the surgeon, securing a verbal guarantee for coverage. So the plaintiff scheduled the surgery with the surgeon.
Unfortunately, the plaintiff received an email from the administrator of the surgical facility requesting an additional approval prior to performing the surgery. Plaintiff contacted the HAP who not only denied the request but called the treatment "unethical." Later the plaintiff was contacted by the plaintiff’s surgeon’s office. They called the HAP and it was revealed the procedure was not only covered but also that the claim should have been paid all along. It was also found that the procedure was properly authorized and the denial was a mistake, as the procedure was typical and routine and nothing out of the ordinary.
Another case is that of Carter vs. Blue Cross Blue Shield of Michigan, a case decided by the United States District Court of the Eastern District of Michigan in 2012. In 2008 the plaintiffs moved to California, enrolled in health insurance and moved again thereafter. The plaintiff’s terminated their policy and traveled to Arizona to stay with their son.
The policy stated that it was massive and that Blue Cross was not liable to pay for any expenses not usual and customary in the area where the insured resided. In other words, if they renewed coverage while they were living in California, they were covered. If they continued coverage even though they resided in Arizona, they were not covered.
The arguments were heated in this case and this case is still ongoing. It is often thought that the insurance company will just try to pay for blood test but not MRI scans. Most often these issues are settled, however, sometimes they do go to court and do establish precedents.
Consult an Attorney
Many people are surprised to learn that suing a health insurance company for negligence is even possible. However, there are circumstances when this may be the appropriate course of action. Consulting with a legal expert in insurance or healthcare law will help to determine the validity of such a lawsuit and how to proceed.
If you have an insurance policy, you have a contract with the insurer and your allegations against them would be against the terms of this contract. For example, if you were to sue an insurance company because they denied your claim for a certain medication, you are simply arguing that the insurance company did not properly follow the contract that is in place between the parties.
For medical malpractice claims, you cannot sue your health insurance company . This is because health insurers are not regulated by the same standards as medical providers. If your medical provider misdiagnosed your medical condition and you were injured because of this misdiagnosis, you may be able to recover damages from your medical provider. But your health insurer is only responsible for paying for your medical treatment as outlined in your contract.
Unfortunately, lawsuits against health insurance companies are complicated. Because of the number of cases handled by large insurers, a denied claim does not always mean the issue lies with the insurer. In many cases, the medical provider, pharmacy or health care facility may be at fault. Reviewing your denied claim with a knowledgeable attorney can help in determining who or what is to blame.