Skip to main content

Permanent Disability/Bad Faith

Our client, Dr. M, a chiropractor, was insured by Lloyd's, London under a policy that provided a total temporary disability benefit of $7,250 monthly for a maximum of 36 months, and a $1 million single-limit benefit if Dr. M was permanently disabled from his own specialty occupation at the end of the 36-month period.

In July 2005, Dr. M fell backwards from a height of seven feet off of a collapsing dirt hill striking his head on a concrete wall, and suffering injuries to many parts of his body. 

The conditions that pose a safety threat to Dr. M and his patients, and prevent him from ever return to practicing chiropractic, are multiple levels of degenerative disc disease in his cervical, thoracic and lumbar spines, left shoulder ligamentous instability, and carpal and ulnar tunnel syndromes. He has been recommended no less than six different surgeries. 

Lloyd's paid the 36 months of temporary total disability benefits.  During the first year of payment, Lloyd’s required him to undergo an independent medical examination with an orthopedic surgeon of its choosing. The orthopedist, Jacob Tauber, M.D., informed the insurer that not only was Dr. M totally disabled, but he went further and determined that he was permanently disabled from returning to his occupation. 

At the end of the 36-month period, Dr. M submitted a claim for the permanent disability benefit. Lloyd's insisted that he undergo another IME. Dr. M wanted to know why if his own treating doctors, and Lloyd’s own IME doctor, had all found him permanently disabled.  The insurer replied that it has the right.  OK, Dr. M said, but then send me back to Dr. Tauber. Lloyd's refused and required an examination with another doctor, even though Dr. Tauber examined him again and determined his condition had not changed.

Lloyd's, instead, selected Todd Moldawer, M.D., who admittedly does not treat upper extremity conditions.  However, after performing a less-than-thorough examination, Dr. Moldawer concluded that, other than overhead lifting, there were was nothing preventing Dr. M from returning without limitation to his practice.

Dr. Moldawer’s opinions were contradicted by every other doctor who has treated and/or examined Dr. M, fourteen physicians in all.  This includes not just Dr. M’s own treating physicians and the previous doctors retained by Lloyd’s, but also three of Dr. Moldawer's own partners, who Dr. M went to see in order to prove that the IME was false.

Nonetheless, Lloyd’s asserted that Dr. Moldawer’s report constituted a conflict between the doctors, so as to invoke a provision of the policy providing for arbitration of the claim.  Dr. M. sued for breach of contract and bad faith in manufacturing an unreasonable basis to deny the claim.  The assigned judge to the case held that the arbitration provision in the policy was enforceable, and ordered it the claim to arbitration before a medical doctor.

However, on the eve of the arbitration, the matter was settled to our satisfaction for a confidential amount.



Our client was a former major league pitcher. During his career he yearly purchased a purchased a single-limit total and permanent disability insurance from Defendant Lloyd’s, London to protect him in the event of a career-ending injury. For the year in question, the benefit was $3 million.
He suffered an injury to the rotator cuff of his pitching shoulder that turned out to be permanently disabling after he underwent three shoulder surgeries and two unsuccessful comeback attempts. He therefore submitted a claim to Lloyd’s. 
After a three-year investigation, the insurance company denied the claim because though it had extensively evaluated his shoulder each year before deciding whether to issue him a policy, and were acutely aware of the health of his shoulder, he did not tell the insurer about a single visit to a doctor (the equivalent of failing to remember a hangnail). This, Lloyd’s asserted, constituted a material misrepresentation voiding the policy.
Except the information that Lloyd’s claims it did not have would not resulted in it declining to issue the policy. This is so because the insurer’s authorized underwriting agent a second policy on our client for a different insurance company at the same time it was underwriting the Lloyd’s policy. Through its underwriting of the second policy, Lloyd’s agent had knowledge of every fact upon which the Lloyd’s rescission was based, and concluded, under the identical underwriting standards and guidelines, that there was nothing about the pitcher’s shoulder that would warrant the policy being declined. In fact, when our client became disabled, the other insurer paid that claim in full.
After nearly five years of extensive litigation, including depositions of many doctors, people in the insurance industry, and several witnesses within the baseball industry, the case settled five days before the scheduled start of the trial for almost double the face amount of the insurance policy.
ERISA–Disability–Back Injury
Our client was a 52-year old Region Sales Secretary for Panasonic who was covered through her work by a long-term disability insurance policy issued by Prudential. She was forced to discontinue her employment because of a chronic disabling back pain for which she underwent a laminectomy surgery, a nerve root blockade, two epidural steroid injections, a spinal cord stimulation trial, an intraspinal opiate trial, and nerve block therapy, in addition to physical therapy and other conservative treatment, and the ingestion of a plethora of pain medication, narcotic and otherwise. Every doctor and health care provider or consultant who is not employed by or an independent contractor of Prudential Insurance Company, including those from Social Security for which she was awarded benefits, concluded that she was totally and permanently disabled from working at her former position or any other occupation for which she is otherwise trained, educated, or experienced. 
She was paid for two years of disability under the “own occupation” definition of disability, but in advance of the expiration of the two year period, Prudential advised her that they would be stopped because her disability was caused in part by depression (though clearly secondary to her physical condition), she was subject to the limitation of the long-term disability policy of 24 months for disability caused by mental illness.                       
Our client protested, and Prudential had her examined by a doctor of her choosing, who while not denying the fact that she suffered from chronic pain, opined that her complaints seemed out of proportion to the “objective evidence.” As a result, Prudential denied her claim solely on the basis of this report, and ignoring all of the medical evidence to the contrary, that included a scathing criticism of the doctor for the insurance company failing to properly consider or address her chronic pain.           
We presented an appeal on behalf of the client that included several pieces of additional evidence, including the report of a Functional Capacity Evaluation that concluded, following many hours in a simulated work environment, that she was unable to perform at any job on a full-time basis.
The matter went to trial before U.S. District Court Judge David O. Carter, who ruled that, under the applicable de novo standard of review, our client was totally disabled and entitled to benefits.   Judge Carter held that the “great weight of credible medical evidence from treating physicians over an extended period of time demonstrates that Williams meets the Plan definition for total disability and is unable to perform for wage or profit, the material and substantial duties of any job for which she is reasonably fitted by her education, training or experience.” He awarded all back benefits, a reinstatement of her monthly benefits, and attorneys fees and costs.   You can read the court’s decision by clicking here.
Life Insurance–Insurer claims policy not in force
Our client’s husband died from injuries suffered in a motorcycle collision in 2007, and her claim for over $600,000 in life insurance benefits was denied because the insurance company claimed no policy was in force at the time of his death.
Approximately nine months before his untimely death, our client’s husband had let his life insurance policy laps for non-payment of premiums. However, as the policy allowed for reinstatement, their agent approached the couple to encourage them to become insured again, and six months after the policy lapse, they agreed to meet with the agents.
At the meeting, the agents required that a reinstatement application be completed and submitted to the insurance company along with one month’s premium, and an unsigned, voided check (which was necessary for the company to set up the direct deposit for the premiums.) Our client and her husband complied accordingly. The agents also told them that the payment of the premium check along with submission of the application created immediate coverage.
The insurance company deposited the premium check, but had not completed the underwriting of the renewal application before the death of our client’s husband. As a result, the company denied the claim on the grounds that the renewal application required that the applicant must be approved for coverage before a policy is in force. 
We sued for the benefits plus damages for bad faith, contending that, despite the language in the renewal application form, the insurance company’s accepting and depositing of a premium check acted to reinstate the original policy, or, alternatively, created an immediate temporary contract of insurance that was in force at the time of the death of our client’s husband.
The case was resolved to our satisfaction prior to trial, the terms of which are confidential.
Health Insurance–In-home nursing care benefits terminated
Our client was born in 2000, the product of crash cesarean section delivery following the mother’s ruptured uterus. At birth she suffered from significant neonatal depression and resultant hypoxic ischemic encephalopathy, leading to severe spastic cerebral palsy and a G-Tube for nutrition. As a result, she has never been able to walk, talk, eat, swallow, blink, sit, or move on her own. She has to have her saliva suctioned constantly, or she risks choking to death. She is thus in need of constant care.
Following her birth, the baby was hospitalized for a lengthy period. The case manager for the family’s health insurance explained to the parents that following the baby’s release from the hospital, the health plan provides for 100 days of skilled nursing care in the home with one day equal to three eight-hour shifts; and that she would authorize 300 shifts yearly. In addition, once those benefits were exhausted, the family would have an additional 90 shifts for Home health visits, such that there would be a yearly maximum of 390 eight-hour shifts.
The health insurer provided those benefits for two years, but then the insurance company advised the family that one shift of eight hours was now to be considered as one day of the skilled nursing facility benefit rather than three such shifts as had been the case for the previous two and a half years. For the next two years, the benefits were calculated in this fashion. The year after, however, they were terminated completely on the basis of a review by an in-house medical director who determined that the services were no longer medically necessary they could be provided by a non-skilled provider, an utterly preposterous proposition given the severity of the child’s condition (health care facilities are prohibited from assigning unlicensed personnel to perform nursing functions even under the direct supervision of a registered nurse).
We sued under California law for unpaid benefits (over $100,000 per year for the in-house nursing care), to have the benefits reinstated and/or damages for the amount of such damages in the future, and for bad faith damages. After an extensive amount of discovery and depositions of many people in the health insurer’s hierarchy, the case was resolved to our clients’ satisfaction.
Property Insurance–Broken city water main floods home
Our client’s home was flood when a water main line suddenly burst, causing millions of gallons of water to discharge and deluge the street on which she lived. Water gushed across her property and into her home, causing damage to the grounds of the property, to the structure of the residence, and to her personal property. The home and property were inhabitable.
She submitted the claim for damage to the home and property to her homeowners insurance company. Property coverage under homeowners insurance policies in California is called “all-risk insurance,” which means all risks of damage are covered unless specifically excluded. 
Our client’s insurance company denied the claim on the grounds that the loss was caused by “surface water,” an excluded risk. However, “surface water” has been universally held to mean water accumulating from natural causes, specifically from falling rain or melting snow, or which rises to the surface in springs, and is defused over the surface of the ground. A broken water main is not a natural cause, and a sudden and accidental influx of water is not excluded from coverage under the policy.
We considered the denial of coverage to be not only a breach of the insurance contract, but a clear act of bad faith, defined as an unreasonable denial of coverage. We sued and asserted such damages and punitive damages. After an extensive amount of pre-trial discovery, the case went to mediation where it was settled to our client’s satisfaction.
ERISA Long-Term Disability–Dysfunction of spinal accessory nerve
Our client was a 53-year old former bank branch manager who went into have a cyst removed from her neck (brachial cleft cyst) but was left with a complete dysfunction of the left spinal accessory nerve, resulting in permanently disabling pain and atrophy of the sternocleidomastoid and trapezius muscles. She must take heavy doses of pain medication, which her doctors tell her is the only effective method of relief for her condition. However, the side effects of this medication are cognitive impairments, which then impacts her ability to maintain employment. If she were to stop the medication, the pain level would be even more intolerable causing a different type of concentration difficulties that would have a similar impact on her ability to work
Every doctor who has examined or treated her concluded she is disabled. The long-term disability insurance company, however, terminated her benefits solely on the basis of a record review (i.e., he never actually examined our client) by a doctor whose business is solely to provide such medical record reviews for insurance company’s, and who has earned several million dollars in fees for so doing. The doctor and his company have had their bias put into question by more than one Court.
We submitted an administrative appeal for our client, as required under the terms of the LTD plan and the regulations governing ERISA. That resulted only in an affirmation of the earlier denial. So, we sued, and the case settled prior to trial to our client’s satisfaction.
We don’t let insurance companies take advantage of you!