Understanding Insurance B…

When you present at a doctor's office or hospital for treatment, you assume that the care you receive will be based on your medical needs and your doctor's good judgment. And of course, that's how it is supposed to work. But there is another party involved in your medical care, even if they don't appear in the treatment room with you: your health insurance company.

Health care, as every adult in America knows, is expensive, sometimes catastrophically so. Health insurance makes it possible for us to get the care we need without going bankrupt from the expense. And we pay a lot for our insurance, whether through employers or the markets. In exchange, we expect to be able to receive the care we need, when we need it, and to have it covered by our insurer.

Insurance companies have a duty to act in good faith: that is, if they issue a policy offering certain coverage, they must, in good faith, provide that coverage if a claim is made. Sometimes an insurer will refuse to honor a claim or authorize a treatment because of a genuine dispute as to whether a condition or treatment falls within the policy's purview. But sometimes, an insurer denies a claim it knows it should cover, hoping that the insured won't contest the denial. When that happens, the insurer is said to be "acting in bad faith."

Legal Implications of Insurance Bad Faith

Most legal actions involving insurance companies are for breach of contract. Insurance bad faith is a different animal, legally speaking, it's a tort, or the ability to sue for a wrong that was done. Tort actions differ from breach of contract actions in a couple of different respects. Typically, breach of contract actions have a longer statute of limitations than torts—often twice as long. But with torts, punitive damages are available to plaintiffs, whereas they are not available in breach of contract cases.

Punitive damages, as their name implies, are intended to punish a deliberate wrongdoer for their actions. Therefore, punitive damages can, potentially, dwarf an award for actual damages. It is possible to sue an insurer under breach of contract and tort, and receive quite different results. If, for instance, an insurer refused to authorize payment for a necessary procedure and hospital stay that cost $50,000 and was found to have breached the insurance contract, they would have to pay the $50,000 claim.

By contrast, if an insurer refused to authorize payment for a procedure covered under the policy, and the patient was harmed (say, by not getting the treatment or getting it soon enough, or having to pay out of pocket), the insured patient might sue under a tort theory. She might then recover not only her actual damages, but punitive damages for the insurance company's bad faith refusal to cover the procedures. Where actual damages might be $50,000, punitive damages designed to "hit the insurer where it hurts" could be many times actual damages.

Dealing With an Insurer Who Acts in Bad Faith

If you suspect that your insurer's denial of a claim is not legitimate, you've likely already spent hours on the phone with the insurance company, to no avail. The insurance company, quite frankly, can afford to wear you down in this way. It may be necessary to get legal help.

We're aware of a patient whose rare eye cancer required insertion and removal of a radioactive plaque behind the eye in two surgeries, five days apart. Because of the radioactivity and need for monitoring, the hospital required the patient to remain inpatient. The insurer, while willing to cover the surgeries, refused to cover the hospital stay between them, claiming it was not medically necessary. This was despite the insistence of the surgeon on the case and the fact that the inpatient stay was hospital policy for this treatment.

When the prospect of litigation for bad faith denial of claim was raised, the insurer changed course and agreed to cover the hospital stay. The amount the patient owed for the stay went from nearly $65,000 down to $200. The simple threat of legal action motivated the insurer. If you or a loved one has already been harmed by an insurer's bad faith actions, it's even more important to get legal counsel; you can be sure that the insurance company has it.

If you would like to know more about insurance bad faith, contact an experienced Oregon medical malpractice attorney.

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