Dentists have a 45% chance of becoming disabled for a substantial period of time during their lifetime by the age of 40, according to the ADA. Naturally, dentists buy a lot of disability insurance. Insurance companies even set up shop at dental schools to sell policies.
The reality is that dentists are very likely to file a disability claim at some point in their career. They should, therefore, at least have a basic understanding of how it really works.
In most states, you have a legal right to be treated reasonably and fairly by your insurance company. But if you ask anyone whether they believe their insurance company is reasonable, the answer is almost always no. Nonetheless, this is what the law requires.
Insurance companies save money by denying claims. They are large and bureaucratic. They make filing a disability claim challenging, to say the least. That is why bad faith laws exist. Bad faith laws protect people from unfair and unreasonable insurance practices.
Generally, when you buy insurance, you are entering into a contract with an insurance company. You agree to pay insurance premiums on time, and your insurance company agrees to pay you if you become disabled. This basic, consensual agreement is the foundation of contract law.
Disputes in contract law concern a single, limited interest—having the promises of others performed. These promises stem from the consensual exchange of duties in the contract. The insurance company agreesto pay your claim if you become disabled, for example, and you agree to pay premiums in full and on time. These are contractual duties. When someone fails to uphold a contractual duty, that is a breach of contract.
Bad faith law provides a different duty—a tort duty. This duty stems primarily from public policy, as opposed to contractual duties, which arise from consensual agreements. For centuries, courts have ruled that there is a special relationship between insurance companies and people who have insurance policies, or insureds. Because the public relies heavily on insurance as a safety net, it is important for the law to require insurance companies to be fair and reasonable.
Insurance companies, however, routinely deny claims knowing that the insured is entitled to benefits. They use deceptive tactics to make unreasonable decisions. Taking one example, insurance companies often mischaracterize the insured’s occupation to deny benefits. Insurance companies argue that disabled people can actually work in their occupation, when they really cannot. Dentists are particularly susceptible to this tactic.
Types of Work
For instance, if you own a private dentistry practice, you know that your occupation involves multiple duties. You perform dentistry, but you also manage a business. Insurance companies look at individuals like this and argue that if you are capable of performing business duties, such as administrative work, you are not disabled, even if you are unable to treat patients.
Let’s say you’re a dentist and you manage your own practice. You have developed chronic back pain and can no longer practice dentistry. Hunching over patients and using fine instruments is too painful. Under an own-occupation insurance policy, you should be covered. After all, that is why dentists buy own-occupation coverage.
However, an insurance company would look at this situation differently. It would see an opportunity to deny your claim by arguing that if you can perform sedentary business duties, you are not actually disabled because you can work in your own occupation—business management. This type of argument is common, but it also constitutes bad faith.
You may have been advised at one point to buy own-occupation coverage. “You spent a lot of time and money training to become a dentist. What if you become disabled one day, and you cannot practice dentistry? You better have disability insurance,” these advisors may have said.
Like most people, you would have purchased insurance expecting to be covered in case you could not work as a dentist, regardless of whether you could do other work, such as administrative work, financing, and other business duties. Yet when you file for disability, your insurance company says that even though you cannot practice dentistry, you can be a business owner, and therefore you are not disabled. Your claim is denied.
This is both breach of contract and bad faith, because the decision is unfair and unreasonable. You purchased insurance in case you could not perform dentistry. Yet when you cannot perform dentistry due to a medical condition such as chronic back pain, your insurance company denied the claim because you could perform other work. That is unfair and unreasonable.
The difference between breach of contract and bad faith is the measure of damages. Breach of contract allows you to collect compensatory damages. This provides you the equivalent of what your insurance company should have paid. Bad faith takes a step further. Bad faith seeks to restore you to the position you would have been in had your insurance company not committed a wrongdoing.
Bad faith damages compensate you for your overall loss, including the consequences of having your claim denied. If you were forced to sell stock or refinance your home, those costs are recoverable. If you were forced to hire a lawyer to sue your insurance company, those costs are recoverable. If you suffered emotional distress, those costs are recoverable.
It is important to remember your rights. If you feel like you are being treated unfairly or that your insurance company is being unreasonable, you are probably correct, and you might have a bad faith claim. Enforcing your rights is not just in your best interest. It fulfills important public policy objectives.
Mr. Bourhis is an attorney with the Bourhis Law Group. He represents claimaints in disability insurance, homeowners insurance, and business insurance disputes. He also frequently writes about insurance and has been published in the LA Times, among other news outlets. Prior to joining the Bourhis Law Group, he served the California Supreme Court and the Honorable Martin J. Jenkins. He earned his JD from King Hall, University of California, Davis School of Law. He can be reached at firstname.lastname@example.org.