Insurer called out for bogus "not medically necessary" claim denial

When an insurance company decides it doesn't want to pay a claim, it is required by law in most states to give a legitimate reason. If it doesn't give a reasonable explanation or doesn't have a legitimate reason, the insurance company can be liable for bad faith. 

One way insurance companies try to boost profits and get around these requirements is to claim that certain treatments are "not medically necessary." An extreme example aired on The Today Show several years ago: 

Here are some of the facts from the show:

• A man and his sister had the same health insurance company, United Healthcare

• The man and his sister had same life-threatening disease, cystic fibrosis, and the same mutation of that disease

• The man and his sister had the same doctor

• The doctor for the man and his sister wrote an identical letter to United Healthcare asking it to pay for a new, life-saving medication for cystic fibrosis, which costs $25,000/month

United Healthcare approved the claim for the sister, but denied the claim for the brother as "not medically necessary." For over a year, the man's health declined, while his sister's improved. As The Today Show prepared to air a segment on the man's fight for life against United Healthcare, the show's producers called to ask for a comment by United Healthcare. The response? A complete change in position, so they wouldn't look quite as bad on national television.

Kevin and Katie Dwyer's case shows just how arbitrary insurance companies can be. But most folks aren't going to receive help from The Today Show to make their own insurance company do the right thing. In a country where we are required by law to buy car and health insurance or get hit with severe economic penalties, it is unfair for insurance companies to get away so often with such arbitrary conduct.

Here at the Chaney Law Firm, we see "not medically necessary" claim denials all the time. It is a method insurance companies use to boost profits, often at the expense of their own policyholders. As one example, one car insurance company denied payments for computerized radiographic mensuration analysis (CRMA) services by a medical doctor in Texarkana based upon reports by two chiropractors in Washington State and Georgia. The medical doctor objected to the Washington and Georgia chiropractic boards and the insurance company, but the insurance company wouldn't change its position. In another example from one of our cases, a carrier has a general business practice of capping claim payouts on PIP claims by setting an arbitrary number of treatments for their own policyholders. If the number of treatments exceeds the arbitrary number, the claim is sent to a physician reviewer (most likely in another state) to provide a sham report for the carrier to rely on in underpaying the claim.

These example reflect a common practice; in many instances, the insurance company will attach a boilerplate report from a medical reviewer who lives many states away and who does not know the standards of practice here at home. Another example is when insurance companies hire the same experts here in Arkansas repeatedly because they always issue the same boilerplate reports in favor of the insurance company. You can read more about these so-called "medical reviewers" and their predictable opinions here.

If you've been told by an insurance company your treatment is not medically necessary, you have rights. You can appeal the insurance company's decision, take your case to the Insurance Commissioner for help, or hire an attorney to help you with the process. We provide free consultations and would be happy to see if we can help. 

Chaney Firm lawyers to teach CLE classes on bad faith, common auto defenses

​Nathan and Taylor are each scheduled to teach a continuing legal education class during a program sponsored by the Arkansas Trial Lawyers Association on June 6–7. Nathan's topic is insurance bad faith, a topic on which Nathan has written before. His presentation will explain the different types of the tort, and will offer tips and advice on successfully bringing and proving a bad faith case against an insurance company. 

Taylor's topic will cover defeating the so-called MIST defense in auto injury cases.​ In many cases without much external damage to the vehicles involved, insurance companies will defend the cases on the theory that because the cars aren't hurt, the occupants of those cars shouldn't be hurt either. Taylor's presentation will focus on scientific literature published over the past 20 years that roundly rejects this theory, and will provide legal authorities showing that insurance companies cannot meet the burden of proving these flawed scientific arguments.

The CLE lineup contains several notable Arkansas lawyers, and we invite you to attend.​

Jury finds health insurer discriminated against patient-advocate doctor

The LA Times reported today on a verdict against a health insurance company that discriminated against a doctor for being a patient advocate. The doctor’s wife was murdered and his children assaulted in 2005, which gave him an appreciation for the patient side of the medical profession.

The doctor challenged hundreds of health insurance claim denials in his provider network when the insurance company contended his treatment “wasn’t medically necessary and would not be covered.” According to the doctor, “many doctors are unwilling to challenge powerful insurance companies because their incomes are so dependent on being in these provider networks. ‘Physicians are so afraid to come forward,’ he said, ‘and I hope this changes that.’” 

A healthcare lawyer interviewed about the case believed it would send a message to insurance companies about the need to be able to justify claim denials and exclusion from provider networks. The loudness of that message will be determined tomorrow, when the jury decides the issue of punitive damages — punitive damages are designed to deter intentionally abusive conduct.

Arkansas Law Review publishes article authored by Nathan

The Arkansas Law Review published an article in its Winter 2012 edition authored by Nathan Chaney. The article is entitled "A Survey of Bad Faith Insurance Tort Cases in Arkansas" and contains a summary of hundreds of bad faith cases decided by Arkansas state and federal courts.

Bad faith cases are unique to insurance companies. All contracts have an 'implied duty of good faith,' but the only time someone can sue for a breach of this duty is when an insurance company does the breaching. Since insurance companies usually dictate policy terms, insurance policies are considered 'contracts of adhesion' that consumers can either sign or reject as-is, and cannot negotiate terms. The consumer's absence of an ability to negotiate is why insurers are held to a higher 'bad faith' standard.

There are two types of bad faith. The first type is called 'third party bad faith.' When an insurance company must defend someone (such as when the policyholder causes a wreck), the insurance company owes a 'fiduciary duty' (the highest legal duty owed by one to another) to the insured. That duty requires the insurance company to settle the case if it has an opportunity to do so and settlement would be reasonable under the circumstances. If it does not settle in this situation, it can be liable for negligent refusal to settle or outright bad faith.

The other type of bad faith is 'first party bad faith.' That involves a situation where an insured makes a claim with the insurance company and the insurance company treats the insured with ill will, hatred, or outright malice. First party bad faith usually arises in one of two circumstances: (1) the insurance company denies the claim on the merits without conducting a proper investigation, or (2) the insurance denies the claim despite facts in the file showing that the claim should be paid.

In a nutshell, insurance companies are supposed to give insureds the benefit of the doubt in the absence of hard evidence that they shouldn't. When they don't, they commit bad faith.