ERISA Bad Faith: Can You Sue Your Insurance Company?
When an insurance company denies benefits unfairly, you may wonder what your options are as you face down medical bills. If your policy falls under the Employee Retirement Income Security Act of 1974 (ERISA) and the insurance company covered by ERISA acts in bad faith, you may have specific legal options. When someone denies benefits covered by ERISA in bad faith, you may sue your insurance company to recover those benefits.
At Peace Law Firm, we represent individuals who face denied or delayed claims. Before becoming an attorney, John Peace worked inside the insurance industry, so we understand how insurers evaluate claims and make decisions. We offer free consultations and handle many ERISA cases on a contingency basis, which allows you to explore your options without upfront costs.
What Is ERISA and What Does It Cover?
ERISA governs many employer-sponsored benefit plans, often including:
- Health insurance plans,
- Short-term disability insurance,
- Life insurance and accidental death benefits,
- Retirement and pension plans, and
- Long-term disability insurance.
ERISA sets rules that insurance companies and plan administrators must follow when reviewing claims and appeals. A plan administrator decides your claim, meaning they determine whether the company will pay you benefits. When a dispute arises about a claim, ERISA requires you to follow a specific process before you can file a lawsuit.
What Is a Bad Faith Insurance Claim?
A bad faith insurance claim arises when an insurer treats a policyholder unfairly or unreasonably, such as by:
- Denying a valid claim,
- Failing to properly review evidence,
- Misrepresenting what the policy covers, or
- Delaying payment without a valid reason.
In South Carolina and many other states, you can sue insurance companies for bad faith and seek damages beyond the value of the claim. Yet, if ERISA covers your policy, you need to follow a specific process to seek recovery, which may be more limited.
ERISA Bad Faith
When ERISA applies, suing an insurance company for bad faith means suing under federal law, ERISA, rather than a state law authorizing bad faith recovery. In ERISA-covered cases, you may be able to pursue:
- The benefits your plan should have paid,
- Interest on those unpaid benefits, and
- Attorney fees and court costs.
You typically cannot recover additional compensation for emotional distress or seek punitive damages, which aim to punish the insurer. If an insurer fails to follow the rules, a court can overturn the denial and award your benefits.
What Does ERISA Bad Faith Look Like in Practice?
ERISA bad faith cases might look like:
- Ignoring medical evidence,
- Relying on paper reviews but no doctor examinations,
- Changing or shifting reasons for denial during the appeal process,
- Selective review of records that overlooks evidence in your favor, and
- Unreasonable delays.
In these situations, we help present your evidence about your ability to work in a way that directly responds to the insurer’s reasoning and strengthens your claim.
Internally Appealing a Denied ERISA Claim
If your insurer denied your claim, your response must follow ERISA’s required process. In most cases, you must complete an internal appeal with the insurance company before you can file a lawsuit.
During this appeal, your lawyer can help you strengthen your case by submitting:
- Additional medical records and test results,
- Written opinions from your treating doctors explaining your condition and how it affects your ability to work, and
- Evidence that directly addresses the insurer’s stated reasons for denial.
By working with an attorney during the appeal, you can build a complete and well-organized record that clearly supports your claim. At Peace Law Firm, we help you prepare detailed appeal submissions that anticipate how insurers evaluate evidence under ERISA.
Filing a Lawsuit Under ERISA
If the company denies your internal appeal, you can file a lawsuit in federal court. ERISA cases differ from typical lawsuits in several ways:
- No jury trial, meaning a judge decides the outcome, not a jury;
- Limited new evidence, meaning you usually rely on the evidence you offered during the claim process; and
- Restricted information exchange, discovery, and greater reliance on the existing record, meaning the evidence you presented as part of the claim.
Because the court focuses on the existing record, the strength of your appeal often determines the outcome.
Talk to Peace Law Firm About Your ERISA Claim
If you have received a claim denial related to ERISA in bad faith, to sue your insurance company may allow you to recover much-needed funds. At Peace Law Firm, we focus on helping individuals stand up to insurance companies. With experience in ERISA and disability claims and insight from working within the insurance industry, we provide clear and practical guidance tailored to your situation.
Contact us today to discuss your claim.
Legal References Used to Inform This Page
To ensure the accuracy and clarity of this page, we referenced official legal resources during the content development process:
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