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Insurers’ Duty to Investigate Claims Prior to Denial


When you submit a claim to your California health insurance provider, that insurer must carefully examine your claim before approving or rejecting it. Even when the claim is for coverage of a new or nontraditional procedure, your insurer has a responsibility to consider why it might be the best course of action in your individual case. When insurers issue rubber-stamp denials of certain forms of treatment without first conducting a thorough investigation, they can face legal action in the form of a bad faith lawsuit. Learn more about an insurer’s duty to investigate claims below, and speak with an experienced Los Angeles bad faith insurance lawyer for more information.

Unfair Claims Practices Act requires prompt investigation of claims

California governs insurer conduct through what’s known as the Unfair Claims Practices Act, contained in the state’s Insurance Code. This law includes a number of mandates on how insurers should respond to policyholders’ claims for benefits, including rules requiring that insurers be truthful with claimants about the terms of their policy and coverage, examine claims promptly, and offer a reasonable explanation for any claim denials.

One important component of these laws is that insurers must “adopt and implement reasonable standards for the prompt investigation and processing of claims.” In other words, health insurers can’t deny a claim without carefully reviewing the policyholder’s medical records and the physician’s reasons for recommending a given treatment. California court cases have established that failing to investigate a policyholder’s claim can amount to a violation of good faith and fair dealing laws.

Reviewers wrongly rely on clinical policy bulletins, not patient records

Nevertheless, many insurers instruct their reviewers to reject all claims for certain forms of treatment, such as claims for surgeries to treat lipedema or proton beam therapy, regardless of the individual patient’s need for those treatments. Insurers often circulate what are known as “clinical policy bulletins,” which instruct medical reviewers to deny claims for certain treatments or therapies out of hand. In one well-publicized case, Aetna faced a $25.5 million judgment after nurses and doctors who had rejected a claim for proton beam therapy—a type of radiation treatment for cancer—had never reviewed the patient’s insurance policy, nor did they have any experience in proton beam therapy. The medical reviewers instead relied only on Aetna’s clinical policy bulletin on proton beam therapy, rather than the individual patient’s history and needs. Medical reviewers who fail to consider the patient’s condition aren’t just breaking the law; they’re putting patients’ lives at risk. These patients may have a right to seek damages for insurers’ bad faith claim denials through an insurance bad faith lawsuit.

If you’ve been the victim of insurer bad faith in California, contact the seasoned, professional, and effective Los Angeles bad faith insurance lawyers Gianelli & Morris at 213-489-1600.

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