FAQ: Can You Sue Your Insurance Company for Denying a Claim?
Can you sue your insurance company after a claim denial? Yes — but it depends on your plan type, jurisdiction, and circumstances. Learn when suing makes sense, what remedies are available, and what to do first.
FAQ: Can You Sue Your Insurance Company for Denying a Claim?
Q: Can I sue my insurance company for denying my claim?
A: Yes — in most circumstances, you can sue your insurance company for wrongfully denying your claim. However, whether suing is the right strategy depends significantly on the type of insurance involved, your jurisdiction, whether you've exhausted administrative remedies, and the amount at stake. This FAQ explains the key considerations.
Q: What legal claims can I make against my insurer?
Depending on your jurisdiction and circumstances, potential legal claims include:
Breach of contract: Your insurance policy is a contract. If your insurer denied a claim that was covered under the policy terms, they have breached the contract. Remedies include the value of the denied claim.
Bad faith / unfair claims practices: Most US states recognise a tort of insurance bad faith — an unreasonable or dishonest denial or delay. Remedies can include the denied claim amount, consequential damages, attorney fees, and (in egregious cases) punitive damages.
Statutory violations: Many jurisdictions have specific statutes governing insurer conduct. Violations can give rise to statutory remedies beyond the contract claim.
Breach of fiduciary duty: In some limited circumstances (particularly life insurance policy contexts), an insurer may owe fiduciary duties.
Fraud or misrepresentation: If the insurer's denial is based on a fraudulent misrepresentation (e.g., falsifying medical review results), fraud claims may be available.
Q: Do I have to appeal first before I can sue?
In most cases, yes. Most jurisdictions require you to exhaust administrative remedies before filing a lawsuit. For health insurance:
- US ACA/ERISA plans: You must exhaust the insurer's internal appeal process before suing. For ERISA plans, you may also need to pursue external review.
- UK: You must complete the insurer's formal complaints process and typically attempt FOS resolution before court action is appropriate.
- Australia: You should attempt PHIO/AFCA resolution before court action.
Failure to exhaust administrative remedies can result in your lawsuit being dismissed.
Exception: If the insurer's appeal process is meaningless or futile, or if the insurer has violated its own procedural requirements, courts sometimes waive the exhaustion requirement.
Q: Is suing harder for employer health insurance (ERISA plans in the US)?
Yes — significantly. If your health insurance is provided through your employer as a group benefit plan, it is likely an ERISA plan. ERISA (Employee Retirement Income Security Act) is a federal law that:
- Preempts state bad faith claims: You cannot sue for bad faith damages (punitive damages, emotional distress) — you can only recover the denied benefit amount and attorney fees
- Limits the standard of review: Federal courts typically review ERISA claim denials under a deferential "arbitrary and capricious" standard — meaning the court will uphold the insurer's decision if it was "reasonable" even if the court would have decided differently
- Limits discovery: Courts typically limit evidence to what was in the administrative record
This makes ERISA litigation significantly harder than suing under state law. It's one reason why external review and exhausting the administrative process thoroughly is so important for ERISA plan members.
Exception: If your employer's plan gives the claims administrator "discretionary authority," the arbitrary and capricious standard applies. If the plan does not explicitly grant discretion, a de novo (fresh) review standard may apply — giving courts more freedom to independently evaluate the denial.
Q: What are my chances of winning a lawsuit against my insurer?
Success rates vary significantly depending on:
- The type of claim and insurer
- The quality of your documentation and legal representation
- The jurisdiction and applicable law
- Whether you have a bad faith claim vs. a pure breach of contract claim
For ERISA health insurance denials, winning is challenging due to the deferential review standard. However, cases involving clear procedural violations, conflicts of interest, or inadequate investigation have higher success rates.
For individual health, disability, life, and property insurance claims under state law (not ERISA), success rates are meaningfully higher, particularly when:
- The policy language clearly supports coverage
- The insurer's denial was procedurally deficient
- Bad faith conduct is documented
Q: How long do I have to sue my insurance company?
Limitation periods vary by jurisdiction and claim type:
US health/disability insurance (ERISA): The limitation period for ERISA claims is typically specified in the insurance plan document itself (commonly 1–3 years from the final denial) and must be followed strictly.
US state law claims (non-ERISA): Typically governed by the state's contract statute of limitations (often 4–6 years) for breach of contract, and the state's tort statute of limitations (often 2–3 years) for bad faith.
UK: Generally 6 years from the date the cause of action arose for contract claims; 3 years for personal injury elements.
Australia: Generally 6 years for contract claims.
Singapore and Malaysia: Typically 6 years from the cause of action.
Warning: Insurance policy contracts often include shorter limitation periods than the general statutory period. Check your policy for any specific time limits on legal action.
Q: Do I need an attorney to sue my insurance company?
For most insurance lawsuits, yes — you should have an attorney. Insurance companies are represented by experienced legal teams with deep knowledge of insurance law. An experienced insurance attorney can:
- Assess the strength of your claim
- Navigate ERISA procedural requirements (where applicable)
- Build the most effective case
- Negotiate a pre-litigation settlement
- Handle discovery and litigation
Many insurance attorneys — particularly those who handle bad faith cases — work on contingency fee arrangements, meaning you pay nothing upfront and they take a percentage of the recovery if you win. This makes legal representation accessible even if you cannot afford upfront fees.
Q: What should I do before deciding whether to sue?
Exhaust all administrative remedies: Complete the internal appeal, request external review, and file regulatory complaints before suing.
Consult an attorney: Most insurance attorneys offer free initial consultations. Get an objective assessment of your legal options.
Consider the cost-benefit: Litigation is expensive and time-consuming. For small claims, the cost of litigation may exceed the recovery. For large claims (disability, life insurance, large medical claims), litigation may be worthwhile.
Consider alternatives: External review, regulatory complaints, and mediation can be faster and cheaper than litigation — and often achieve the same result.
Document everything: Your litigation case will be built on your administrative record. Ensure your appeal file is comprehensive and well-documented.
Q: Can I sue for more than the denied claim amount?
In state law bad faith cases (US): Potentially yes. Bad faith remedies can include:
- The denied claim amount
- Consequential damages (costs caused by the denial, e.g., medical debt interest, income lost)
- Attorney fees
- Emotional distress damages (in some states)
- Punitive damages (for egregious bad faith — can be multiples of the claim amount)
In ERISA cases (US): Generally limited to the denied benefit amount and attorney fees. No punitive damages or consequential damages.
In UK FOS cases: Compensation for the claim, plus distress/inconvenience awards up to £375,000 for general insurance.
Conclusion
You can sue your insurance company for wrongfully denying your claim — but litigation is usually the last resort after exhausting administrative remedies. Exhaust internal appeals and external review first, file regulatory complaints, and consult an attorney who specialises in insurance disputes to assess your specific situation. Use ClaimBack at claimback.app to generate a professional appeal letter that builds the strongest possible administrative record before considering litigation.
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