FAQ: Can You Sue Your Insurance Company for Denying a Claim?

Yes — in most circumstances, you can sue your insurance company for wrongfully denying your claim. However, whether suing is the right strategy depends on the type of insurance involved, your jurisdiction, whether you have exhausted administrative remedies, and the amount at stake. Litigation should almost always be a last resort — the administrative appeal process is faster, cheaper, and wins a surprisingly high percentage of cases. External Independent Review: Complete Guide" class="auto-link">External reviewers overturn insurer denials 40 to 60 percent of the time, with no attorney required.

Why Insurers Deny Claims

Before considering legal action, understand the most common denial types and how they're challenged:

Medical necessity denials. External reviewers — independent physicians with no insurer affiliation — overturn these denials 40 to 65 percent of the time without any litigation.

Prior Authorization Denied: How to Appeal" class="auto-link">Prior authorization failures. Frequently reversed on appeal when medical necessity is clear and authorization was obtained in good faith.

Experimental or investigational claims. Denials of FDA-approved treatments or treatments with AAN/NCCN/ASCO guideline support are legally vulnerable and often reversed at the external review stage.

ERISA plan denials. Employer-sponsored plan denials involve specific federal legal standards under 29 U.S.C. § 1132 and may require federal court after administrative exhaustion.

How to Appeal Before Suing

Step 1: Exhaust Internal Appeals

File a formal internal appeal within 180 days of the denial under ERISA 29 CFR § 2560.503-1. Address every reason cited in the denial with supporting clinical evidence and applicable regulations. The administrative record you build during this process is the foundation for any future litigation.

Step 2: Request External Review

If the internal appeal is denied, request external review through an IROs) Explained" class="auto-link">Independent Review Organization. External review is free under the ACA (45 CFR § 147.136(d)), binding on the insurer if decided in your favor, and overturns denials approximately 40 to 60 percent of the time.

Step 3: File Regulatory Complaints

File with your state insurance department for non-ERISA plans. For ERISA employer plans, file with the Department of Labor's Employee Benefits Security Administration (EBSA) at 1-866-444-3272. For Medicare plans and No Surprises Act violations, file with CMS. Regulatory pressure often resolves disputes without litigation and creates a paper trail supporting future legal action.

Step 4: Document Everything

Keep copies of every communication with dates, names, and delivery confirmation. The documentation record built during the administrative process is the evidence foundation for any legal action.

Step 5: Consult an Insurance Attorney

Many insurance attorneys offer free initial consultations and take cases on contingency — particularly for bad faith and disability claims. Under ERISA § 502(g), courts may award attorney fees and costs to a prevailing party.

What Legal Claims Can You Make?

Breach of contract. Your insurance policy is a contract. If your insurer denied a covered claim, they breached the contract. Remedies include the value of the denied claim plus interest.

Bad faith. Most states impose a duty of good faith on insurers. Bad faith remedies can significantly exceed the denied benefit and may include the value of the denied claim, consequential damages, attorney fees, emotional distress damages in some states, and punitive damages for egregious conduct.

ERISA claims. ERISA § 502(a)(1)(B) allows you to sue in federal court to recover denied benefits, but damages are generally limited to the value of the denied benefit plus potential attorney fees — punitive damages and consequential damages are typically not available in ERISA cases.

State consumer protection claims. Some states allow insurance denial claims under state consumer protection or unfair trade practices statutes, providing additional remedies beyond contract damages.

What to Include in Your Appeal

• All denial letters with specific reason codes and policy provisions cited
• Complete claim file (request under ERISA/ACA rights)
• All appeal submissions with proof of delivery
• Phone call log: date, time, representative name, summary of conversation
• Medical records and supporting clinical documentation
• Evidence of any procedural violations (missed deadlines, incomplete notices)
• External review request and decision if obtained

Fight Back With ClaimBack

Litigation is expensive and slow. The administrative appeal process — internal appeal, external review, regulatory complaints — succeeds at meaningful rates and should always come first. ClaimBack generates a professional appeal letter in 3 minutes, building the strongest possible administrative record that supports both your immediate appeal and any subsequent legal action if needed. Start your free claim analysis → Free analysis · No credit card required · Takes 3 minutes

Related Reading

• How to Write an Insurance Appeal Letter
• What Is Medical Necessity?
• Internal vs External Insurance Appeal