In the Disney Pixar movie "The Incredibles," retired superhero Mr. Incredible makes a living as an insurance company employee who is pressured by his boss to deny as many claims as possible, despite the merits of the claims. Fortunately, Mr. Incredible goes out of his way to secretly explain to the insurance customers how to make sure the insurer properly pays for valid claims.
Unfortunately, Mr. Incredible, who ultimately lost his job at the insurance company, probably doesn't work at Aetna. CNN reports that, in a stunning admission, an Aetna medical director in California admitted under oath that he never looked at medical records when deciding whether to approve or deny care. California's insurance commissioner is now looking into how widespread the practice is. As the nation's third-largest health insurer, such practices, if common, could have significant implications with respect to health care, and insurance generally. With respect to the insurance industry generally, this admission probably comes as little surprise to attorneys who deal with insurance regularly.
Insurance companies have certain duties, provided by both the contract and, in Georgia, at least, by case law, that require them to act in good faith when making decisions about when to cover claims. In the case of health insurance and certain other types of insurance (disability insurance, first-party auto and homeowners insurance, and others), a statute (OCGA 33-4-6) provides penalties for cases where insurers act in bad faith. In certain cases, however, particularly health and disability insurance and plans provided by employers federal law, rather than state law, governs, and often makes it more difficult for customers to obtain benefits. The federal law (ERISA, or the Employee Retirement Income Security Act) has been broadly interpreted to give insurers a great deal of discretion in paying or denying claims. It also generally precludes jury trials when a claimant seeks to take the insurer to court.
Georgia law also provides certain duties for liability insurance companies when it comes to properly adjusting claims. Liability insurance comes into play when a person is sued for a negligent act (such as a car accident) and their insurance company is responsible for paying the claim. If the at-fault person's insurance company does not properly pay the claim when appropriate and protect its customer, the insurance company may be liable to its customer if the customer ends up having to pay any of the damages out of pocket. For example, in one case in which John Hadden was involved as an amicus last year, the 11th Circuit Court of Appeals (the federal appeals court covering Georgia, Florida, and Alabama) upheld an award by the federal trial court of more than $8 million where Nationwide, the at-fault driver's liability insurance company, allegedly failed to properly pay the claimants' demand for payment of $100,000 when it was demanded. Although the issues involved in such cases are distinct from the Aetna situation uncovered recently, they also commonly involve claims that the insurer failed to properly evaluate the available information regarding the claim (including sometimes not properly reviewing medical records) and therefore improperly denying, or failing to pay the full value of, a claim.