Insurance Bad Faith & SSDI Claims in Maryland

Insurance Bad Faith & SSDI Claims in Maryland

When Maryland residents apply for Social Security Disability Insurance (SSDI) benefits, they often encounter insurance carriers and third-party administrators who delay, deny, or underpay legitimate claims. While SSDI is a federal program administered by the Social Security Administration, many claimants also carry private disability insurance policies through employers or individual plans. When those private insurers act dishonestly or unreasonably, Maryland law provides powerful remedies through bad faith claims.

Understanding how bad faith intersects with disability benefits can make the difference between receiving the compensation you deserve and being left without income during your most vulnerable moments.

What Constitutes Insurance Bad Faith in Maryland

Maryland recognizes both statutory and common law bad faith claims against insurance companies. Under Maryland Code, Insurance Article § 27-1001, insurers are prohibited from engaging in unfair claim settlement practices. These include:

• Failing to acknowledge or promptly respond to communications regarding a claim
• Refusing to pay a claim without conducting a reasonable investigation
• Compelling claimants to initiate litigation by offering substantially less than what is owed
• Misrepresenting pertinent facts or policy provisions
• Failing to provide a reasonable explanation for denial of a claim

Maryland courts have also recognized a common law tort of bad faith, allowing claimants to pursue damages beyond the policy limits when an insurer acts with actual malice or gross negligence. The Maryland Court of Appeals established in Mesmer v. Maryland Automobile Insurance Fund that insurers owe a duty of good faith and fair dealing to their policyholders—a duty that runs alongside every insurance contract in the state.

How Bad Faith Affects SSDI and Private Disability Claims

SSDI denials themselves are handled through the federal administrative appeals process—not through Maryland state bad faith law. However, many claimants simultaneously hold long-term disability (LTD) policies through their employers or private insurers. These policies are frequently governed by ERISA (the Employee Retirement Income Security Act) if obtained through employment.

This distinction is critical. ERISA-governed LTD claims significantly limit your remedies compared to state bad faith law. Under ERISA, you generally cannot recover extracontractual damages, emotional distress damages, or punitive damages—even when an insurer behaves egregiously. You are typically limited to recovering the benefits owed plus attorney's fees at the court's discretion.

However, if your private disability policy was purchased individually—not through an employer—ERISA does not apply, and Maryland's bad faith statutes and common law remedies are fully available to you. This can dramatically increase the value of your claim and your leverage during settlement negotiations.

Common Bad Faith Tactics Used Against Maryland Disability Claimants

Insurance companies employ a range of tactics to minimize or avoid paying disability benefits. Recognizing these patterns is the first step toward protecting your rights.

• Biased independent medical examinations (IMEs): Insurers hire physicians who routinely produce findings favorable to the carrier, regardless of the claimant's actual condition. Maryland courts have scrutinized IME doctors who have financial relationships with the insurance industry.
• Surveillance and pretextual investigations: Insurers may conduct video surveillance to catch claimants in activities inconsistent with their claimed limitations, often manipulating context to misrepresent capability.
• Unreasonably short claim reviews: Some carriers render decisions within days of receiving a claim, without adequately reviewing medical records, treating physician opinions, or vocational assessments.
• Ignoring treating physician opinions: Under both SSDI standards and Maryland common law, an insurer's systematic disregard for the opinions of treating physicians can support a bad faith finding.
• Applying shifting definitions of disability: Many LTD policies shift from an "own occupation" standard to "any occupation" standard after 24 months. Insurers sometimes apply the stricter standard prematurely or inaccurately.

Your Rights and Remedies Under Maryland Law

If your insurer has engaged in bad faith conduct on a non-ERISA policy, Maryland law entitles you to significant remedies. A successful bad faith claim can result in:

• The full amount of benefits owed under the policy
• Consequential damages—financial losses flowing directly from the wrongful denial
• Emotional distress damages in appropriate cases
• Attorney's fees and litigation costs
• Punitive damages when the insurer's conduct was particularly egregious

Maryland also imposes regulatory penalties through the Maryland Insurance Administration (MIA). Filing a complaint with the MIA does not substitute for a civil lawsuit, but it creates an official record of the insurer's conduct and may prompt intervention that resolves your claim more quickly.

For ERISA-governed claims, while remedies are more limited, courts have recognized that procedural bad faith—including failing to follow ERISA's claims procedure requirements—can entitle claimants to de novo review rather than the more deferential "arbitrary and capricious" standard. This procedural distinction can significantly affect the outcome of your case.

Steps to Take If You Suspect Bad Faith

Acting quickly and systematically protects your legal position and preserves evidence of the insurer's misconduct.

• Document everything: Keep copies of every letter, email, and phone call log with your insurer. Note dates, times, and the name of every representative you speak with.
• Request your complete claim file: You have the right to obtain the insurer's full claim file, including internal notes, investigation reports, and communications between claims adjusters and supervisors. This file often reveals bad faith conduct that would otherwise remain hidden.
• Obtain your own medical opinions: Counter biased IMEs with thorough documentation from your treating physicians and, where appropriate, independent specialists who can speak to the severity and permanence of your condition.
• Comply with deadlines: Missing administrative appeal deadlines—particularly the 180-day ERISA appeal window—can permanently forfeit your rights. Do not assume an extension will be granted.
• Consult an attorney before accepting any settlement: Insurers sometimes offer quick settlements at a fraction of claim value, particularly when they know they have acted in bad faith. An experienced attorney can evaluate whether the offer reflects the true value of your claim.

Maryland's statute of limitations for bad faith insurance claims is generally three years from the date the cause of action accrues—typically when the denial becomes final or the pattern of delay becomes apparent. Acting before this deadline is essential.

If you are simultaneously pursuing SSDI benefits through the Social Security Administration, be aware that a federal disability determination may be relevant—but not legally binding—in your private disability insurance litigation. Courts and juries often find SSA approval of disability status persuasive evidence that the private insurer acted unreasonably in denying similar benefits.

Need Help? If you have questions about your case, call or text 833-657-4812 for a free consultation with an experienced attorney.

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