Bad Faith in Disability Insurance — When to Sue
Disability insurance is supposed to provide peace of mind — protection when illness or injury prevents you from working. But for many Albertans, that promise ends in frustration, delay, and financial hardship.
When insurers unfairly deny valid claims, delay payments, or act dishonestly, they may be guilty of bad faith. Under Alberta law, insurers owe a duty to treat claimants fairly, investigate claims properly, and pay benefits promptly. When they breach that duty, you can sue — not just for unpaid benefits, but for damages caused by their misconduct.
As Alberta disability lawyers who once defended insurance companies, we've seen both sides of these cases. We know what constitutes bad faith, how to prove it, and when to take your insurer to court.
This article explains what bad faith means in disability insurance, how to recognize it, and when you should consider suing your insurer in Alberta.
This guide covers:
What Is a Disability Claim?
Disability insurance provides income replacement if a medical condition prevents you from working. Alberta claimants may have coverage through:
Types of Disability Insurance:
What Does 'Bad Faith' Mean in Alberta Law?
Insurance contracts are unique: they're based on good faith — mutual honesty and fairness. When an insurer breaches that trust, the law calls it bad faith.
In Simple Terms
Bad faith occurs when an insurer acts unreasonably, dishonestly, or with reckless disregard for your rights.
Legal Definition (Simplified)
An insurer acts in bad faith when it intentionally or negligently fails to treat the insured's interests with equal consideration as its own.
Key point: In other words, insurers must handle claims fairly, not just profitably. When they don't, they can be sued for compensatory and punitive damages on top of unpaid benefits.
How to File a Bad-Faith Lawsuit
Filing a bad-faith lawsuit requires careful preparation and legal expertise. Here's the process:
Hire a Disability Lawyer
We'll review your claim, denial, and internal insurer communications.
File a Statement of Claim
The lawsuit names the insurer and outlines both the benefit and bad-faith claims.
Disclosure & Discovery
We obtain the insurer's internal notes, medical reviews, and surveillance logs.
Negotiation or Mediation
Most cases settle once the insurer sees the evidence.
Trial (if necessary)
Courts can award benefits, interest, aggravated damages, and punitive damages.
How a Lawyer Builds a Bad-Faith Case
A skilled Alberta disability lawyer ensures both the unpaid benefits and the bad-faith conduct are addressed together.
Review Your Entire Claim File
Identify procedural errors or policy breaches.
Compare Insurer Communications
Expose inconsistent or misleading explanations.
Coordinate Expert Evidence
Obtain independent medical or vocational reports.
Assess Emotional or Financial Impact
Document stress, anxiety, and hardship caused by the insurer's behaviour.
Negotiate or Litigate
Demand full compensation and additional damages for bad faith.
Case Example
A 47-year-old Calgary teacher was denied LTD benefits for depression. The insurer ignored her psychiatrist's reports and cut benefits without review. We proved the denial was unreasonable and secured $220,000 in compensation, including aggravated and punitive damages.
Frequently Asked Questions
Conclusion
Bad faith turns an already difficult disability claim into a devastating experience — but Alberta law gives you tools to fight back.
Insurers have a legal duty to act fairly and promptly.
Delays, deception, or disregard for your evidence can justify a lawsuit.
Bad-faith cases can recover benefits and damages for emotional harm.
Legal action holds insurers accountable and restores your financial security.
Still have questions? Contact us today — your consultation is free.
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