Most of us are covered by disability policies through our employers. Premiums are paid by payroll deductions and coverage is described in a summary plan description. Those policies (subject to a few exceptions discussed below), are governed by federal law, specifically, the Employee Retirement Income Security Act of 1974 ("ERISA"). These laws provide strict requirements for appealing a claim denial, as well as limited remedies for those whose disability benefits are wrongfully cutoff by their insurance carrier. No matter how misguided an insurer's decision is, the only remedy for insureds under ERISA is (1) the payment of past disability benefits owed by the carrier and (2) the possible recovery of attorneys' fees. In most circumstances, nothing else is recoverable.
By contrast, where disability coverage is provided through an individual policy purchased through an insurance broker, or a group policy issued through a governmental or church entity, state law applies. In most states, including California, the difference is huge. Remedies under California law, for example, are not limited to past benefits and attorneys' fees. Instead, if an insured proves that her insurer denied benefits unreasonably in "bad faith," she can recover all of her future disability benefits for the duration of the policy, which, in most instances, runs to age 65 or 67. Insureds may also recover punitive damages if they can prove that the insurance company acted with fraud, malice, or oppression in denying their claim. None of these damages are recoverable under ERISA.
If your disability claim has been denied, make sure you contact an attorney who can not only protect your rights, but can maximize your recovery under the applicable federal or state law.