Yes, you can sue your health insurance company, but what you can realistically recover depends almost entirely on what type of plan you have, and you have to finish the insurer’s appeals process before a court will hear you. Employer-sponsored plans governed by the federal ERISA statute sharply limit the damages available. Individual-market plans, government-employee plans, and church plans fall under state law, where the financial stakes are much higher.
First, Figure Out Whether ERISA Applies
This is the gating question. The Employee Retirement Income Security Act of 1974 covers most private employer-sponsored health plans.1U.S. Department of Labor. ERISA If you get coverage through your job at a private company, ERISA almost certainly applies. Plans bought on the individual market (including through HealthCare.gov), government-employee plans, and church plans are generally not ERISA-governed and fall under state law instead.
Why it matters: ERISA preempts most state-law claims. You generally cannot bring a state bad faith lawsuit or a state consumer protection claim against an ERISA-governed plan, even if your state’s laws would otherwise allow it. This is the single most frustrating feature of health insurance litigation, and it’s the reason many attorneys turn down ERISA benefit-denial cases.
Finish the Appeals Process Before You Sue
Federal law and most courts require you to exhaust the insurer’s appeals process before filing a lawsuit. Skip this and your case will almost certainly be dismissed. Appeals also resolve more disputes than people expect, and they build the record you will need in court.
Internal Appeal
You have 180 days from receiving a denial to file an internal appeal. Submit a written explanation of why the denial was wrong, your supporting medical records, and a letter from your doctor if possible. The insurer must respond within 60 calendar days for services already received, 30 calendar days for prior authorization appeals, and 72 hours for urgent care appeals.2U.S. Department of Health and Human Services. Internal Claims and Appeals and the External Review Process Overview
External Review
If the internal appeal fails, request an external review by an independent third party. Federal standards require all health plans to offer it.3HealthCare.gov. External Review You have four months from the final internal denial to file the request.4eCFR. 45 CFR 147.136 – Internal Claims and Appeals and External Review Processes The reviewer’s decision binds the insurer. Many disputes end here.
State Insurance Department Complaint
While appeals are running, you can file a complaint with your state department of insurance. A department won’t award you damages, but it can investigate claim handling and delays, pressure the insurer, and create an official record of the dispute. Sometimes it resolves the issue faster than anything else.
What You Can Actually Recover
This is where plan type does most of the work.
If Your Plan Is Governed by ERISA
Under ERISA Section 502, you can sue to recover benefits due under the plan, enforce your rights under the plan, or obtain a court order requiring the plan to follow its own terms.5Office of the Law Revision Counsel. 29 USC 1132 – Civil Enforcement Courts can also award reasonable attorney fees at their discretion. That is the whole menu. Punitive damages, emotional distress, and consequential damages like lost wages from a delayed surgery are off the table.
The practical effect: if your employer-sponsored plan wrongly denies a $30,000 surgery, the most a court will typically award is that $30,000 plus potentially attorney fees. You will not get additional money for the harm the denial caused or to punish the insurer. ERISA cases often are not economically worth litigating unless the denied benefit is substantial or the fee-shifting provision makes representation viable.
If Your Plan Is Not Governed by ERISA
State law governs, and most states allow bad faith claims. A successful bad faith case can include the denied benefit, consequential economic losses (like interest on money borrowed for treatment), emotional distress damages, attorney fees, and punitive damages for especially egregious conduct. Specifics vary by state, but the financial exposure is high enough that these cases settle more readily and attract more attorney interest.
Grounds You Would Sue On
The most common claim is wrongful denial of a covered service, whether through ignoring medical evidence or misreading policy language. Breach of contract follows directly: your policy is a contract, and when the insurer doesn’t pay what it owes, you have a claim for the shortfall.
Bad faith is a more aggressive theory. It applies when the insurer doesn’t just make a wrong call but handles the claim unreasonably or dishonestly, by dragging out an investigation without explanation, ignoring evidence your doctor submitted, or misrepresenting what the policy covers. Bad faith matters because it unlocks the damages beyond the denied benefit itself, but only for plans outside ERISA.
Federal law, state insurance codes, and consumer protection statutes also impose their own obligations on insurers, and a violation of those rules can be the basis for action in its own right.
How the Lawsuit Plays Out
ERISA cases and state-law cases follow different tracks, and the difference is substantial.
ERISA: Review of the Administrative Record
In most ERISA benefit-denial cases, the court reviews the same record the plan administrator reviewed. There is typically no new evidence, no depositions, and no trial in the traditional sense. The judge reads the administrative record and decides whether the denial was correct. If the plan gives the administrator discretion to interpret its terms, courts apply a deferential standard and will overturn the denial only if it was arbitrary and unreasonable. If the plan does not reserve that discretion, the court reviews the denial fresh. Either way, the record you built during appeals is what wins or loses the case.
Non-ERISA: Full Litigation
State-law claims follow the standard litigation process. Both sides exchange evidence through discovery: written questions, document requests, and depositions under oath. Discovery is where these cases are won, because it forces the insurer to produce internal communications, claims handling guidelines, and adjuster notes. Motions to dismiss or for summary judgment can end a case early, and many do. If the case survives, settlement talks typically intensify, often through mediation, before any trial.
Deadlines
Every lawsuit has a deadline, and missing it means losing the case no matter how strong it is.
ERISA itself does not set a specific deadline. Courts borrow the most analogous state limitations period, so your deadline depends on where you live. Many ERISA plans also include their own contractual deadlines for filing suit, and courts enforce them as long as they are reasonable and don’t expire before appeals are complete. Read your plan.
For non-ERISA claims, state statutes of limitations for breach of contract and bad faith typically run two to six years, depending on the state and the theory. The clock usually starts when the insurer issues its final denial, though some states start it when you first knew or should have known about the denial.
The safest move is to talk to an attorney soon after your external review is denied. Waiting until you feel ready to sue is how people miss deadlines they didn’t know existed.
Paying a Lawyer
Most attorneys who handle these cases work on contingency, taking a percentage of what you recover instead of billing hourly. The standard fee is roughly one-third of the recovery if the case settles before trial, rising to about 40 percent if it goes to trial.
In ERISA cases, the fee-shifting provision lets courts order the losing insurer to pay your attorney fees, which is the main reason lawyers take these cases given the limited damages.5Office of the Law Revision Counsel. 29 USC 1132 – Civil Enforcement Fee awards are discretionary, not guaranteed. In non-ERISA cases, many states independently allow fee recovery in bad faith actions.
Beyond fees, expect costs for filing, expert witnesses (especially medical experts on the necessity of the denied treatment), medical record copying, and deposition transcripts. Some firms advance these and deduct them from your recovery; others want you to pay as the costs come up. Settle that question before you sign a retainer.