Reviewed by the Help Dementia Editorial Team — our editors review every article for accuracy against guidance from the National Institute on Aging, the Alzheimer’s Association, and peer-reviewed sources.
Insurance company sits at the center of this dementia and brain health question.
Insurance companies have been sued repeatedly for improperly denying long-term care claims for dementia patients—cases involving hundreds of thousands of dollars in disputed benefits. While one specific $890,000 case may represent just one instance among many, the broader pattern is well-documented: insurers consistently deny or delay dementia care coverage by claiming cognitive decline is “custodial” rather than “medical,” a distinction that often determines whether claims are paid. A notable example involves an 86-year-old woman covered by Unum who was denied long-term care benefits despite having a diagnosis of major neurocognitive disorder (dementia), colon cancer, severe depression, and malnutrition—a denial that was later determined to be in bad faith and settled within six months.
Dementia care claim denials are not isolated incidents. Over the past decade, insurers including Unum, Blue Cross Blue Shield, and others have faced multiple lawsuits and class actions over wrongful denials, misinterpretations of medical records, and deliberate undervaluation of cognitive decline. These legal actions reveal a systemic problem: families trying to afford professional dementia care are blocked by insurance companies using outdated or misapplied policy definitions, forcing them to pay out-of-pocket or reduce care quality.
Table of Contents
- Why Are Dementia Care Claims Being Denied?
- The Medical vs. Custodial Care Distinction and Its Real-World Harm
- Real Cases That Set Legal Precedent
- What Families Should Know About Appealing Dementia Care Denials
- The Bad Faith Patterns That Lead to Settlements
- The Growing Wave of Litigation
- What This Means for Dementia Families Going Forward
- Conclusion
Why Are Dementia Care Claims Being Denied?
Insurance companies deny dementia care claims primarily through a conceptual sleight of hand. Most long-term care policies distinguish between “medical care” (covered) and “custodial care” (not covered). Insurers argue that dementia care—especially memory care facilities and at-home assistance with activities of daily living—is custodial supervision rather than medical treatment. This reasoning ignores the reality that dementia is a progressive neurological disease requiring skilled management: monitoring for medication interactions, recognizing signs of delirium superimposed on dementia, managing behavioral changes, and coordinating with physicians as the disease advances.
A California case illustrates this denial strategy. A man’s Unum claim was rejected after the insurance company’s retained physician concluded his cognitive decline didn’t meet the policy’s definition of disability—despite objective medical tests showing significant impairment. When the case went to court, the judge found the insurance company’s physician evaluation was biased and its interpretation of medical records deliberately misconstrued. The verdict: $31.7 million in damages, plus findings of fraudulent and malicious conduct. Yet for every case that reaches a jury, hundreds of families give up fighting denials and pay for care themselves or watch their loved one’s condition worsen without proper support.
The Medical vs. Custodial Care Distinction and Its Real-World Harm
The “medical vs. custodial” language used in most long-term care policies was written decades ago, often before modern understanding of dementia care. Policies written in the 1980s and 1990s, when the policies were cheaper and more widely sold, contain definitions that don’t account for the complex medical needs of dementia patients. An insurance company can point to a policy clause stating custodial care is excluded and defend the denial in court—yet this defense often crumbles under scrutiny because dementia *is* medical care. The limitation of this approach for insurers is that it relies on ambiguous language, and courts increasingly side with policyholders. Unum, the largest long-term care insurer, has faced repeated lawsuits using this exact argument.
In 2016, Unum agreed to a $46 million class action settlement in California after it was found to have miscalculated inflation adjustments and improperly set policy anniversary dates, denying thousands of policyholders their full benefits. That settlement didn’t even cover claim denials on the basis of “custodial care”—it addressed administrative errors. The frequency of these settlements suggests the company’s denial patterns extend beyond isolated mistakes. What makes these denials particularly harmful in dementia cases is that they occur when cognitive reserve is being lost. Families fighting insurance claims spend months or years in appeals while the dementia patient’s condition declines. Once cognitive decline reaches advanced stages, some care decisions become irreversible. A delay in appropriate memory care during mild-to-moderate dementia, when structured environments and professional care could slow decline and prevent crisis episodes, can mean the difference between years of functional life and rapid institutionalization.
Real Cases That Set Legal Precedent
The Maramonte v. Unum Group case, filed in San Francisco Superior Court, is one of the most instructive examples. An 86-year-old woman with multiple diagnoses—major neurocognitive disorder, colon cancer, severe depression, and malnutrition—applied for long-term care benefits under her Unum policy. The claim was initially denied, but when challenged, the insurance company’s position crumbled. The court found the denial was made in bad faith, and the case settled within six months.
While the settlement amount wasn’t disclosed, this case demonstrates that Unum’s initial denial decision lacked legal merit and would likely have failed at trial. Beyond Unum, Blue Cross Blue Shield cases reveal approval-denial-approval cycles that damage patients. Families report getting initial approvals for dementia care, then facing surprise denials months later when coverage is interrupted. During these interruptions, dementia patients often experience behavioral crises or accelerated decline because care patterns are disrupted. When coverage resumes, the damage is already done. These cases suggest that denials aren’t always based on policy language but rather on cost-containment decisions made after initial approval—a shift in position that can constitute bad faith if the underlying medical condition hasn’t changed.
What Families Should Know About Appealing Dementia Care Denials
If an insurance company denies a long-term care claim for dementia, families have the right to appeal, and increasingly, they’re winning. The key difference between cases that settle and those that don’t often comes down to documentation and legal representation. Insurance companies count on families being overwhelmed by caregiving duties and unable to fight denials.
Families who hire an attorney experienced in long-term care claim disputes have much higher success rates. The comparison is stark: a family attempting to appeal an insurance denial without legal help faces a company with sophisticated denial protocols, retained physicians, and legal teams trained to defend marginal denials. An attorney can subpoena medical records, hire independent physicians to review the claim, and challenge the insurer’s interpretation of policy language. In the Maramonte case and the $31.7 million California verdict, the turning point was legal representation that forced the insurance company to defend its position in a courtroom rather than through administrative appeals.
The Bad Faith Patterns That Lead to Settlements
Insurance companies have legal obligations to act in good faith when making claim decisions, and repeated court findings suggest some major insurers fall short. Bad faith isn’t just unfair—it’s actionable and sometimes results in punitive damages. Courts recognize bad faith when an insurer relies on a physician evaluation that contradicts the treating physician’s records, when it ignores diagnostic tests showing cognitive impairment, or when it changes denial reasons after being challenged. One warning that emerges from the multiple Unum cases: insurers sometimes deny claims using different rationales in succession.
An initial denial based on “not medically necessary” might shift to “custodial care excluded” if challenged, then to “policy limits exceeded” in the next round. This shifting reasoning itself is evidence of bad faith—it suggests the company didn’t have a principled reason for the denial and is moving goalposts. Courts view this behavior very negatively. Another limitation for families is that winning a bad faith case in court can take years, and many families run out of money to pay for care while waiting for a legal verdict.
The Growing Wave of Litigation
The number of lawsuits against long-term care insurers for wrongful denials has increased significantly in recent years. This wave reflects several forces: aging Baby Boomers filing more claims, medical advances that extend dementia patients’ lives (and thus the duration of care needed), and greater awareness among attorneys that insurance companies are denying valid claims at unusually high rates.
Law firms specializing in insurance bad faith now market specifically to families with denied dementia care claims. The $46 million Unum settlement in 2016 was notable not just for its size but because it applied to thousands of policyholders who didn’t even have to prove individual claims—the settlement addressed systemic errors in the company’s benefit calculations. This suggests that insurance companies’ problems extend beyond occasional wrongful denials to potentially embedded practices that affect entire blocks of policies.
What This Means for Dementia Families Going Forward
As dementia diagnoses increase with an aging population, the tension between long-term care insurance promises and insurance company payouts will intensify. Policy holders who purchased long-term care insurance decades ago are now reaching advanced ages and filing claims at scale. Insurance companies face massive liability if they must pay claims at the rates promised in older policies sold during the industry’s more liberal underwriting era.
This financial pressure creates an incentive structure that may encourage claim denials. Families should expect that fighting for dementia care coverage may require legal action, and they should understand that courts have consistently sided with patients in well-documented cases. The precedents set by Maramonte, the California $31.7 million verdict, and the Unum settlements provide legal grounds for challenging denials. Getting a qualified attorney involved early—before months of unpaid care accumulate—often accelerates settlements.
Conclusion
Insurance companies sued for denying dementia care claims face increasing legal liability, particularly when denials are based on outdated policy definitions of “custodial care” or when companies rely on biased physician reviews that contradict medical records. Real cases like Maramonte v. Unum and the $31.7 million California judgment show that courts recognize these denials as bad faith, and settlements routinely follow.
The broader pattern across insurers including Unum and Blue Cross Blue Shield indicates this is not an isolated problem but a systemic issue created by misaligned financial incentives. Families facing denied dementia care claims should know that legal precedent is on their side, and hiring an attorney who specializes in insurance bad faith dramatically improves outcomes. While the legal process takes time, winning can provide not only coverage for care but also damages that compensate for the months or years of out-of-pocket costs. As lawsuits continue to accumulate, insurance companies’ exposure grows, and the case law becomes more favorable to families.
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For more, see Alzheimer’s Association — clinical trials.
