What is ERISA?
ERISA stands for the Employee Retirement Income Security Act of 1974. It is a set of federal regulations that apply to insurance policies obtained through your employer, union, or employee organization.
Congress originally passed ERISA to protect large pension funds (hence the “Retirement Income” part of the name). As you may recall, several decades ago there was very little protection to employees’ pension funds if the employer went bankrupt or if the employer decided to raid the pension funds. Thus, Congress enacted ERISA to protect employees’ retirement pensions.
Unfortunately, the insurance companies have used their power and influence to broadly expand the reach of ERISA to other “fringe benefits” and employee benefits. In 1986, the U.S. Supreme Court decided that ERISA governs employer-provided insurance benefits in addition to employer-provided pension plans. Now ERISA applies to most all employee benefits, including health, life, and disability insurance – and not just pensions. ERISA “preempts”, or supersedes, state laws that govern employee benefits plans.
You are probably here to learn more about how ERISA regulations relate to long term disability (LTD) benefits, which can provide you with an income if you are injured or sick and unable to work. You properly planned for the unexpected by purchasing LTD benefits. In fact, such insurance benefits are one of the only things we will ever buy that we hope to never use. You probably filed a claim for benefits only to be shocked to learn that insurance companies and ERISA administrators regularly deny benefits to claimants who are disabled.
Fighting to obtain and maintain ERISA LTD benefits requires a deep and thorough understanding of a very complicated area of law. It is very easy to make mistakes that will totally destroy your opportunity to ever receive disability benefits.
Is My Claim Governed by ERISA?
If you are covered by a group long term disability policy through your employment, your claim is probably governed by ERISA. As stated throughout the remainder of this website, if you did not obtain disability coverage through your employer or employee group, and instead purchased it as an individual policy from an insurance agent or broker, then there is a good possibility that your disability claim will not be covered by ERISA and your legal options and remedies are more favorable. Moreover, church and governmental (including most City and University) employees are also exempt from ERISA.
What to Do If You Are Denied Coverage for a Non-ERISA Policy
If you have church policy, a governmental employee policy, or an individual disability policy purchased directly from an agent or broker then you may not have to appeal the denial before filing a lawsuit. In these instances, you should consult an attorney immediately.
What to Do If You Need to Appeal a Denial Under ERISA
If you have a disability claim that is subject to ERISA regulations, you must be sure to file a timely appeal of the denial of your benefits. ERISA requires that you “exhaust” all “administrative remedies” before you can file a lawsuit. This means you may have to file several appeals directly with the insurance company before you can take your case to court.
In most instances, you must file your appeal within 180 days from the date on your denial letter. However, you should read the last few pages of your denial letter from the insurance company. The insurance company typically tells you: (1) the time limit to file your appeal and (2) the address where you should send the appeal. You do not necessarily require an attorney to appeal your denial of benefits, but it may be to your benefit to retain the assistance of an attorney to help you in your claim with the insurance company.
Federal ERISA Laws and Regulations are Different Than State Laws
Federal ERISA claims are much different than state law breach of contract claims. Once the internal appeals are completed (or “exhausted”) and a lawsuit is filed, no additional evidence can be submitted in an ERISA claim. The federal court considering the lawsuit must limit its review to the administrative record (i.e. the long term disability claim file). Under ERISA LTD laws and regulations, there are no trials, depositions or hearings. The claimant is not allowed to testify on his or her own behalf. The claimant’s treating physicians are not allowed to testify. There are no third-party witnesses. The claimant cannot introduce evidence that was not in the claim file at the time the insurance company issued its final decision. In other words, the Court limits its review to the medical and vocational proof already in the claim file.
Standard of Review
In most ERISA-governed long term disability cases, federal courts are required to defer to the insurance company’s decision so long as there is a rational basis and reasoned explanation for the denial or termination of benefits. In fact, the federal court will overturn the insurance company’s denial only if the claimant is able to prove that the denial was “arbitrary and capricious.” This is the highest burden of proof in civil cases and is far more difficult to meet than the typical “preponderance of the evidence” standard in a civil claim; this burden of proof is far more similar to the “beyond a reasonable doubt” standard in criminal cases.
The Insurance Company Is Not Bound By Findings of Other Insurance Companies or Governmental Agencies
Insurance companies must consider a favorable disability determination by the Social Security Administration as part of its review; however, case law across the country is clear that insurers are not bound by that determination. The insurance company is allowed to make its own independent determination. If it does not follow Social Security’s disability findings, the insurance company must explain why it is not also making a finding of disability.
What Civil Remedies Are Available?
Under ERISA, the most the court can do is award the claimant his or her past-due disability benefits and have their monthly disability check reinstated. In a state law breach of contract claim, a claimant may be eligible to receive consequential, bad faith, or punitive damages; however, these types of damages are not available in ERISA claims. An ERISA claimant may seek attorney fees, but they are rarely recovered. Here are some ways that ERISA limits your rights in court:
- No discovery period. When you submit your initial claim and administrative file, this is your only chance to admit new evidence. After you submit your administrative file to the court, you will not be allowed to add anything to it. This is why having a complete and strong administrative file is so important.
- No state law protections. Most ERISA claims do not have the same rights as those who have individual policies. It depends on the state as to whether they have implemented state protections for ERISA claims – consult a disability attorney to help you check your state laws.
- No jury trial. Your case will be heard and decided by an administrative law judge. You will probably not be allowed to have witnesses speak on your own behalf.
- No second chances. If you failed to follow the instructions given to you in your denial letter or missed a deadline, you are not given the opportunity to correct it. Your case will be dismissed.
- No punitive damages. If you win your case against the insurance company, you are only entitled to the money they owe you for your claim. This can include back pay plus interest and attorney’s fees. It will not include any additional money meant to punish the insurance company called punitive damages.
As you can see, LTD law is stacked heavily in favor of insurance companies to the detriment of claimants.
What is ERISA Preemption?
Courts have determined that all State laws affording remedies to insurance claimants (insureds) for the improper denial of employer-provided insurance benefits do not extend beyond the limited remedies afforded by ERISA. State laws, including “common law” and state statutes, are “preempted” by ERISA. For example, any right under Florida law to recover “extra-contractual” damages for the bad faith breach of an insurance contract is preempted and not available under ERISA regulations.
ERISA Law is Complicated
ERISA long term disability insurance claims are complicated. They involve short deadlines and are governed by complex federal laws and regulations. Many of the legal guidelines for ERISA claims are created by case law that applies to each federal circuit.
Here are some of the pitfalls claimants come across in ERISA LTD cases
- Failing to provide adequate evidence of the disability;
- Failing to appeal in a timely manner;
- Failing to recognize that you often only have one chance to appeal, and if the appeal is denied, a court’s review is limited to the evidence that was submitted to the insurance company.
When you are sick or injured, you have your health to worry about. In trying to get better, you may not understand each and every one of the complicated procedures that are often required to obtain LTD benefits. Insurance companies seize upon this disadvantage and regularly deny benefits to people who have a real and significant disability. The insurance companies are skilled at using the complicated and one-sided ERISA rules and regulations in their favor.
You need to counter-balance this equation with an experienced attorney on your side. An experienced long term disability attorney can assist you in determining whether your claim is subject to ERISA regulations or not. Mr. Ortiz is familiar with ERISA policies and procedures. He has helped numerous disability claimants nationwide obtain the LTD benefits they rightfully deserve. The Ortiz Law Firm can help you with your long term disability appeal or lawsuit. If your disability insurance claim has been denied or terminated call us at (888) 321-8131 or contact us online to request a free case evaluation.