ERISA Facts

If the benefits in question were connected to your employment, the answer is probably yes. However, if the employer was a government or church, then ERISA may not apply. Although this seems straightforward, this question can be incredibly complex.

One of our cases involved several months of litigation surrounding the question of whether a church was a church because there is some division on whether “religious entities” are considered churches. Quasi-governmental entities can lead to lengthy preliminary disputes as well. The insurance company will do everything it can to get ERISA to apply if there is even a slim chance it will work.

If ERISA does apply, finding out what the terms of the insurance policy are can prove quite difficult. ERISA benefits often involve interpreting several different documents, including global wrap plan documents, summary plan descriptions, and insurance policies or certificates of coverage. These will often have different, conflicting terms, and it is not always easy to know which set of terms the court will find to be controlling.

The other big problem here is that employers will rarely send you all the documents you need and have requested. It is also often quite difficult to know who to request these documents from in the first place. Further, many of the benefits under an employee welfare benefit plan or pension plan will be interconnected. So, if you have an ERISA disability benefits claim, you will need the ERISA life insurance policy as well because the ERISA life insurance policy premiums for that life insurance policy should be waived and coverage continued while you are disabled.

• The most typical types of ERISA-governed employee benefits that we see are disability benefits, life and AD&D insurance, pension benefits, and medical insurance benefits.
• Most people are unaware of the full extent of the group insurance benefits that are provided as part of their employee benefits package. You cannot rely on the insurance company to tell you about these additional benefits.
• It is important to note that the investigations that we conduct into these benefit packages are not limited to things you or your spouse purchased, it is also crucial to investigate what the employer paid for. A lot of people are unaware of the insurance that is provided in the employee benefits packages because the employer pays the premium.

Exhaustion of administrative remedies is also very important under ERISA. If your ERISA benefits require you to go through certain administrative remedies in order to dispute a claim denial, then you must exhaust those remedies before you can go to court. For example, in the case of an ERISA life insurance claim, the insurance policy may require you to submit a claim within a certain number of days. If that claim is denied, then you are often required to appeal to the claims handler who denied your claim and ask them to reconsider that denial before you file a lawsuit. If you don’t go through that process or you fail to appeal within the appropriate timeframe, a court may later find that you failed to exhaust administrative remedies. This is very bad because it could be the end of the road for your claim.

Your case will very likely be dismissed by the court if exhaustion has not occurred. Although most claims will involve an initial decision and an appeal, some plans may allow additional administrative remedies that should be utilized before you can file suit. The plan can also specify the statute of limitations, so this whole process can easily cause disaster.

The ERISA benefit plan may also require sending each claim to a different entity, so it is important to know exactly what to do and what the deadlines are for each step. It is also important to know when the insurance company has missed a deadline, because you may be able to file suit and strip them of one of their biggest defenses to your claim; the arbitrary and capricious standard of review.

During the appeal review phase, the insurance company will likely do everything it can to avoid a full investigation of your claim. Why? Because gathering more evidence means it is more likely there will be evidence showing you are entitled to your ERISA benefits. Essentially, the insurance companies avoid helping you prove your ERISA claim, which is why they typically only request a couple of months’ worth of doctors’ notes for a disability claim arising from a lifetime illness. This behavior also helps them in litigation because the insurer will argue that no medical evidence can be submitted to the judge if it was not obtained or provided to the insurer before it denied your claim. Insurers will use this phase to try to permanently tie your hands behind your back if you file a suit.

Another tactic we often see is that the insurance company will often pay so-called impartial paper reviewers or, even worse, have its own in-house physicians (employees of the insurance company) dispute your treating physicians’ findings. These paid-for opinions are an attempt to create evidence the insurance company can point to when denying your claim because you are capable of work. This is particularly problematic if you appealed an ERISA claim denial without an attorney and exhausted administrative remedies because the record in court will likely be limited to whatever evidence the insurance company had at the time of its final decision.

Clients or their prior attorneys rarely understand how important this appeal phase is, and some actually rely on the insurer to obtain medical records, talk to their doctors, and actually help them with their ERISA claim. Anyone who has dealt with an insurance company knows how this will play out in most cases. ERISA claims are often won and lost in the “administrative” review phase, and this will often take a very considerable amount of work.

Many times, clients have come to us after they have been dealing with certain law firms who advertised themselves as handling ERISA claims, but the client then later found out that the attorney rarely, if ever, actually litigated any ERISA claims in a courthouse. 

This type of problem is compounded even further by the fact that the various district courts across the country have different interpretations of the same federal law at issue (ERISA). Thus, where your case is filed can often win or lose the case before you even get started. Pick a lawyer experienced in dealing with these issues and that has been in courthouses across the country

ERISA is full of deadlines and those deadlines come very quickly after the first denial of your benefit. You will often find you have somewhere between 30 and 180 days to appeal your claim after it is denied.

Then, if that final denial of your appeal is issued, you must worry about something called the statute of limitations. The statute of limitations is the deadline for filing suit, and if this deadline is missed, then your case will almost certainly be dismissed very early on in the process. This deadline can be very different based upon policy language, factual circumstances, and state law. Even if you figure out how long the statute of limitations is, you also have to worry about when the clock begins to tick. Sometimes, the period begins on the date you become disabled. In other cases, it might be the date your claim is denied or the date you were required to tell the insurance company about your claim.  Determining when that clock starts and stops ticking is no easy thing to calculate because ERISA has been subjected to a lot of different interpretations and ERISA doesn’t contain its own defined clock or statute of limitation.

Courts will look to state law if a statute of limitation is not specified in the contract. If the contract provides a limitations period, things can be particularly counterintuitive because some courts have found that the limitations period begins running on the date of the claim, regardless of whether the claim was being paid or not.

Thus, an insurer could pay a claim for a year and a half, deny the claim and take six months or more to render its final appeal decision. If a two-year period is set out in the policy, the insurance company could argue you might have only months to file suit. This may sound like a lot, but it takes time to get the ERISA claim file from the insurer, the plan documents from the employer, and to decide who the proper defendants are.

Another pitfall of ERISA is how one-sided the law can be. The ERISA record limitations discussed above are bad enough, but insurers’ decisions are also typically granted deference under the arbitrary and capricious review standard. Thus, the court could rule in the insurer’s favor even if they find the insurer made the wrong decision. In other words, the judge could conclude you are disabled and still rule that you lose your case. 

A judge could be required to allow the insurance company’s wrong decision to win if there is any reasonable basis the insurer can manufacture or point to. When it comes to defining what constitutes a “reasonable basis,” courts are all over the map, with some appearing to suggest that any basis is good enough. That would mean the insurance company’s in-house physician could be wrong about everything in his/her opinion, but the insurance company still wins if the claims adjuster who denied the claim “reasonably” relied upon that in-house physician’s opinion to deny your claim.

All these barriers embolden insurers to deny claims in a way they never would if state law applied, but insurance company’s act particularly badly due to ERISA’s limitation on damages. Past due benefits are all that can be sought. There are no future benefits or punitive damages or any other real skin in the game for the insurer here. It will just have to pay the claim it refused to pay and potential interest. Insurance companies have no economic incentive to pay an ERISA claim. In other words, you can go all the way through litigation, and the court will likely only order the insurer to pay you what it should have paid to begin with. Insurers understand that many people will give up without filing suit and many others cannot wait years to receive their benefits. This means insurers can get away without paying anything or can at least settle good claims for much less than what is owed. When someone actually decides to stick it out and gets a successful ruling, then the insurer will just have to pay a claim it was required to pay anyway.

Insurers are particularly bold when ERISA is involved because of all the advantages it provides, and most major insurers have developed a litigation strategy designed to be as recalcitrant and difficult as possible. When you file a lawsuit against them, they will attempt to bury your attorneys in work if you try to conduct any discovery and they will try to drag the entire process out as long as they can. Because most plaintiff’s work is not paid hourly, this is meant to make it so the case will only be profitable to the plaintiff’s lawyer if the insured client (you) take an early cut-rate settlement that gives you a fraction of what you are owed in exchange for giving up all of your rights.