Types of Claims We Handle
Individual Disability Income Insurance Claims
These Policies are sold to high-wage earners. The policies are designed to replace the lost income resulting from the high-wage earner not being able to return to their specialized occupation. These types of claims arise in conjunction with nearly every type of injury or illness claim for high-wage earners, ranging from car crashes to product liability claims and Social Security Disability claims. If your firm takes in a claim involving high-wage earners, especially those with advanced degrees such as those found in the medical and legal field or business executives, you probably have some of these claims in your files right now.
ERISA is a comprehensive federal statute that applies to many claims related to employee benefits, including disability insurance, medical insurance, life insurance, or pension benefits. (52% of civilian workers received employer-sponsored medical coverage in March 2017, and 46% of Alabamians were covered by employer insurance in 2015. Employee Benefits in the United States – March 2017, Bureau of Labor Statistics; 2015 Health Insurance Coverage of the Total Population, The Henry J. Kaiser Family Foundation. ERISA benefits claims involve a complicated area of the law that involves many hurdles for claimants and their attorneys that are not always apparent.
ERISA was passed in response to significant problems involving corruption and self-dealing large pension plans. In order to provide federal oversight of employee pensions and uniform national standards, Congress drafted ERISA. At the last minute, ERISA was amended to include other employee benefits, referred to as ERISA welfare benefits; those include disability benefits, health insurance, life insurance, and other benefits offered by private employers. Thus, ERISA covers two broad areas of employee benefits: pension benefits and welfare benefits.
ERISA was also drafted in a way to make things simpler and encourage employers to offer these benefits. For instance, employee benefits before ERISA were subject to varying and often conflicting state laws, and employees’ rights were not adequately protected by state laws. Employees often had significantly different rights depending on the state in which they worked, while large, multi-state companies often had conflicting obligations.
The intent of Congress in enacting ERISA was to protect the “interest of participants in employee benefit plans . . . by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts . . . .” 29 U.S.C. § 1001(b). The statutory language of ERISA draws heavily from trust law as well as contract law. Congress instructed the courts to develop a common law of ERISA, using both trust and contract principals. The Department of Labor was delegated authority to issue regulations governing the processing of ERISA claims.
ERISA applies to almost all disputes over employee benefits offered by private employers. Any state law claims, such as breach of contract or bad faith, do not apply because the rules under ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan . . . .” 29 U.S.C. § 1144(a).
This means almost all employee benefit plans that provide health insurance, life insurance, long-term disability insurance, or similar benefits are governed by federal ERISA law; however, plans sponsored by governmental employers and churches are not usually governed by ERISA. 29 U.S.C. § 1004(b). If ERISA applies, most claims should be filed in federal court (except for claims that are limited to benefits over which state courts have concurrent jurisdiction), and if a plaintiff files a claim that is properly preempted by ERISA, the defendant may remove the claim to federal court without regard to the well-pled complaint rule (29 U.S.C. § 1132(e)); therefore, ERISA claims are rarely litigated in state court.
ERISA divides employee benefits into two broad categories: pension benefits and welfare benefits. Long-term disability benefits, health insurance, life insurance, dental insurance, and similar benefits fall under “ERISA welfare benefits.” If an ERISA plan participant or beneficiary is denied those benefits, the person must go through the ERISA plan’s required appeal procedures. If the claim is still denied, the person can then bring an action under ERISA § 502(a)(1)(B) (29 U.S.C. § 1132(a)(1)(B)).
Because ERISA preempts any state law remedies, a plaintiff may only obtain those remedies available under the ERISA statute and case law. Usually, this is a remedy to obtain the benefits that should have been paid under the plan, plus possibly attorneys’ fees, and interest. Other remedies, such as punitive damages, make-whole damages, bad faith damages, or similar remedies are preempted.
Additionally, when reviewing the limited record, courts usually review the decision under an arbitrary and capricious (abuse of discretion) standard of review that is deferential to the decision made by the plan administrator. According to the Supreme Court in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), the rule is that courts should review denials of ERISA benefits de novo, but that same decision held that if the parties agree to a deferential standard of review, then courts should apply that standard. Id. at 115. As a result, most ERISA plans and group insurance policies contain language conferring the deferential standard of review, and that exception has virtually swallowed the default rule.
From December 1, 2012, to December 8, 2017, there were 380 cases coded in Pacer as 791 (ERISA) in Alabama’s three federal districts. Excluding government actions, actions brought by the insurer, and class action cases which were not individual ERISA benefits cases, only 20 cases (5.26%) out of 380 cases coded as 791 (ERISA) in CM/ECF went the distance to a final decision in all three of Alabama’s districts. Remember, there are no jury trials under ERISA, so this typically meant it was decided via dispositive briefing.
Of the 20 cases that went to a final decision, only four resulted favorably for the plaintiff. Out of 380 ERISA cases, the individual won 4 times. Improving your client’s odds of winning requires an understanding of the importance of ERISA’s administrative remedies.
Before filing a lawsuit, a claimant must exhaust the available remedies under the plan, so long as the plan’s procedures are reasonable. This typically means a claimant must apply for benefits in accordance with the plan’s application procedures. If the claim is denied, the claimant must appeal under the plan’s appeal procedures. A claimant is required to “exhaust” his or her administrative remedies before filing an action in court.
It is crucial to understand that the record closes when the insurance company or ERISA administrator issues its final decision. Claimants must submit all the evidence they want to be considered during the administrative appeal process, and may not submit new evidence regarding the merits of their claim once the case is in court.
In other words, the basic rule is that the record closes when the administrator or insurance company makes its final denial, and it is often impossible to submit new evidence in litigation that was not sent to the insurance company before it denied the claim. This typically leads to extremely curtailed records requests and reviews by insurers. Willful blindness helps them later on in court.
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