Basic Information Regarding Long Term Disability Benefits Subject to ERISA
The following is a short article I wrote for new clients, primarily those with long term disability claims subject to ERISA. It is intended to provide general information.
Many folks are shell shocked by the denial of their disability benefits. They cannot understand how such a thing could happen. The following is intended to act as a reality check for the disbelieving and to tell the reader a little bit about how the dark side gets away with it. Read on, but do not become too discouraged. Our firm helps people with long term disability claims which are subject to ERISA, as well as those which are not.
DISABILITY BENEFITS SUBJECT TO ERISA
Things Do Not Seem Right
You obtained disability insurance through your employment. It may have been touted as a fringe benefit of the job. Your employer may have paid all or a part of the premium. The insurance was described as long term disability insurance or long term income protection. It is supposed to kick in after you have been disabled for 6 months (or in some cases longer). The shiny brochures said it would provide you with monthly income when you were disabled. You were told that monthly income could continue until you reached age 65. It sounded great. It really wasn't expensive. At least the cost was low when compared to the cost of an individual policy of disability insurance purchased from an agent. Such a deal!
Now you are disabled. You haven't worked for many months. You are financially pressed. The disability benefits promised in the shiny brochure are not coming in. They either stopped or never began.
You can not figure out what the problem is. All of your doctors tell you that you are disabled from work. Their reports have been submitted to the insurance company. Your doctors have even done some tests which indicate that you are not faking or exaggerating. The insurance company (or other firm handling your claim) has not had you examined by a doctor. They have not even seen you in person. You have been successful in obtaining Social Security Disability Benefits. Clearly you are disabled. Yet the insurance company persists is saying you are not, that you are not entitled to any benefits from them. This seems wrong, unfair, maddening and almost bazarre. You think of those ads you saw on TV. You are seriously injured. Lawyers should be chomping at the bit to take your case. You make some calls. Once they find out it concerns insurance you obtained through your employment, no one is interested. What's wrong? This shouldn't be. This is America. How can they get away with this?
The Employee Retirement Income Security Act of 1974 (ERISA) applies to your claim for disability benefits.
What is so different about a claim subject to ERISA?
Usually In Ways That Do Not Favor the Claimant
An ERISA benefit claim is decided based on the contents of a so called "administrative record". Usually there is no testimony. There is no right to a jury trial. The cases are normally heard in federal court after administrative appeals are exhausted. Exhaustion of administrative appeals is mandatory. The review conducted after the filing of suit in federal court is a review of the Administrative Record.
The standard of review applied by the court is usually "arbitrary and capricious". This means that the decision of the insurance company to deny benefits is afforded deference by the federal court. The decision of the "claims fiduciary", often the insurance company funding the plan, the very same folks who are supposed to pay, will not be reversed by the court unless it is found to be "arbitrary and capricious". It sounds bizarre but, sadly, it's true. The same outfit which will have to pay if money is owed gets to decide if the money is owed. Adding insult to injury, the denial decision may even be treated with the same kind of deference afforded an independent tribunal, (assuming an effective grant of discretionary authority in the insurance or plan documents).
Compare this treatment to the litigation model most people expect and experience in non Erisa cases. If, for example, you purchased disability insurance privately, ERISA does not apply. The usual litigation model is what you experience. After the insurance company denies your claim, you file suit. There is no requirement of an administrative appeal. The case is filed in state court. You have a right to a jury trial. There is no administrative record. The record is made during the course of the law suit and most particularly by what goes on at trial. In such cases, the disabled person will testify at trial. His doctors will also testify. The defendant will have their doctors testify. After all the evidence has been presented, the judge or jury makes a determination as to whether the insured was disabled under the definition given in the policy. If the insurance company has wrongfully denied benefits, the claimant receives an award of the benefits wrongfully denied. The insurance company is forced to pay what they should have paid in the first place. In some states, (not New York unfortunately), one can even recover other damages if you can prove that the insurance company denied the benefits in bad faith. So if your claim arises from a privately purchased policy , you have a much better chance of getting justice.
ERISA benefit claim denials must be administratively appealed. Under the current regulations you must be afforded 180 days to "appeal" the denial of you claim. Do not rush an appeal. Your representative needs to determine precisely why the carrier is denying benefits and to gather the documents and reports which will show that the denial is wrong, that it's bogus. Claimants who simply send in a letter saying "I appeal because you are wrong to deny me benefits and my doctor says so" do themselves a great disservice. The appeal determination will probably uphold the denial of benefits. The claimant will have lost the opportunity to stock the administrative record with documents and reports which indicate that benefits should be paid; that only an arbitrary insurance company would deny benefits.
If the administrative appeal is denied, you can file suit. A long term disability case subject to ERISA normally is brought in federal court. If filed in state court, the Defendant will usually "remove" the case to federal court. Defendants prefer federal court for a number of reasons, including the fact that federal judges are not elected and are appointed by the President for life. Hence, ultimately a federal judge will probably decide the case, usually solely on the Administrative Record. There is no trial testimony at all, at least none allowed on the issue of whether you are disabled. Essentially the federal judge reviews the decision made by the insurance company to deny benefits and the documents upon which they based that decision.
The standard of review used by the judge is usually a standard called "arbitrary and capricious " or "abuse of discretion". This means that the judge will not be deciding the issue anew. Instead he will be reviewing the administrative record to see if the decision was arbitrary, without reason, unsupported. If there is evidence to support the denial of benefits and it is reasonable, then the denial must be upheld. This is so even if the judge would have decided the case differently had the initial decision been his. In other words, you have the burden of showing, based on documents in the administrative record, that the decision was arbitrary and capricious, not just that it was wrong. The legal playing field is not level. It is tilted in favor of the insurance company.
We think it definitely helps to be represented by an ERISA attorney experienced in representing disabled claimants. It is also recommended that such representation be secured well before the appeal has been submitted and decided. Remember, the case will be decided on the "Administrative Record". Getting the right proofs in the record and augmenting the record so as to make any denial appear arbitrary is something that this office does for its clients. This maximizes the chances for success on the administrative appeal. It also increases your chances in federal court should the carrier persist in denying your benefits.
Disclaimer: Obviously, the foregoing document is intended only to provide general information. ERISA is complex and there are exceptions and qualifications applicable to many of the general statements made herein. This document is not to be relied upon in the place and stead of professional advice on your particular matter.