SHORT-TERM DISABILITY (STD) AND LONG TERM DISABILITY (LTD) INSURANCE BENEFITS...

OK, so you have become disabled due to injury, disease, or other medical condition. You have a disability plan through your employer and you have filed all of the claim forms and submitted your doctor's reports. And now your claim has been denied or the company has paid benefits for awhile and now notifies you that it no longer considers you disabled. It's time to sue, right? Well, not exactly. Welcome to ERISA - the federal Employee Retirement Income Security Act!

Overview

Through ERISA Congress intended to protect such things as employee pensions, life insurance benefits, disability insurance benefits, health benefits and the like. If these benefits are obtained through a "Plan" created by an employer or an employee organization (like a labor union) then, with some exceptions, ERISA applies. This means that federal law--ERISA--governs whether a worker is entitled to the benefits, what rights the worker has to obtain information, and what remedies the worker has if his (or her) claim for benefits is denied.

It is difficult to overstate the impact of ERISA application. ERISA sweeps away state laws which would normally govern whether there was a right to benefits. ERISA replaces these state laws with a comprehensive set of Federal regulations. State laws involving breach of insurance contract and bad faith do not apply to ERISA plans.

ERISA governs all claims for benefits (whether procured through insurance or otherwise) from an "employee welfare benefit plan." An employee welfare benefit plan is defined as "any plan, fund, or program . . . established or maintained by an employer or by an employee organization" which provides employee benefits such as life, health or disability. 29 U.S.C. § 1002(1). If your right to benefits is through a plan established by an employer or an employee organization (like a labor union), it is preempted by ERISA.

It doesn't take much for the employer to have established a plan. Under "safe harbor" regulations promulgated by the Department of Labor 29 C.F.R. § 2510.3-1(j), the employer will "establish" a plan by arranging for group insurance for its employees, unless the employer does nothing more than (1) allow the insurer to publicize the program, and (2) allow for payroll deductions to pay for the insurance. However, if the employer does almost anything else, there will be sufficient involvement to show the employer "established or maintained" the plan. Any of the following employer activities will probably lead to ERISA preemption:

Paying all or part of the policy premiums;
Urging employees to join the plan;
Retaining some of the deducted premium to administer the plan;
Keeping track of who is in the plan;
Answering questions for the plan members about their coverage.

There are two exceptions to ERISA coverage: (1) the plan is a church or religion, or (2) the plan is with respect to governmental entities and agencies. A government plan is defined under statute as "a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality any of the foregoing." 29 U.S.C. § 1002(32).

ERISA Plan Structure

Several entities are involved in an ERISA plan:

Plan participant: usually an employee or former employee who becomes entitled to plan benefits because of his/her status as an employee.

Plan beneficiary: a non-employee who is or may be entitled to plan benefits, usually because of the beneficiary's relationship to the plan participant (e.g., a wife, child, or other dependent).

Plan sponsor: the employer or is some cases a group of several employers.

Plan administrator: an entity (not necessarily the employer) that is responsible for the administrative details of the plan such as compliance with statutory disclosure requirements and dispensing information about the plan to plan participants and beneficiaries.

Plan fiduciary: generally any entity that undertakes a decision-making role with respect to the operation of the plan; with respect to benefit payments, this usually means the entity paying the benefits-frequently an insurance company.

What is a "Plan"? The U.S. Supreme Court describes it as "...a scheme decided upon in advance...which comprises a set of rules that define the rights of a beneficiary and provide for their enforcement". Some plans are self-funded whereby participant-employees pay into a fund managed by the employer (sponsor) or a labor union. Others are insured plans whereby the benefits are provided through a group insurance policy purchased by the employer/sponsor.

State Law vs. ERISA

Why is it so important to determine whether your claim is subject to ERISA? Because ERISA preempts normal state court remedies, with its own enforcement scheme. Compared to state court remedies, the federal enforcement scheme is sadly lacking and "stacks the deck" in favor of the employer and its insurance carrier.

For example, if you have a private disability policy and the insurance company denies a claim for benefits, you have the right to sue in state court for the benefits to recover the damages flowing from the claim denial. There might also be a right to punitive damages. During the lawsuit you could take full discovery into why his claim was denied. You have the right to a full trial where you can call witnesses on your behalf, call insurance company witnesses to explain themselves, and have the issues decided by a jury of your peers. If you win, the insurance company has to pay your lawyer a reasonable attorney fee.

ERISA remedies are substantially different than what is seen under most state laws, for example:

There is no right to a jury trial; rather the case is decided by a judge.
There are generally no witnesses; instead the judge relies on the paper record developed while the insurer was deciding the claim.
There is no right to punitive or consequential damages.
If you win, the judge may, but does not have to, award a reasonable attorney fee for your lawyer.

But wait, that's not the worst part! In state court the jury makes an independent determination of whether you are entitled to benefits denied. It's up to the jury to determine which witnesses they believe and most importantly what medical evidence they believe. It makes no difference that the insurance company exercised "good faith" in making its decision. But even though there is no jury in federal court, doesn't the judge have the right to reach his own conclusion about your entitlement to benefits much like the jury in state court?

No, not exactly! Almost all employee benefit plans grant the plan administrator and the plan fiduciary wide discretion in the interpretation of the plan and in the determination of benefits owed. Where such discretion is granted in the plan, the judge cannot make his own independent determination of whether benefits are due; instead, the judge is limited to reviewing the action of the plan administrator or fiduciary in denying benefits and may not overturn that decision unless the decision can be found to be arbitrary and capricious. Normally, this means that the judge is limited to reviewing the insurance company's claim file and determining whether there was a reasonable basis to deny the claim. For example, ERISA claims are often denied based on the opinions of physicians who may have examined or treated the beneficiary. The plan administrator or fiduciary is not required to give more weight to the opinions of your treating physician; instead, the insurance company may give more weight to the opinion of its own "house physician" who earns his living by reviewing claims for the insurance carrier. This is contrasted with the regulations of the Social Security Administration that require that judges in social security disability claims give more weight to the opinions of your treating physicians because those physicians usually have greater familiarity with your problems and how those problems affect you than physicians that have only examined you once for a brief time or have simply reviewed your medical records without ever having examined you. Regrettably, the U.S. Supreme Court recently turned down an effort to apply the same "treating physician rule" to ERISA cases.

So what does all this mean if my claim is denied?

I'll make this simple...you need a lawyer! First, we need to determine if your case really is subject to ERISA. Yes, if your benefits are provided through your employer, your claim is probably covered by ERISA; however, that is not always the case and the consequences of avoiding ERISA coverage are huge. We need to consider how certain terms are defined in your disability plan; most importantly, the "standard of disability"; i.e., are you required to prove that you are disabled from performing the duties of your regular or customary job or any job in the national economy? We must examine the reasons the plan administrator gave for denying your claim and determine our ability to overcome those reasons with new or better evidence. Remember, if the evidence that supports your claim is not presented to the plan administrator before its final denial of your claim, you may not be able to get that evidence before the judge if you later have to file suit to overturn a final denial of benefits. Oftentimes the assistance and cooperation of your physicians may be necessary or you may need evaluations by other specialists. Sometimes it is necessary to have vocational experts address the impact of your conditions on your ability to perform the requirements of your job or other work. Most ERISA plans provide for a generous appeal period, normally 180 days. You must exhaust the appeal process provided for in the plan. Failure to do so may prevent you from filing suit in court. You cannot expect much assistance if you contact your lawyer a few days before the appeal period runs out. Do not delay contacting your attorney!

A parting word of advice: your credibility matters and it matters hugely! Disability claims administrators routinely hire private investigators to conduct surveillance of your activities after submission of a claim. If you have claimed disability benefits because your back hurts so bad that you cannot continue your work as a cashier in a convenience store, you will need a magician, not a lawyer, if the claims administrator has a surveillance tape of you laying patio blocks around your swimming pool!

For more information on ERISA plans and claims procedures from the U. S. Department of Labor click this link:
http://www.dol.gov/ebsa/publications/how_to_file_claim.html