Disability Insurance Claims

Supposedly, ERISA was enacted in 1974 to protect people who get their health insurance through employer-provided plans, but anyone who has spent time working on these types of long term disability cases knows that the reality is less about protecting you and more about keeping insurers from losing money.

I’ve talked about this problem before here, but today I wanted to lay out exactly what you’re losing when you have a plan covered by ERISA laws.

When Congress created the Employment Retirement Income Security Act in 1974 (ERISA), the stated intention was to “protect…participants in employee benefit plans and their beneficiaries…by establishing standards of conduct…and by providing for appropriate remedies.” Basically, the law was supposed to make things better for people in big group health plans by demanding that they all follow the same federal rules.

While they certainly knew that ERISA regulations would cover a lot of people, they still meant for there to be plenty of non-ERISA plans. Unfortunately, the people who actually wrote the language of the law made it so vague that today practically everyone getting insurance through their employer is governed by ERISA – and the vast majority of people in our country are insured through their work. Though plans that aren’t covered by ERISA do exist, they are incredibly few and far between.

While it’s notoriously difficult to get the other side to pay for your attorney fees in an ERISA lawsuit, that doesn’t mean it’s impossible. Some judges are more willing to engage in this practice, and a few even follow the rule present in other types of cases but missing in ERISA that the winning party deserves to have the losing side pay. Because of this, it seemed useful to talk about how the actual amount of your monetary award is calculated.
The Lodestar Method and How It Works

To get the lodestar figure, the district court has to look at 12 lodestar factors.

By now, most of our followers probably know just how tough it is to get the other side to pay for your fees in an ERISA case. This is something we’ve covered at length because we want to make sure potential claimants know what they’re in for if they decide to move forward with an ERISA lawsuit.

Well, it turns out that there’s yet another roadblock to getting your attorney fees paid by the opposition: after going through all of the administrative requirements, it’s possible that you might finally get to court only to have them decide that ERISA doesn’t apply to your lawsuit after all. The entire case will be dismissed, and because of this you have to foot the bill for any fees that you owe your lawyer – you can’t even petition for the other side to pay; you’re just out of luck.

If you’ve been paying attention to our updates on long term disability, you already know that it’s extremely difficult to convince judges to force insurers to pay your attorney fees. And you also know that even if you are awarded fees, the award may only partially cover what you owe for the trial and legally can’t include anything you owe for using a lawyer through the administrative process.

The whole thing blatantly favors insurance companies and we’re long overdue for a change in the law, but in order for that to happen, enough people have to complain to Congress. Until that day, we have to live with the current rules, and that means understanding how they work – understanding the Five Factor Test.

This isn’t the first time we’ve talked about ERISA’s unfair rules regarding getting your attorney fees paid for by the other side. Not only are you not guaranteed to get those fees paid if you win like in many other kinds of cases, the decision is left up to the discretion of the judge. Moreover, that judge can choose the percentage of the fees that the insurance company has to pay, allowing them to get off the hook for less and take more out of your pocket.

But the law even goes beyond this. Though claimants are forced to go through convoluted administrative “remedies” before they can even file a court case, if an attorney helps you during this portion of your case, it’s not possible to have the other side pay for any of the fees incurred during this time.

Texas has passed amended the Texas Insurance Code to prohibit what are known as discretionary clauses in insurance disability insurance contracts. This applies even to insurance policies governed under restrictive federal ERISA law.

Under the terms of most disability policies, the insurance company administers the appeals process and retains the sole authority to grant or deny benefits to applicants. Because the insurance company both pays benefits and retains the sole authority to grant or deny benefits, the disability insurance company has an inherent conflict of interest.

Under ERISA the insurance company has a fiduciary duty to act in the best interests of their policy holders, but because of the conflict of interest described above, insurance companies are notorious for denying claims. However, because of the discretionary clauses’ in the insurance policies, the courts have had to give deference to the insurance company’s decision to deny claims.

As soon as you realize that you’re having a serious medical problem and that it’s not going away, you need to file for disability benefits. Unfortunately, a lot of people just don’t know where to start or what to do. After all, how many of us really read through all of that documentation we got when we were first hired at our company? If you’ve even heard of ERISA law, the chances of you really understanding it and knowing the specifics may be pretty slim.

ERISA regulations allow for insurance companies to use specific standards to determine whether or not a person claiming a medical disability is able to work. When you initially file your claim and go through the process, they will be using the “own occupation” standard.

As the name implies, your insurer will attempt to see if you are able to do the work required by your current job or based on what you have in your history. The standards for different types of jobs are laid out by the Social Security Administration and defined in the Dictionary of Occupational Titles.

For example, if you’ve been a construction worker for the last decade, they will try to determine if you’re still able to lift heavy objects and engage in physical labor. Construction, which is considered “heavy” work, requires you to be able to frequently carry about objects of around 100 pounds. If some kind of injury or impairment is keeping you from doing this, then you would be eligible for disability.

If you’ve been denied disability benefits or are in the process of battling for your rights to a claim, you’ll probably agree with a recent senate hearing debate that centered on the effectiveness of Employee Retirement Income Security Act (ERISA). The act, which regulates minimum standards for employee benefits, finally reached the ears of Congress in late 2010.

As you may know firsthand, deceptive and misleading tactics are used by many long-term disability insurance companies to deny their policyholders the benefits they deserve. According to hearing committee testimony this problem could be partially caused by regulations put in place through the Employee Retirement Income Security Act (ERISA).