ERISA is a federal law that regulates the handling of Employee Benefit Plans. The term is an acronym for the Employee Retirement Income Security Act of 1974. By definition, ERISA covers practically all group disability, health, and retirement plans within private industry.
Without a doubt, ERISA is a hot button issue in disability insurance law. If your long term disability coverage is a group plan, take note! As you read the following, think of how you can best prepare for potential problems in the event you must file a claim for benefits.
Which Laws Regulate Your Disability Claim?
Knowing what laws govern your insurance claim is the first step in the process of fighting an unfair denial.
- Scenario: You are a customer service rep for a mid-size company. Your employer provides disability insurance as a group health benefit to all its employees. You recently had a bad fall, seriously damaging your back and neck. No longer able to work, you have filed a claim for disability benefits under that policy. On review of your claim, the insurance company awards benefits.
- Fast forward 24 months: the same insurer now says you are no longer disabled under the policy and there is no medical reason you cannot return to work. They terminate your monthly benefit payments. But the reality is, you cannot work.
In order to defend your claim and fight for your rightful benefits, you must act under the appropriate law that governs your group disability claim.
In this case, that law is the very strict and often unfair federal law called ERISA.
ERISA does not apply to individually-purchased insurance.
Individual policies are more expensive to own, and the coverage is written to protect you as an individual working in your own occupation, not a group of employees working generally.
The laws governing disputes on individual insurance policies are state insurance laws including bad faith, contract law and Deceptive Trade Practices Act (DTPA).
ERISA denies you of the stronger state law protections.
It is the state laws that offer the strongest protections against wrongful behavior of disability insurance carriers. But when Congress drafted ERISA, they inserted a clause that says it will preempt (replace or override) state laws.
So under ERISA, if your insurer wrongfully denies your group LTD claim, you do not have the ability to sue the insurer for significant monetary awards, or to punish an insurer’s egregious actions, such as you would under states law such as:
- breach of contract
- insurance bad faith
- emotional distress
- special damages
- punitive damages
These are the protections that would help you and your family recover from soaring medical bills, loss of income and other significant financial losses–but are not available in your group claim. All you are allowed to recover are the benefits your insurer should have been paying in the first place.
How else does ERISA affect my disability claim?
When you need to dispute or appeal a group disability claim, ERISA laws take over. ERISA is full of regulations that do not favor you but actually help protect the insurer.
When fighting a denial, you cannot take proactive legal recourse, including making a claim directly against an insurance company. You have to follow the insurer’s administrative appeals procedure, and adhere to strict timelines.
This may not sound so hard, but few people understand what it takes to beat the insurers at their game and win on appeal under ERISA. With little to hold them accountable, many insurers rely on a battery of denial tactics aimed to undermine initial claims, even valid ones.
And if you appeal and the insurer denies the appeal, what then? The next and final step is to file a lawsuit in Federal Court. Once in court, your legal remedies are very limited:
- You get one shot to appeal. If you do not follow the insurer’s directions to appeal the denial or fail to meet the appeal deadlines, you cannot sue in court.
- You are not even allowed a jury trial. The judge decides your case reviewing the same information that the insurer reviewed to deny your initial claim and the resultant appeal.
- You have no state law protections. Each state has its own statutes designed to protect a claimant from wrongful, deceptive or bad faith insurance practices.
- Discovery is rarely allowed, and no new information may be submitted to support your claim. For this reason, it is vital to have an experienced ERISA attorney representing you, to fully and properly develop your claim beforehand, during the administrative appeal.
- The insurer pays no punitive or consequential damages. The only repercussion the insurance carrier faces is to pay the benefits they owe you, and perhaps pay lawyer’s fees. Because they are not held accountable, insurers do not hesitate to take the minor risk of denying legitimate claims.
What kind of claims are exempt from ERISA?
The following disability insurance programs are likely exceptions to ERISA.
- Individual policies that you purchase on your own;
- Disability plans for government employees, including local, city, state and federal government;
- Professional associations offering group disability plans;
- Church plans, religious institutions’ coverage;
- Self-employed individuals if only the individual and their family are covered;
- Voluntary plans (“pass-through” plans) where the employer contributed no money to the plan and merely serves as a “pass-through”;
- Some partnerships: partners in a partnership with a plan that only covers partners but no employees would not be an ERISA governed plan.
This is a complex area of law where all requirements must be met. In fact, many ERISA cases involve the precise question of whether there is a conflict about preemption. Such cases require the Court to determine whether a state law is preempted because it conflicts with a specific portion of the complex ERISA statute.
How can I be sure ERISA applies in my case?
In review, we can see that:
- employer-sponsored group LTD plans generally fall under ERISA law
- individual LTD policies are generally governed by state law
The operative word here is “generally.” The waters begin to get murky when coverage is under a hybrid plan, through a professional association, or various other possibilities.
- Suppose you teach at a charter school. It may be a “public” school operating as a private school; is it considered a government entity where disability insurance plans are non-ERISA?
- If you and your co-workers purchase insurance with funds deducted from your wages, but without your employer’s contributions or participation, does that policy fall under ERISA?
- Does ERISA regulate your claim if you work in public transportation or law enforcement?
- You may supplement your employer-sponsored group LTD plan with an individual disability policy. If you filed a claim under both, and are awarded benefits under both, will one claim’s benefits offset the other?
- Suppose you are a doctor. You supplement your group LTD plan with additional coverage through the AMA. Beware of subtleties in the law when seeking benefits under both professional association plans and ERISA-based coverage from your employer!
So how can you know if ERISA applies to your claim? Ask an experienced ERISA lawyer to review your policy. If you have been denied benefits, ask the lawyer to also review your claim application, the denial letter, and any further correspondence that is part of your claim file.
With so much at stake, this one step can remove any guesswork and help you move forward in confidence with proper legal action.
Questions? Our Law Firm Can Help.
Thanks to ERISA, insurers know they’re protected from legal liability when they deny your group disability claim. They do not have to answer for their violations and unfair actions. We have the experience and the resources to help you change that.
If you’re fighting your insurer for disability insurance benefits, do not delay: call 866-365-7898. In any situation where you have not received the benefits you deserve, our attorneys are here to help.