Legal Fee Law Reins In Insurers

The scales of Justice weigh heavily in favor of insurance companies generally, but even more so in disability income claims. After all, insurers are well funded, have their health, and employ plenty of lawyers who are familiar with the “ins” and “outs of the business.

A typical disabled employee, on the other hand, frequently has little or no funding (being unable to work), has little experience in law, and hasn’t a single friend, relative or neighbor who even knows where a law school is located, let alone having attended one.

The issue of whether a mental or physical impairment truly prevents a claimant from performing the duties of employment can be a complex question, even if it is conscientiously considered by people who have no financial interest in the outcome. When you add the financial interest insurance companies have in the outcome of these questions, the issue becomes more vexing because if they agree that the employee is disabled, they pay – and insurance companies hate that.

This leads to a situation in which insurers make claimants run through hoops in an effort to discourage them because there is very little downside to such conduct. Most states make each litigant pay for his or her own legal fees and costs. So, if an insurer makes a claimant sue and loses, what’s the downside?

In the 2nd Circuit Court of Appeals, which includes New York, Connecticut and Vermont, ERISA claimants get a leg up from a line of cases starting with Birmingham v. SoGen-Swiss International Corporation Retirement Plan, 718 F. 2d 515 (2nd Cir. 1983), which hold that although the award of counsel fees and costs is discretionary with the court, the 2d Circuit favors awarding counsel fees in ERISA cases unless there is a particular justification for not doing so. This judicial attitude in the Circuit makes insurance companies think twice in ERISA matters before saying “No” just because they can with impunity.

A road map for evaluating the merits of the right to attorney’s fees, was set forth in Chambless v. Masters, Mates & Pilots Pension Plan, 815 F. 2d 869 (2nd Cir. 1987) and has generally been followed in the Circuit. The major points of the scorecard are:

Culpable conduct (i.e., arbitrary and capricious) by the insurer.

The defendant has the financial resources to satisfy an award.

The merits of the case favor such an award.

The award of attorney fees would tend to deter defendant insurer and others from violating ERISA regulations in the future.

The results in the case confer a common benefit in that the defendant and other insurers will think twice before violating ERISA’s requirements in future.


Nobody wants an illness or injury which eliminates their income or employment. But for those unfortunate enough to face this condition in the 2d Circuit, there is some comfort in knowing that if they are covered by ERISA, arbitrary denials can cause insurers to bleed.


 

 

 

 

 

For The New Year

What better way for us to start the New Year than with resolutions that are apropos for disability income insurance claimants, both ERISA and private.
So, here goes:
 

For a potential claimant: I will read my policy carefully and ask some one who knows to clarify what stumps me. And, I will do it now, before I become disabled.
 

For an actual claimant: I will do my best to get myself back on track so that I may go back to work (if I can get a JOB!).
 

For an insurance company: I will do my best to:

Train my claims employees to consider all of the evidence fairly when assessing claims.

 Halt the practice of getting a stable of shill doctors to “examine” claimants and call these exams “independent”.

Spend more money paying claims and less on fighting people who I know are entitled to benefits.
 

For an Independent Medical Examiner: I will call them as I see them, reread my Hippocratic Oath and conduct disability physicals so as to “do no harm” to those I examine.

For a treating physician: I will pay strict attention to my medical reports, knowing that insurance companies are just waiting for me to make a mistake or an omission which will prejudice my patient’s claim.

For myself, as a disability income attorney: I will continue to work hard to get all disability claimants the benefits they have paid for with their premiums.

For all of us: A wish for good health and that you never have to make a claim to any insurer for anything!

                   What a Happy New Year that would be!

 

 

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