ERISA May Be The Key To Your Case

A recent case made it very clear that insurance companies will try to move mountains to get a disability claim covered by ERISA. Insurance companies, which usually are cold to anything but profits, are “hot” for ERISA as the law has been adjudicated down through the years by the courts.

This point was highlighted in Hill v. Lincoln National Life, WL 5863007 (N.D.Cal., 2013), a case in which there was a lot of confusion about the type of coverage a claimant had. Ms. Hill said ERISA did not apply to the disability policy she had while the defendant, Lincoln National, argued strenuously that it did apply.

What should interest those not familiar with ERISA is: Why do both sides fight so strenuously over the ERISA issue?

The answer is simple. If the case is decided under ERISA, the insurer may be protected, even for egregious conduct. The company can deny the most obvious claim for benefits without the threat of having to pay extra for the denial. They can starve a claimant through a long litigation without worrying about having to pay more when the claimant prevails. No risk, no loss. So, why not hang on to the money for as long as you can?

ERISA preempts state law which would otherwise provide a claimant some relief against the tactics used by insurers. For example, a jury may decide an individual, non-ERISA disability claim in state court. But, ERISA precludes the use of a jury. All ERISA cases are decided by a Federal judge without a jury. There are no witnesses and no testimony.

In addition, depending on the language used in the ERISA plan, the Federal Court must give deference to the ERISA plan administrator’s decision. In other words, if ERISA applies, the court can only reverse the administrator (usually an employee or associate of the insurance company which will have to pay the benefits claim) if it finds the decision was “arbitrary and capricious”, a very tough standard for a claimant to prove.

Some other factors which make the application of ERISA to a claim a most important factor:

• Strict time limits on filing the claim, medical reports and documents which support the claim. A claimant’s failure here can bounce a claim forever.
• State laws with penalties and doubling of recoveries, do not apply in ERISA since ERISA preempts state law. Insurance companies can delay, obfuscate and prevaricate with almost total impunity.
• Medical reports from insurance company doctors who never see a claimant are given as much weight by the courts under ERISA as the treating doctor’s opinion.
• Social Security disability decisions, no matter how well founded, are not binding on ERISA insurers.

Knowing this, we can see whether a case is decided under ERISA or under state law is an issue important to both the insurer and the claimant.

The success or failure of the claim may very well depend on it.





Leave No ERISA Stone Unturned

Representing ERISA claimants requires an attorney to start at the very beginning and go careful step by careful step to the end. Nothing is to be assumed. An attorney has to make certain that the plan structure and all actions taken pursuant to it by the administrator have been done properly and only as authorized by the plan and ERISA law.

A recent decision, Gaines v. LINA, 2013 WL 677886 (N.D.Ill.), clearly illustrates this point. The issue in the case was whether the court would apply the de novo standard of review or whether it would give deference to the claim denial issued by the insurer, LINA.

If de novo, the Court could hear evidence and decide the matter based upon the preponderance of the evidence presented. If the Court had to give deference to LINA’s denial of benefits, the Court could only consider the record and could overturn the denial only if it found, based on the record, that the denial was “arbitrary and capricious”, a very tough obstacle for a denied claimant to climb.

The ERISA plan documents showed that the employer and the plan administrator had authorized the claims administrator to utilize its discretion in deciding claims. If properly set up, this would force a court, under Firestone v. Bruch, 489 U.S. 101 (1989), to give deference to the denial of the claim.

The problem for the employer in this case was that the plan document relied upon to authorize administrative discretion gave “Cigna” not “LINA” the authority to exercise discretion. Therefore, the Court held, since only Cigna was authorized to exercise discretion, LINA had no authority to do so and the case would be heard de novo.

In making this ruling, the Court followed a line of cases which held that when an unauthorized body without fiduciary discretion to determine disability benefits denies an ERISA LTD claim, the claim will be reviewed by a court on a de novo basis.

Sometimes in the jungle of ERISA plan language and the thicket of insurance policy terms the insurance company and the employer stumble and the claimant gets a break. You can be sure it doesn’t happen too often, but when it does, it is cause for a celebration.

We’ll drink to that.



ERISA Benefits Straitjacket

We have warned several times before that ERISA disability cases are not to be trifled with. The presently ongoing matter of Gearlds v. Entergy Mississippi, Inc., 2012 WL 1712441 (S.D., Miss 2012) adds new emphasis to this warning.

The big problem with being unsure of how to proceed is that ERISA law is that sometimes the ERISA statute requires a decision which is counterintuitive to what ordinary common sense (even legal common sense) would indicate.

Gearlds, which at this writing is an undecided appeal, involves an employee who was thoroughly misled by his employer, Entergy, into early retirement in 2005, based on the assurance that he would continue to be covered by the employer’s health insurance plan. He was actually covered for those benefits until 2010, at which point his coverage was terminated by Entergy. After several years of paying, the plan “discovered” it had been mistaken in 2005 and that Gearlds was not an eligible employee under the plan after he retired.

To add insult to injury for Mr. Gearlds, his wife retired from her employment between 2005 and 2010, and he could have received benefits under her policy but turned them down because he believed he was covered under Entergy’s plan.

This case clearly illustrates the importance of knowing ERISA law before claiming a benefit. ERISA rights result from Federal statutes and regulations issued by the U.S. Department of Labor. If a claimant doesn’t meet what’s required in that law and those regulations, the claimant is most likely going to fail in seeking benefits.

Gearlds is a prime example of ERISA litigation that seems to defy common sense. Mr. Gearlds was clearly misled, whether by intention or negligence, by his employer, to do an act which he would not have done if he were properly informed. Yet, because ERISA requires strict interpretation of an employer’s plan, he has so far been denied relief while his employer is permitted to deny him benefits which the employer told him he had.

In ERISA, the plan is the lodestone for benefits. Not only that, under ERISA, the plan administrator interprets the plan and decides what the plan covers. And, courts give deference to the administrator’s decision so long as it is not “arbitrary and capricious”.

What a person can ordinarily do with his property may not hold true if the property is an insurance policy or benefits covered by ERISA. To be certain that your wishes are carried out, the plan administrator’s approval must be obtained.

Otherwise, the administrator may reject what you want to do and your beneficiary may be forced to go without your largesse.



Be Careful With ERISA


A recent decision of the 7th Circuit Court of Appeals underscores a couple of issues of interest to ERISA claimants and attorneys:

* You just can’t “wing’ it when your legal right is created by a statute.
* Even a seemingly minor procedural miscue by a claimant can get the claim booted out of court, with prejudice.

In Edwards v. Briggs & Stratton,2011 WL 1602061, a claimant was 11 days late in filing her disability appeal with her plan administrator even though there had been ongoing communication between her and the administrator. The administrator rejected her appeal on “lateness” grounds and the Federal District Court and Seventh Circuit agreed, taking the position that the failure to file on time constituted a failure to exhaust administrative remedies and dismissing the case with prejudice.

We are all familiar with attorneys advertising their experience in their particular practice area, and why clients need that experience. Some of those claims are valid and some are pure advertising hype. The Edwards case demonstrates that such a claim is valid in ERISA matters.

In Edwards, the court found that Ms. Edwards made several procedural errors which “deep-sixed” her claim. She was late in advising that she intended to appeal, and also in providing certain information required for her claim. Although, it might seem obvious to an ordinary observer that she was appealing a decision of the plan administrator, she did not make her intentions absolutely clear, with this “wiggle” room, the administrator and, ultimately, the court, found that she had not actually appealed within the time frame required by Federal regulations, and, therefore, she had failed to exhaust her administrative remedies. The court dismissed her claim with prejudice.

Although the court could have exercised discretion and give her some leeway since she was only 11 days late in providing what the court was looking for, the court withheld its discretion and dismissed her case with prejudice.

This case illustrates that ERISA law is one of those areas in which experience is generally a “must”. ERISA disability claims are created by statute. ERISA regulations promulgated by the Department of Labor along with the statute itself, cover thousands of pages in the United States Code and the Code of Federal Regulations.

It is a “picky” law which starts off giving the plan administrator deference in decisions. We have to assume that administrators will always give themselves and the plan the benefit of doubt, so a claimant a starts off behind the 8-ball.

Add to this the regulatory time limits and other technical requirements which must be met to pursue a claim, and it’s easy to see how those, unfamiliar with the timing and format of claims, can trip over the requirements. And, once they trip, as shown in Edwards, they may be out forever.

Much about ERISA is counterintuitive, so just exercising sound, common sense judgment, will not always win the day for a claimant. We don’t mean to enshrine ERISA claims work in some kind of voodoo mysticism, but we do mean to point out that ERISA practice requires more than a cursory reading of a few sections of the ERISA statute and regulations to become proficient.

If one prosecutes ERISA disability insurance claims, one needs a decent knowledge of other statutes which affect claims, such as HIPPA and COBRA. Experience and a good working knowledge of general insurance law are also a plus. It is not enough to just prove a medical disability in a disability income insurance matter. The claimant must also show that the disability prevents the claimant from performing the duties of his or her usual occupation. Sometimes the policy will require proof that the claimant is unable to perform the duties of almost any occupation.

As the Edwards decision shows, ERISA litigation should not be a hit or miss undertaking, where a claimant or an attorney can read a few cases to “get the feel of it” and then go winging along to a successful conclusion.

What you don’t know about ERISA can kill your claim. Just ask Augusta Edwards.



Is There ERISA Hope?

It was both startling and refreshing last Tuesday (September 28, 2010) to watch the U.S. Senate Finance Committee hold a hearing on the real problems claimants have with ERISA, a statute which, when enacted by Congress in 1974, was supposed to be the “greatest piece of legislation for the working man since Social Security”.

The inequities which have developed through the years since then, seem to have arisen from how courts have interpreted the legislation. Courts seem to have bought the insurance company party line that without the insurance companies having an advantage (“deference’), the ERISA system would fall apart, disability income insurance would be priced out of the market and there would be no insurance for anyone.

Although there seems to be very little chance that the present contentious Congress will make any real effort to clarify ERISA to undo the damage courts have done to claimant’s rights, the remarks of Finance Committee Chairman, Senator Max Baucus, offer a glimmer of hope.

At the hearing, Committee Chairman Baucus said there was a huge ERISA problem and that he was disturbed by the testimony he heard at the hearing. He cited what he called “abusive insurance company tactics” and the conflicts of interest inherent in the system. A promise by him to compare what happens to long term disability claims under ERISA and Social Security, seems to offer a way bring the ERISA claims system more in line with what Congress said it intended in the legislation.

Those of you who follow this blog are aware of the one-sided way courts seem to look at ERISA, particularly as it pertains to LTD claims. The litany of cases which support this statement include the leader, Firestone v. Bruch, 489 US 101 (1989) , which decision unwittingly bestowed upon the insurance industry an undeserved mantle of impartiality and evenhandedness.

For whatever reason, in Firestone, the U.S. Supreme Court decided that if an employer in an ERISA plan gives discretion to the administrator of the plan (usually an insurance company selected by the employer), a claimant is not entitled to an actual trial by an impartial judge. Firestone decrees that a court may only “review” the insurance company denial of benefits on the record and may overturn a denial only if the claimant proves that the denial was “arbitrary and capricious”, after giving the insurance company position “deference”. What a tough, tough hurdle!

The policy behind the decision appears to be that it is more important to keep a lid on insurance costs than it is to provide employees with a fair and impartial consideration of their right to a fair and Impartial consideration of their right to benefits when they are stricken with a long term, disabling illness or injury

Talk about putting the fox in charge of the hen house! Giving this devastating power to insurance companies has led to a rash of cases in which obviously disabled persons have been denied benefits despite being clearly unable to work. The Firestone decision was the keystone in ERISA law which unconscionably built a bridge of profits for insurers on the blighted lives of totally ill and injured workers and their families.

To add insult to injury, the courts consistently failed to recognize the damage Firestone had caused, and usually refused to grant discovery to claimants who needed the discovery if they were to have any hope of obtaining evidence that the denial was “arbitrary and capricious”.

For years, until MetLife v. Glenn, 554 US 105 (2008) , courts seemed blind to the inherent conflict of interest insurance companies had judging the validity of a claim they would have to pay.
Insurance companies took advantage of this Firestone-induced exalted position by engaging in all sorts of shady tactics that made a disability claimant’s position as underdog even more daunting:

• They established stables of I.M.E. doctors who would deny claims from behind a desk, without ever seeing the claimant, while at the same time earning the major source of their annual annual income from doing so.
• They paid their employees bonuses and other financial incentives based on the number of claims the employees terminated or denied.
• They found ways to delay, delay, delay, while insureds, unable to work and earn money, burned up their resources just to try to go on living.
• They insisted that claimants apply for Social Security disability benefits so they could offset the Social Security benefits against their own benefit obligation, then ignored those same Social Security disability awards when they later decided they to terminate their own obligation to pay benefits.
• They did all of these things without facing any penalty for their egregious conduct. 

So, after all of these years of insurance companies being in the driver’s seat, one can see why this Senate Committee hearing raises hopes for ERISA claimants. But, don’t become too excited. In addition to the problem of legislative inertia, the insurance companies have yet to marshal their lobbyists, publicists, advertising forces and friends in Congress to their cause, which is – keep the status quo.

As we have said several times before, the key to today’s world is: Follow the money!

And, the money is all on the insurance companies’ side.