Speak Very Clearly in ERISA

A recent line of court decisions has been placing ERISA plan drafters under a heightened duty to speak very plainly if they want to have courts uphold plan administrator discretion in making disability decisions. The importance of discretion; it will determine whether a reviewing court applies a de novo standard of review to the evidence in a case, or if the court must find an abuse of discretion to overturn a plan administrator’s decision.

In Cosey v. Prudential, 2013 WL 5977151, 4th Circuit (2013), the Fourth Circuit found that ERISA plan language stating that benefits will be paid to a claimant who “…submit(s) proof of continuing disability satisfactory to Prudential…” was ambiguous and therefore failed to grant the necessary discretionary power to the administrator.

Ms. Cosey offered a mixed bag of medical opinions to support her claim of both short and long term disability. Most of her complaints involved her own reported symptoms, with very little objective proof.

The Federal District Court below had found the plan language offered the degree of certainty necessary to give the administrator’s discretion in ruling on a claim. In fact, the District Judge bootstrapped the language so that the administrator could even require objective evidence to uphold a claim for disability even though there was no such requirement in the policy.

The Fourth Circuit Court of Appeals strongly disagreed, finding the plan language lacked the clarity ERISA requires to confer discretionary power in the administrator.

The major fault in the language, the Court found, was that “proof satisfactory to us” is ambiguous. It can mean proof must be provided in a certain form and the wording does not clearly confer discretion to the administrator to make a decision on the merits.

The extraordinary part of the opinion to our mind was the Court’s concern that an employee may not understand the meaning of the language in the plan and that an employee may make a choice of employer based on whether a plan gives an administrator’s decision deference.

In reality, such a chain of events is so far from what actually happens in real life that it makes us wonder how courts can conceivably think that an employee carries any weight in the ERISA plan his employer enters into. Further, it suggests a degree of sophistication regarding the nuances of ERISA jurisprudence that most laymen, even most lawyers, simply do not possess.

The insurance contract portion of an ERISA plan is not a contract the employee bargains for. It is a contract of adhesion. It is in place at the time of employment and the employee either takes it or leaves it. There is no input from the employee which can change its terms.

That’s why we are upset when the Supreme Court justifies, as it did in U.S. Airways v. McCutchen, 133 S. Ct. 1537 (2013), taking away important equitable remedies from employees on the grounds that the insurance contract is something they had a hand in bargaining for.

The decision in Cosey is to be applauded. Employers and insurance companies have all the say in the wording of an ERISA plan and its supporting insurance policy. It should be done correctly.

The worrisome part of Cosey is that some judges still think employees have any influence or knowledge of the ERISA plan and insurance policy which covers them. This is absolutely not so.

To believe it is so, gives the wrong slant to deciding future ERISA cases.





In ERISA, Go It Alone At Your Peril

Every night, before going to bed, every disability insurance company executive prays for each ERISA claimant to go it “alone” without a lawyer, in filing a disability claim. This is especially so if the claim is based upon a mental or nervous condition.

Why? Three reasons. First, the prosecution of such a claim requires knowledge of a highly technical law which is sometimes counterintuitive to common sense. What you might expect is not what necessarily what you get with ERISA. Secondly, because insurance companies have developed, down through the years, an arsenal of strategies which surprise the uninitiated and can sink an ERISA claim before it even gets started. Thirdly, because such claimants may be impaired by their mental condition, they are even more vulnerable than most to the rigid, technical requirements of pursuing an ERISA claim.

Some people seem to have an intuitive dislike for dealing with an attorney. Likewise, some attorneys give good cause for people to have such feelings. But, at bottom, people hate to pay attorney fees unless they think they are getting a real benefit. Insurance companies know and encourage this feeling so that ERISA claimants will often go it alone into an area of law filled with land mines and booby traps.

The ERISA statute, 29 USC, Sec. 1001, et seq., has been around since 1974. It has developed an encyclopedia of decisions, some very technical, interpreting the meaning of the statute in those 40 years. Insurance companies have followed these decisions religiously, most times as a party to the litigation which produced the decision. On the other hand, you, the claimant, are likely to be totally unfamiliar with ERISA, or the way courts have interpreted and applied it.

Add to this mix that an ERISA disability involves a person who can’t work, is sick or injured, is probably under severe financial pressure -- and you can see that the cards are stacked in favor of the insurer. Plus, if the disability is psychiatric, this may add a new dimension to the person’s ability to withstand the rigors of making such a claim.

If the claim is based on a psychiatric condition, a lawyer should have experience with this type of issue. Not only are the medical questions different, requiring specialized knowledge of these types of illnesses, but the relationship of client to attorney also may require a special “touch” to be effective.

Some people think an ERISA claim is similar to a Social Security disability claim. Not so. The fundamental difference is in who decides the claim.

In Social Security, it is an impartial judge whose job it is to weigh the evidence and then come to an impartial decision. The judge has no axe to grind.

In ERISA, it is a plan administrator who is employed by or closely affiliated with the same insurance company which has been fighting your claim all the way and will have to pay the claim if the decision favors you. The difference is obvious.

When you have an ERISA claim you have to decide how to pursue it. You can decide to go it alone and take your chances that without the requisite knowledge you’ll be able to work your way through. Or, you can retain a lawyer who has the experience necessary to help you work your way through. When you make the decision, give some thought to the stakes involved and avoid being penny wise and pound foolish.

It’s your call.








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.



Post The ERISA Plan

One way to make ERISA easier for employees to understand would be to post the employer’s plan online where they can see what protections they are supposed to get. Airing out the protections and restrictions of employer purchased insurance policies would make it easier for employees to know their coverages and limitations, and is now a common practice for many larger employers.

This would bring the reality of the contractual relationship of employees a little closer to the harsh reality created for them in U.S. Airways v.McCutchen, 133 S. Ct. 1537 (2013). If the fair reach of Equity is precluded by the employee’s supposed agreement with the terms of an employee welfare benefit plan, the employee ought to have a reasonable way to know what the terms of the plan are.

Most of the time the plan details and the insurance policies which underwrite the plans are hidden away in the Human Resources Department of the employing entity. Even if an employee was aware of this situation when becoming employed, the employee would have to ask for a copy of the ERISA plan from the Human Resources department and would probably be given a copy of the Summary Plan Description (SPD) instead. The SPD is supposed to accurately convey, in simple language, the terms of the plan.

However, reading the SPD would do the employee little good because the Supreme Court has held that the SPD is not the plan and only the language of the plan itself is the law of any case brought under it, Cigna v. Amara, 131 S. Ct. 1866 (2011). So, even if an employee knows enough to ask for a copy of the plan, what he or she would probably get (the SPD) would not be the final say in any dispute.

In fact, even if the SPD is flat out wrong, the employee cannot rely on it if the SPD contradicts the plan itself.

With this in mind, we were absolutely floored by the decision in McCutchen. If the law of the case is the plan itself and the employee never sees it until requesting it (which is usually after a claim accrues), how did the Court base its decision on holding that the plan is what the employee bargained for and therefore they are bound by its terms?

McCutchen makes it more imperative that employees learn about their ERISA plan as soon as they can before or when they become employed. If courts are going to hold them to having bargained for the plan terms, in all fairness they should be able to know the terms of the bargain when they become employed.

Making the full plan available online seems the easiest way to accomplish this.




In ERISA, Do It NOW!!!


A recent case involving the Federal Employees’ Group Life Insurance Act (FEGLI) reminded us again of the way some Federal statutes, including ERISA, can defeat the intentions of a policyholder even though basic common sense might dictate otherwise.

This most important topic has received our attention several times before
but repeated reminders are warranted so that beneficiaries and their attorneys remain alert to the danger of not checking and updating ERISA plan documents pertaining to those beneficiaries.

Courts consistently hold that in ERISA cases, the ERISA plan documents are the one and only contract to be looked to in a dispute. What the plan says is the rule of law and must be followed when a question of plan administration arises. This is so even when it is apparent from the facts that the policyholder would have clearly wanted another outcome.

In this reminder case, Hillman v. Maretta, 133 S. Ct. 1943 (2013), Mr. Hillman had been married to Judy Maretta, and while he was married to her, he named Judy as the beneficiary of his FEGLI policy. Mr. Hillman divorced Judy several years later and then married Jacqueline Hillman to whom he was married at the time of his death.

Judy Maretta sought Mr. Hillman’s FEGLI policy benefits and because she was still listed on his policy as his beneficiary, Judy received them even though she was no longer his wife.

His wife, Jacqueline, sued under a Virginia statute which gave her rights to the policy benefits under the facts of this case.

As in similar ERISA cases, the Supreme Court ruled preempted Virginia’s statute and that the policy proceeds were to stay with the beneficiary listed in the FEGLI policy. The Court upholds the principle that in these types of disputes court should uphold the law as it was written by Congress and unless specifically exempted, the Federal law preempts state law.

The lesson for ERISA policyholders is clear: If you want to change a beneficiary or in any way alter what an ERISA plan calls for, DO IT NOW!!! If you die or become incompetent before you get around to making the change, forget about it. It won’t happen.

Whether it’s a tax plan, divorce, remarriage or some other event which requires a change in what an ERISA plan calls for, notify the plan administrator immediately and complete the necessary paperwork to effect the change.

To do otherwise clearly jeopardizes what you have in mind.



Relying On SPD In An ERISA Claim Is A "No-No"

An ERISA SPD (Summary Plan Description) is supposed to help employees understand the insurance protection they have from their employer by explaining that protection in plain English.

However, since the SPD is compiled by a person who may or may not have the needed abilities to read, understand and transcribe in plain English the complex language of an ERISA plan and its underlying insurance policies, the SPD may very well contain errors, misinterpretations and may even omit important requirements.

To rely only on the information in an SPD in making an ERISA claim is to court disaster. Proof of this is in Cigna v. Amara, 131 S. Ct. 1866 (2011), which holds that even when an SPD provides incorrect information, a claimant has no right to rely upon it. Only what is actually in the plan controls.

ERISA claims are dependent solely on the terms of the ERISA plan specific to each employer, regardless of what the SPD says. The plan has to conform to strict Federal regulations modified only by case law which pertains to ERISA.

The one consistent rule is that the specific terms of the employer’s plan itself are the only reliable guidelines for evaluating an insurance claim under an ERISA plan.

The result is layer after layer of complex, many time obtuse “legalese”, inserted in the plan by people who know exactly what they are doing. To most people, including some lawyers who don’t practice ERISA law, the plan may as well be written in a foreign language.

To determine whether an employee’s claim is covered by an employer’s ERISA plan, one must first read and understand the plan and the accompanying insurance policies. Only if the claim is covered by the plan will the claimant have a shot at succeeding.

In most cases an employee will never have seen a copy of the plan. He or she may not know where to find one. ERISA requires employers to furnish an employees with a copy of the ERISA plan when asked.

If circumstances are forcing you to think you might have to make an ERISA claim, getting a true copy of the plan and the insurance policy associated with it, should be your first order of business. Most employers make them available through their Human Resources departments. uman Resourcersd departmentsd.

When you get the necessary documents, if the language is a bit much or you think you don’t have the expertise, get help from a lawyer, preferably one who has experience with ERISA claims.

The SPD is OK for giving you a general overview of the ERISA coverage afforded you by your employer.

But, when matters turn serious, rely only on the terms of the ERISA plan and the insurance policy which supports it. To do otherwise may do you great harm.






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.