Since the inception of the Employment Retirement Income Security Act in the 1970's it has undergone a few legislative changes and has resulted in thousands of legal opinions across the country. Second to the First Amendment of the US Constitution it is probably the most debated law / regulation of modern time. When it comes to short and long term disability insurance claims governed by ERISA, the opinions issued from Federal Judges on a weekly basis are unpredictable.
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. In general, ERISA does not cover group health plans established or maintained by governmental entities, churches for their employees, or plans which are maintained solely to comply with applicable workers compensation, unemployment, or disability laws. ERISA also does not cover plans maintained outside the United States primarily for the benefit of nonresident aliens or unfunded excess benefit plans. ERISA does not require any employer to establish a pension plan. It only requires that those who establish plans must meet certain minimum standards. The law generally does not specify how much money a participant must be paid as a benefit.
As a disability insurance lawyer that has handled thousands of ERISA disability insurance cases it is disturbing to continuously read the inconsistent and often pro-insurance company decisions.
ERISA disability insurance claims are always handled in Federal Court and they require a lot of work from both the lawyers involved and the Judge that is required to review the case.
Just like everything else in life, there are Judges that do a good job and really take the time to review a disability denial, and there are Judges that look for the easy way out and rush to make an uneducated decision. ERISA disability claims require courts to constantly review the latest case law and to understand the fiduciary obligation of a Plan administrator when reviewing a disability claim.
ERISA Plan administrators have a fiduciary duty to protect the rights of their plan participants and to conduct a full and fair review. Unfortunately most Plan Administrators, which are usually the insurance company employees, are looking for ways to deny a claim rather than approve a claim. To make matters worse, most disability policies have discretionary clauses, which give the insurance company plan administrator the right to interpret the terms of the plan and make the decisions they feel are appropriate. As a result of the discretionary clause, courts are required to give deference to the finding of the insurance company. This means that in an ERISA disability case containing a discretionary clause, the Court must make a finding that the disability carrier abused their discretion or acted arbitrarily and capricious. Approximately 90% of the litigated ERISA disability cases contain discretionary clauses.
There is an incredible amount of power given to these insurance companies, yet in most ERISA cases the Federal Judges will remand the claim back to the insurance company if they think the insurance company acted unreasonably in making a claim determination.
The court has the power to award benefits, yet they usually remand the case. The remand is a temporary success as it gives the claimant a lifeline, but it is not the ultimate success of having benefits paid. In most cases, Judges should be making final decisions and stop giving the insurance companies so many chances to review a claim a 3rd and 4th time.
While these multiple reviews are going on, a claimant is forced to sit on the sideline with no benefits and the insurance company continues to bleed out the claimant. If a Court finds that an insurance company abused their discretion or acted unreasonably, then the Claimant should be paid all past due benefits and the company can continue to evaluate the claim. Instead, our ERISA laws have been shaped so that the Insurance company gets multiple chances to review the claim and the Claimants needs to sit back and wait.
The ERISA laws need to be changed to allow a Jury to make a determination of disability benefits owed and Federal Judges need to stop remanding these ERISA disability claims. Insurance companies should know how to handle a claim and they should not be given the opportunity to correct the same unreasonable claim tactics that they have been using for years.
5 - Senate Finance Committee Chairman Max Baucus will convene a hearing to examine difficulties workers face in securing benefits they are entitled to from private long-term disability insurance plans...