Mentioning the acronym ERISA to just about anyone will likely solicit a perplexed stare. Yet, whether working in blue-collar jobs or white-collar service work, ERISA is implicated in the great-majority of claims for benefits (including disability, life, and health insurance) that is made under an employee benefit-plan.
Passed in 1974, the Employee Retirement Income Security Act governs benefit-plans established or maintained by private employers. Congress enacted ERISA, in part, to "protect . . . the interests of participants in employee benefit plans and their beneficiaries" by setting out substantive regulatory requirements for employee benefit plans and to "provid[e] for appropriate remedies, sanctions, and ready access to the Federal courts."[i]
Notwithstanding Congress' goal in enacting ERISA, the case-law has evolved rather unfavorably for, if not with hostility towards, beneficiaries and participants of ERISA plans. Yet, despite the difficulties facing the ERISA plaintiff-practitioner, practicing in this field can be quite rewarding. The purpose of this paper is to impart basic, but indispensable knowledge on effectively handling long-term disability ("LTD") benefits claims and litigation under ERISA.
Indeed, ERISA applies in most situations where a private employer offers benefits to its employees, but it is important to decipher at the outset whether ERISA governs your client's claim.
a. Governmental plans (as defined in §1002(32));
b. church plans (as defined in § 1002(33));
c. plans maintained outside of the United States.
Under the Department of Labor ("DOL") regulations, "normal compensation" paid to an employee as a result of a disability and from "the employer's general assets" does not constitute an employee welfare benefit plan.[ii] Referred to as "payroll practice", such plans are not regulated by ERISA. Focus on the source of funding and not the compensation amount.[iii]
Individual insurance purchased by the insured is not ERISA-governed. Likewise, plans without employees where the only participants are self-employed individuals, sole-proprietors, or partnerships are not typically ERISA plans.[iv] Lastly, look for "safe-harbor" plans. According to Federal Regulations, certain types of group insurance plans offered by an insurer to employees are not covered by ERISA if all four enumerated elements, identified at 29 C.F.R. 2510.3-1(j), are present.
First, request a copy of the disability insurance policy and applicable plan documents, including the Summary Plan Description (this is a summary of plan terms in ordinary language). Although ERISA draws from trust law, the Supreme Court has recently placed heavy emphasis on the plan itself, remarking twice in the past two years that "the plan is at the center of ERISA".[v]
Requests must always be made in writing and directed to the plan administrator. The plan administrator has 30 days to comply with a written request for plan documents, and a civil monetary penalty of up to $110 per day[vi] may be imposed for failure to timely produce the requested information.[vii]
Also obtain, and review, the administrator's claim file. A claimant must be "provided upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits."[viii]
Promulgated pursuant to sections 503 and 505 of the statute, the DOL claims procedure "set forth the minimum requirements for employee benefit plan procedures pertaining to claims for benefits by participants or beneficiaries".[ix]
Among other procedural requirements, the claims procedure establishes the following deadlines for disability claims:
a. Appealing a Benefit Denial or Termination
Claims administrators must provide written notification of a denial, setting forth, among other things, the specific reasons for the denial and a description of the disability plan's review procedures.[xiii]
Preparing your client's appeal (to the administrator) as though you are anticipating litigation increases the chances of approval as well as ensures the development of a complete record. Submit a written appeal that refutes the purported basis for denying benefits and provide (and continue to provide) any evidence of disability, such as:
(1) medical records:
(2) a narrative authored by your client's physicians;
(3) medical questionnaires (prepared by you and completed by your client's physicians)
(4) sworn statement of your client's physician(s);
(5) a prescription history; and
(6) video-footage depicting your client's disability (where advantageous);
If your client was approved for social security disability benefits, request the entire Social Security Administration file and forward it to the insurance company. It likely contains a treasure-trove of evidence of disability. Consider, also, the utility of having your client undergo a functional capacity evaluation ("FCE"), neuropsychological evaluation, or other medical testing to document his or her restrictions and limitations.
If a participant or beneficiary believes that benefits due him or her under the plan were not provided, then he or she can file suit under § 1132 (a)(1)(B). A participant or beneficiary can also bring suit to "enforce his rights" under the plan, or to "clarify his rights to future benefits" if he believes it is called into question.[xiv]
Insurance companies are quick to note the remedies available for wrongful denial of benefits are limited to benefits that should have been paid in the first place.
While ERISA itself contains no statutory exhaustion requirement, courts of appeals have uniformly required participants exhaust internal review before bringing a claim for judicial review under § 502(a)(1)(B).[xv]
There may be limited instances where legal action can be initiated without seeking "administrative" review, such as "when resort to the administrative remedies would be futile or the remedy inadequate,"[xvi] or, in situations where a plan has failed to establish or follow claims procedures, a claimant shall be "deemed to have exhausted the administrative remedies".[xvii]
An action "may be brought in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found, and process may be served in any other district where a defendant resides or may be found."[xviii]
With the purpose of ERISA being to provide a uniform regulatory regime over employee benefit plans, any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted.[xix]
There is, however, a "savings clause", which acts to preserve state insurance laws that regulate insurance from the vast preemption of the statute.[xx] Note: the "savings clause" does not prevent preemption if a plan is self-funded (as opposed to insured).
Once a topic of great debate, district courts throughout the nation have increasingly shown a tendency towards permitting reasonable discovery following the Supreme Court's decision in Metropolitan Life Insurance Co. v. Glenn in 2008, particularly as it pertains to conflict of interest.[xxi] In Glenn, the Supreme Court held that entities that both fund ERISA plans and conduct benefit determinations have a conflict of interest.[xxii]
Nevertheless, many ERISA defense attorneys continue to argue there can be no discovery where the applicable standard of review is the arbitrary and capricious (also known as the abuse of discretion) standard.[xxiii]
In Firestone Tire & Rubber Co. v. Bruch, the Supreme Court unanimously held that district courts should review de novo benefit decisions made by an administrator.[xxiv] However, the Court also stated that trust principles make a deferential standard of review appropriate when a trustee exercises discretionary powers (i.e., where the plan gives the administrator or fiduciary discretion to determine eligibility for benefits or to construe the terms of the plan).[xxv] With that, ERISA defendants could, and did, insert self-serving language in the plan that grants the administrator discretion. Today, the great majority of ERISA plans and/or disability policies contain the requisite language to trigger the deferential arbitrary and capricious standard.
Under this standard of review, by and large, the only evidence the court will review is that found in the "administrative record" compiled and prepared by the administrator during the claim review process, and with the court giving deference to the administrator's decision, your client prevails only if the court finds the decision to be unreasonable.
Far too often, the deference given to ERISA defendants proves fatal to recovering benefits. For this reason, development of the record during the claims process is crucial to success in the district court.
Since ERISA is generally viewed to be an action in equity, there is no right to a jury trial.[xxvi]
Attorney fees and prejudgment interest are left to the sound discretion of the court.[xxvii] ERISA also contains a fee-shifting provision.
1. Presumably because of agency law overlap, ERISA defendants often attempt to invoke a perception of claims and appeals decision-making akin to neutral, unbiased governmental administrative agencies. However, the Supreme Court has made clear that the dual role of administrator of claims all while serving as the insurance company paying claims out of its own assets create an inherent conflict of interest.[xxviii] Remind the court.
2. Be mindful of the limitations period to bring legal action in the plan/disability policy. Recently, the Supreme Court held that contractual limitations provisions in ERISA plans are enforceable, even those that begin to run before the claimant has exhausted mandatory appeals, so long as it is not unreasonably short or a controlling statute preempts.[xxix]
3. Disability plans/policies are drafted with language permitting an "offset" of disability benefits by other benefits, including social security and worker's compensation benefits. Clients should be advised that an overpayment of ERISA disability benefits may occur.
[i] 29 U.S.C. § 1001(b).
[ii] 29 C.F.R. § 2510.3-1(b)(2).
[iii] Cal. Div. of Labor Standards Enforcement v. Dillingham Constr., 519 U.S. 316, 326-27, 117 S. Ct. 832, 136 L. Ed. 2d 791 (1997) (noting the importance of the source of funding as a distinguishing feature between ERISA plans and non-ERISA plans throughout Department of Labor regulations).
[iv] 29 C.F.R. 2510.3-3(b).
[v] Heimeshoff v. Hartford Life & Acc. Ins. Co., 134 S. Ct. 604, 612, 187 L. Ed. 2d 529 (2013)(quoting US Airways, Inc. v. McCutchen, 133 S.Ct. 1537, 1548, 185 L.Ed.2d 654 (2013)).
[vi] As required by the Debt Collection Improvement Act of 1996, the $100 limit has been increased to $110 for violations after July 29, 1997. 62 Fed. Reg. 40696.
[vii] ERISA § 502(c), 29 U.S.C. §1132(c).
[viii] 29 C.F.R. § 2560.503-1(h)(2)(iii)
[ix] 29 C.F.R. §2560-503-1(a).
[x] 29 C.F.R. §2560-503-1 (f)(3).
[xi] 29 C.F.R. §2560-503-1 (h)(3)(i).
[xii] 29 C.F.R. §2560-503-1 (h)(4)(i)(1) and (3).
[xiii] 29 C.F.R. §2560-503-1 (g).
[xiv] 29 U.S. Code § 1132.
[xv] Heimeshoff, 134 S. Ct. at 610 (citing LaRue v. DeWolff, Boberg & Associates, Inc., 552 U.S. 248, 258–259, 128 S.Ct. 1020, 169 L.Ed.2d 847 (2008)).
[xvi] Oliver v. Coca-Cola Co., 497 F.3d 1181, 1200 (11th Cir. 2007), vacated in part on petition for reh-g, 506 F.3d 1316 (11th Cir. 2007).
[xvii] 29 C.F.R. § 2560.503-1(l); Coats v. The Guardian Life Ins. Co. of America, 2008 U.S. Dist. LEXIS 7014, *6-7 (M.D. Fla. 2008).
[xviii] 29 U.S. C. § 1132 (e)(2).
[xix] Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, at 54-56, 95 L. Ed. 2d 39, 107 S. Ct. 1549; see also Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 143-145, 112 L. Ed. 2d 474, 111 S. Ct. 478 (1990).
[xx] 29 U.S.C. § 1144(b)(2)(A).
[xxi] 128 S. Ct. 2343, 2351 (2008).
[xxii] Id. at 2346.
[xxiii] For an analysis of the scope of discovery in the various circuits post-Glenn, see Confusion Demands Simplicity: Applying FRCP 26 to ERISA Conflict of Interest Discovery Requests, J. Bennett Lebsack, 27 ABA Journal of Labor & Employment Law 121 (2011).
[xxiv] 489 U.S. 101, 115 (1989).
[xxv] Id. at 111.
[xxvi] See e.g., Blake v. Union Mutual Stock Life Ins. Co. of America, 906 F.2d 1525 (11th Cir.1990).
[xxvii] 29 U.S.C. § 1132(g).
[xxviii] Metropolitan Life Ins. Co. v. Glenn, 128 S. Ct. 2346 (U.S. 2008).
[xxix] Heimeshoff, 134 S.Ct. 604 (2013).