What Is ERISA? How It Affects Your Long-Term Disability Insurance Claim
The Employee Retirement Income Security Act of 1974 (ERISA) is a complex body of federal legislation that governs almost all benefits workers receive from their employers, including disability insurance coverage. While there are notable exceptions, most employer-sponsored group short- and long-term disability insurance policies fall under the jurisdiction of ERISA.
The legislation offers you few protections as a policyholder and claimant, and works against you, and in favor of your insurer, in several important ways.
How ERISA Works in Your Favor in Long-Term Disability Insurance Cases
The federal government designed ERISA to prevent employers and benefits providers from exploiting employees. Therefore, the legislation imposes a number of requirements on disability insurance companies providing employer-sponsored long-term disability insurance coverage.
Remember, ERISA is a hugely complex body of legislation. While the protections it affords you may sound promising, insurance companies devote huge resources to finding ways to circumvent these requirements and employ teams of defense lawyers to fight ERISA pre-empted cases. Getting an Illinois ERISA attorney on your side is the best way to ensure that your disability insurance provider doesn’t exploit a legal technicality to wrongfully delay or deny your claim.
Under the terms of the legislation, your employer-sponsored long-term disability insurance provider is considered a fiduciary. This means the disability insurance company owes you certain responsibilities as a claimant and policyholder. Among these are a duty to act prudently and solely in your interest.
The “Full and Fair Review” Requirement
The legislation also guarantees you a “full and fair review” of any decision by your insurance company not to approve a benefits claim you submit. In recent years, the Department of Labor (DOL) made various amendments to the law to try and strengthen and clarify this requirement; these new rules have been in force since April 2018. They include stricter requirements around the level of detail in ERISA claim denials, a prescribed period within which you can respond to the introduction of new evidence by your insurance company, and a requirement that any expert used by your insurance company in your case be impartial.
If your disability insurance company does not adhere to these new procedural and regulatory requirements, you can file a lawsuit in federal court. This is an exception to the general rule, discussed below, that you cannot sue your insurer in an ERISA disability case prior to its making a decision on your claim at the administrative appeal stage.
The Duty to Share Information
ERISA requires long-term disability insurers to disclose to you any information that is relevant to your group policy. They must also share relevant information about your claim following a denial, including the reasons for the denial. You must fully and comprehensively provide all your medical, occupational and financial evidence regarding your case before your insurer’s final appeal decision.
If you succeed in a federal ERISA disability lawsuit, your insurer must usually cover your legal costs associated with the court action, per the terms of the legislation and put you back on claim, and pay your attorneys fees. However, your insurer generally does not have to reimburse the legal expenses you incur at the administrative appeal stage.
How ERISA Works Against You
ERISA is very favorable to insurance companies, and unfavorable to policyholders when it comes to group disability claim appeals.
When you file an initial ERISA disability claim for monthly benefits and receive a denial from your insurer, you generally must submit an administrative appeal to the company within a specified timeframe, usually six months. While this might seem like plenty of time, the administrative appeals process is highly demanding, and failure to comprehensively appeal can fatally damage your chances of coming away with monthly benefits.
This is because the administrative appeal is the only chance you get to submit the medical, occupational, and financial evidence that supports your claim. If your administrative appeal fails and you take your insurance carrier to federal court, you can only introduce as evidence the contents of your administrative record (that is, the evidence you submitted before the initial denial and what’s in your administrative appeal).
It’s important to note that, because of ERISA rules, you generally cannot sue your insurance company in court in relation to a denied claim prior to completing an administrative appeal. If you do reach that stage, you can only sue in federal court. These restrictions do not apply to individually purchased long-term disability insurance policies. If you wish, you may usually sue the provider of such a policy directly after receiving a claim denial.
Another quirk of the ERISA rules around long-term disability insurance claims is the fact you do not have the right to a jury trial, as you would in other situations. Instead, you and your insurer simply submit your evidence to the court and let the judge decide the case on that basis. You cannot introduce witnesses or expert testimony in court.
When To Call an ERISA Attorney
While the federal government penned the ERISA legislation with the intention of protecting employees, workers ended up at a disadvantage. If you file a claim on an employer-sponsored disability insurance policy and your insurer rejects it, you need to act quickly to compile a comprehensive appeal in advance of the application deadline.
Don’t wait around. Contact DarrasLaw today to schedule your free initial policy analysis or free claim assistance.