Most employer-sponsored disability plans — except for those sponsored by public employers and religious organizations — come under the Employee Retirement Income Security Act (ERISA), which creates an exclusive federal regulatory scheme for benefits claims and subsequent challenges.
ERISA was created with the intention of protecting plan participants from the abuses of plan administrators, but over time, ERISA has actually developed into something of a headache for the plan participants it was originally meant to protect. If your plan is ERISA-governed, for example, then you must fully exhaust your administrative remedies before pursuing civil action against the plan administrator or insurer — this can extend the timeline of the dispute and keep you in a vulnerable position for longer.
Additionally, ERISA preempts bad faith actions against insurers, thus eliminating a significant recovery option for insured plan participants whose insurers have mishandled their disability claims.
Though in the past, federal circuit courts — when reviewing denial of benefits cases governed by ERISA — used to defer to the decisions made by the plan administrator (pursuant to the “abuse of discretion” standard), the law in many states has since changed significantly.
Many states have prohibited the use of discretionary provisions (transferring responsibility for claims handling and determinations from plan administrators to insurers).
In these states, ERISA jurisprudence now requires that the court review the denial of benefits decision in accordance with the “de novo” standard, which requires that the court review the denial of benefits as if no prior decision had been made (pertaining to the facts at-issue).
By reviewing denial of benefits claims de novo, the court empowers ERISA beneficiaries to a significant degree — you must present the facts that support your claim, and the court will evaluate whether you should have received benefits in accordance with the language/terms of the applicable plan.
Yes, absolutely — in fact, concern over plan mismanagement by fiduciaries is what led to the enactment of ERISA in the first place. ERISA fiduciaries have strict duties to act in the best interest of plan participants. Failure to do so could expose them to substantial civil liability under ERISA.
Unfortunately, bad faith claims are not actionable under ERISA.
ERISA is a federal law that pre-empts state bad faith laws, including those of Illinois. If your disability benefits claim has been mishandled by the insurer, and ERISA applies, then you will not be entitled to bring a claim for bad faith. This can undercut your ability to obtain maximum damages in extreme cases, as bad faith claims often lead to significant damages (and sometimes, courts award punitive damages, which can further multiply the amount received).
In some limited cases, however, you may be able to bring a separate fraud claim against certain defendants. You’ll want to consult a qualified ERISA disability attorney in Chicago for an evaluation of your bad faith claims and how you might be able to strategize around the pre-emption issue.
Many common law fraud claims are pre-empted by ERISA as well — such a claim might only avoid pre-emption if you can show that the defendant owed you (and violated) a duty independent of the ERISA-covered plan.
Every plan is different and may impose different procedures. For example, some plans may extend or contract the typical deadlines. Others may have different factors for determining the person who will be reviewing the claim denial.
During the administrative appeal process, you will send comments and evidence that supports your argument that the claim should have been accepted and benefits awarded. In doing so, you will have to evaluate the plan documents, as well as other relevant documentation — such as medical records, file physician review reports, and vocational opinions. Once a decision has been made (regarding your appeal), you will receive a written decision that describes the specific reasoning on which the denial (or acceptance) is based.
At this point, if the administrative appeal process has led to a denial (in whole or in part), you will have exhausted all available remedies and will be entitled to bring a civil action against the defendants.
Generally speaking, no.
Although ERISA benefits claims can be brought in many courts against both the insurer and the plan administrator (your employer)
You are entitled to litigate your ERISA disability benefits claim, but you must first exhaust all the administrative remedies that are available to you.
In the context of ERISA, this generally requires that you challenge the adverse decision of your insurer through the administrative appeals process. The administrative appeals process — and its mechanisms — can vary quite significantly from plan-to-plan, but if you do not go through the applicable administrative appeals process, you will not have the right to sue for benefits/compensation pursuant to litigation.
Your benefit plan is governed by ERISA if it can be reasonably defined as an “employee welfare benefit plan,” which means that the plan is employer-sponsored and provides employee benefits that may include health, disability, retirement or life insurance benefits.
If your employer purchased group disability insurance through an insurer, for example, and you are provided coverage through that plan, then in all likelihood, ERISA governs those benefits.
Two prominent exceptions exist:
The Employee Retirement Income Security Act (ERISA) was enacted in 1974 with the intention of protecting the assets and rights of plan participants in employer-sponsored benefit plans.
Since its enactment, ERISA protections have been expanded.
The Employee Retirement Income Security Act (ERISA) was established in the 1970s with the intention for providing additional protections to benefits plan participants from the misconduct of Plan Administrators, among others. In the context of today’s insurance disputes, however, ERISA coverage may ultimately give policyholders fewer protections than non-ERISA plans.
ERISA application may not always be a negative, however. ERISA plan participants in some circuit courts can have the denial of their benefits claims evaluated under the de novo standard, which means that the court will not defer to the factual determinations of the Plan Administrator. Instead, the denial of benefits will be considered with a “blank slate,” given the evidence.
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