Why Does Federal Law Apply to My Disability Insurance Claim?
If you’ve researched disability insurance claims, you’ve probably noticed that the process varies depending on whether federal or Illinois law applies to your case. For example, under Illinois law, you can request a jury trial in a short-term or long-term disability lawsuit. However, this is not an option in federal court.
While you may prefer Illinois’ appeal process to the federal version, you can’t pick and choose your court. Instead, you’ll need to determine whether ERISA (Employee Retirement Income Security Act of 1974) applies to your case and preempts (overrides) our state’s laws.
At Bryant Legal Group, we guide disabled individuals through their complex legal claims. In this blog, we’ll explain the essentials of ERISA preemption.
What Is ERISA Preemption?
Usually, when federal law and state law come into conflict, federal law overrules any state laws that would otherwise apply. ERISA is the same as other federal laws in this regard — it contains a preemption clause, commonly called ERISA §514.
Congress enacted ERISA to provide more consistency and uniformity concerning employer-sponsored benefits. Lawmakers included a preemption clause to prevent significant variation between states when it comes to retirement and group benefits.
Under §514, the federal law overrides any state laws that relate to any employee benefit plan. This relationship can be either direct or indirect. Generally speaking, most issues involving your eligibility for disability insurance benefits will fall under ERISA if you have employer-sponsored short-term or long-term disability coverage.
- Related Article: 5 FAQs About Private Disability Insurance Claims
How Will ERISA Impact My Disability Insurance Claim?
Under ERISA, you must follow a strict claim process, which goes as follows:
- You file your short-term or long-term disability claim with the insurance company.
- If the company denies your claim, you must file an appeal with the insurer, usually within 180 days of the initial denial.
- If the insurance company upholds its denial, you can file a federal lawsuit. You cannot demand a jury trial or present new evidence during this lawsuit.
- If you win your federal lawsuit, you will receive the benefits you are owed, but you cannot get compensation for your pain and suffering or the insurance company’s misconduct.
In comparison, Illinois’s insurance law permits jury trials, bad faith insurance claims, and more types of compensation for those who win their claims.
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When Does Illinois Law Apply to My Disability Insurance Plan?
ERISA covers most employer-sponsored benefit plans, including healthcare, pension, and disability insurance. However, ERISA does not apply to:
- Private disability plans that you purchase individually
- “Church plans”
- Certain voluntary benefit plans
- Plans for federal, state, or local government employees
In these cases, state law typically will apply to your claims. If you’re a federal employee, you’ll file with the Federal Employees Retirement System (FERS).
ERISA’s Savings and Deemer Clauses
Additionally, there are some circumstances where Illinois law might apply due to ERISA’s savings clause. While §514 preempts most state laws, Illinois and other states still can regulate insurance companies and the “business of insurance.”
The courts have increasingly given states more power to regulate insurers under the savings clause. For example, Illinois and many other states ban discretionary clauses, which insurance companies use to limit a court’s ability to review a denial of benefits. Federal courts have upheld these bans under ERISA’s savings clause.
However, there’s even an exception to the exception. Under ERISA’s “deemer clause,” state regulatory laws typically do not control self-insured plans where the employer uses its own funds to provide and administer group benefits.
Statute of Limitations
Additionally, ERISA does not include a statute of limitations. Because the federal law is silent on this issue, Illinois law applies in most circumstances. In our state, you have 10 years to file your ERISA lawsuit in federal court unless your Plan Document says otherwise.
Bryant Legal Group: Client-Focused Disability Insurance Lawyers in Chicago
At Bryant Legal Group, we always take a practical, client-first approach to disability insurance law. From day one, we aim to educate and empower our clients, giving them the tools they need to make the best possible decisions about their claims.
If you’re not sure whether federal or state law applies to your claim, contact our experienced disability insurance lawyers today. We’ll help you interpret your policy and give you practical advice. To schedule your initial consultation with one of our attorneys, call us at 312-561-3010 or complete our online contact form.
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