The Employee Retirement Income Security Act (ERISA) of 1974 was federal legislation designed to protect the retirement plans of most Americans. However, it also granted immunity to insurance companies that issue group disability benefits and bars state-law based claims for bad faith, violations of state Unfair Claims Settlement Practices laws, mental anguish and punitive damages.
ERISA allows insurance companies to play “hard ball” on claims, as there is no downside for insurance company misconduct. The most the insurer will ever have to pay is the amount of benefits owed, although some Courts will award attorney fees and/or interest. But in most ERISA governed claims, Courts will only overturn the insurer’s decision if the claimant proves that the denial was “arbitrary and capricious.” This is the highest burden of proof in civil cases.
Most Short Term Disability (“STD”) and Long Term Disability (“LTD”) insurance claims are governed by ERISA. However, church and governmental employees are exempt from ERISA and their disability claims are governed by the Contract Law of the State of their residence. There are also limited “safe harbor” provisions which exempt certain disability insurance claims when the employee paid 100% of the LTD premium and the employer had a minimal role in providing the insurance coverage and, essentially, just allowed the insurer to use its payroll deduction system.
For claims governed by ERISA, the playing field is not even. The employers and insurance companies are given broad deference by the civil justice system and claimants face an uphill battle if they wish to challenge an adverse employee benefits decision.
Whether of not your disability insurance claim is governed by ERISA, you need an experienced disability lawyer who knows the insurance companies’ tactics and games and who can maximize the chances of winning you appeal and/or obtaining a favorable settlement if litigation is commenced. Call now to discuss your situation, free initial consultation.