ERISA Disability Claims

 ERISA Disability Claims

ERISA stands for the Employee Retirement Income Security Act of 1974. ERISA is a federal law that governs employee welfare benefit plans and the remedies of participants in these Plans. ERISA was marketed and sold to Congress as a law that would encourage employers nationwide to adopt more welfare benefit plans and offer more benefits to their employees, because ERISA would act as a uniform body of law that would allow employers and insurance companies to predict how the plans would be interpreted and enforced throughout the country, rather than subjecting the employer to 50 different sets of states’ laws plus federal laws. In reality, however, ERISA was designed to protect insurers from losing money.

ERISA applies to all employee welfare benefit plans established or maintained by an employer engaged in commerce or by an employee organization representing employees engaged in commerce. As a practical matter, almost all long-term disability plans offered by a private employer are subject to ERISA’s rules and regulations.

Certain types of employee welfare benefit plans are not covered by ERISA:

1) Government Plans—this includes federal, state, county and local governments, including school districts, public universities, and public hospitals;

2) Church Plans—Employees of qualified religious institutions such as a church, synagogue, or mosque, as well as hospitals participating in a religious initiative, are generally exempt;

3) Self-Employed Individuals—Self-employed individuals are not governed by ERISA if only the individual and their family are covered;

4) Partnerships—If a plan covers only partners, but not employees, it is not governed by ERISA;

5) Pass Through Plans—Voluntary Plans where the employer contributed nothing to the plan, but merely acted as a “pass-through” for collection of premiums, are exempted from ERISA if all requirements are met. These plans are rare, because insurance companies usually require the employer to make some form of contribution towards the premium to set up the plan so that the insurer receives ERISA protection; and

6) Conversion Coverage—Even if an employee participates in an ERISA-covered plan, if that person’s employment ends and they have an option to continue their coverage, as long as the continuation premium was paid for by the employee, then the converted plan may no longer be covered by ERISA.

State Protections Do Not Apply to ERISA Claims

A claim for disability under an ERISA-covered plan is entirely different than a non-ERISA plan. The claim must be filed according to ERISA regulations and procedures, and the claim, if initially denied by the insurance company, must be appealed to that same insurance company. State laws governing ordinary insurance claims are preempted, which means they do not apply to an ERISA claim. This means that many state protections that were enacted in response to insurance companies’ sneaky tactics will not apply, including: bad faith claims, punitive damages, mandatory attorneys’ fees, statutory penalties, prejudgment interest for breach of contract, special damages, emotional distress damages, etc.

An ERISA claimant can only sue for what the insurance company should have paid as benefits. Although ERISA allows a successful plaintiff to recover attorneys’ fees, the award is discretionary and, as a practical matter, the plaintiff must endure years of hardship and stress to win a very difficult lawsuit before he or she even has a right to ask that an award of attorney’s fees even be considered by the court. Thus, the insurance company can hang on to its money for years and the worst thing that will ever happen to it is to have to pay the money that it should have paid from the outset. If you can disregard any sense of moral decency or the general notion of right and wrong for just a minute, it is hard to blame them for holding on to their money for as long as possible when there is no penalty for doing so.

ERISA removes the right to a jury trial. Insurance companies despise juries, because juries are made up of ordinary people with common sense who do not like it when faceless corporations pinch the downtrodden in the name of a small profit. This nation’s founders recognized the right to a jury trial as an essential tool to prevent American citizens from becoming subject to arbitrary abuses, and most states incorporated some form of the right to trial by jury into their state constitutions. Unfortunately, ERISA claims are not given the same protections as most other legal claims in the American legal system.

Discovery and Litigation

ERISA claims generally prohibit any discovery, including depositions of the claimant or the insurance company employees who participated in the investigation of the claim. The case is decided by a federal judge based upon the administrative record, which is the paper claims file that the insurance company maintains during the claims process. This is why the presentation of the claim during the administrative proceeding is critical. If the claimant does not ensure that the evidence needed to prove their claim is included in the claim file, then it cannot be presented to the judge during a lawsuit. Thus, the claimant cannot rely on the insurance company and its employees to gather a complete set of relevant medical records, which they will certainly volunteer to do; the claimant cannot rely on the insurance company and its employees to obtain an “independent” medical evaluation, which they will assure you they are doing; and the claimant cannot rely on the insurer to speak with the treating physicians. The insurance company’s representatives will certainly sound very convincing when they assure you that they are taking care of all of this, but once the claim is denied and the administrative record is lodged with the court, these things will be noticeably absent. By then, however, it will be too late to correct the record, and the insurance company will have a guaranteed win in its pocket.

Abuse of Discretion Standard of Review

In most ERISA claims, the plaintiff must prove to the court that the insurance company “abused its discretion” when it denied the claim. This is also called the “arbitrary and capricious” standard, because the insurance company’s decision will be upheld unless it was considered arbitrary or capricious. This means that the decision will be upheld unless the court determines that there was absolutely no evidence whatsoever upon which the insurance company could base its denial. As long as the insurance company can point to a single shred of evidence to justify its decision, the decision will be upheld. In a non-ERISA context, the plaintiff will prevail if he or she demonstrates that, “more likely than not,” they are disabled. This is not the case with an ERISA claim. It does not matter if the claimant points to five different opinions from treating physicians who have personally seen and treated the claimant over a number of years. If the insurance company can point to a single opinion by an “independent” medical examiner who simply reviewed the claimant’s medical records and concluded, without ever laying eyes on the claimant, that the person is not disabled, the insurance company will win.

https://www.dri.org/docs/default-source/webdocs/other/holmstrand_discretionary_clause_chart.pdf?sfvrsn=2

Treating Physicians’ Opinions Carry Little Weight

To make matters worse, there is no treating physician rule, unlike a Social Security Disability claim where the administration places great weight on the opinion of a claimant’s treating doctor. In an ERISA case, the insurance company can completely ignore the treating doctor’s opinion and rely on their own paper-examining doctor’s opinion exclusively. The insurance companies will use their own nurses and doctors to review the records and, not surprisingly, they often have an opinion that is drastically different than the claimant’s doctor. The Supreme Court has decided that a claimant’s doctor’s opinion should be considered as “a factor” in the insurance company’s determination, although it is not entitled to “great weight.”

Social Security Administration Decisions Carry Little Weight

Because Social Security has a different set of rules for determining disability, the insurance company can and often will ignore an award of benefits by Social Security. Thus, the insurance company can claim the benefit of the SSD award by offsetting any benefits it owes or has paid the claimant, while simultaneously distancing itself from any determination that the claimant is disabled.

Subjective vs. Objective Evidence

Insurers usually cite the lack of “objective” evidence to support a claimant’s condition as a basis for denial. Such justification disregards the fact that many conditions have no objective indicators. In other words, physicians cannot place the X-ray of a fibromyalgia patient on a light box and show where the condition exists. Physicians must rely upon trigger point examinations which focus on patients’ subjective reports. Physicians also rely upon their own professional judgment given their familiarity with the patient, the patient’s history, and their interaction with the patient throughout the course of their relationship to make their diagnoses. Nevertheless, insurers will explain away treating physicians’ opinions based upon these factors since they are considered subjective in nature and not verifiable by objective indicators.

Vocational Reviews

The insurance company’s medical reviewer will frequently conclude that, given the claimant’s condition, the claimant has certain physical and/or mental limitations. The insurance company will then provide these restrictions and limitations to a vocational analyst who will determine whether the claimant has the skills necessary to perform their own occupation or any occupation in the national economy. The analyst will do this using the claimant’s job description, past work history, and educational background. The vocational analyst will list jobs that are available in the economy, and that the available jobs will pay a certain percentage of the claimant’s pre-disability earnings. Not only do these reviews often place unrealistic expectations on the claimant’s work capabilities, they are entitled to rely upon jobs that exist in the national economy, even if such a job does not exist in the claimant’s local economy.

Residual Functional Capacity Evaluations

A claimant’s residual functional capacity (RFC) is a determination of the physical level of activity that person can sustain. It is the maximum remaining ability a claimant has to perform sustained work activities in an ordinary work setting on a regular and continuing basis (8 hours per day, five days per week)). The Dictionary of Occupational Titles and Social Security define work as sedentary, light, medium, heavy, and very heavy.

A “Sedentary” occupation requires minimal physical activity—a desk job, essentially, where the worker sits up to six hours a day, stands or walks up to two hours a day and lifts and carries up to 10 pounds.

A “light” occupation requires that the worker be able to stand or walk up to six hours per day and frequently lift and carry 10 pounds, and occasionally lift and carry 20 pounds, i.e., a cashier or security guard.

A “medium” occupation requires the ability to lift 50 pounds, i.e., a nurse or commercial truck driver.

A “heavy” occupation, i.e., construction, requires the ability to lift 100 pounds.

A “very heavy” occupation requires the ability to lift more than 100 pounds.

RFC is considered from the perspective of seven different exertional activities (three work positions and four worker movements of objects). The three working positions are sitting, standing, and walking. The four worker movements of objects are lifting, carrying, pushing, and pulling.

Each of the five exertional RFC levels—sedentary, light, medium, heavy, and very heavy—is defined by the degree that the seven primary strength demands of jobs are required. Thus, a sedentary occupation is defined as follows:

· Sitting should total six hours in an 8-hour workday;

· Periods of standing or walking should total no more than 2 hours in an 8-hour workday;

· Lifting no more than 10 pounds at a time; and

· Occasionally—less than one-third of the time—lifting small articles, files, and office objects.

Light occupation is defined as follows:

· Standing or walking off and on, for a total of approximately six hours in an 8-hour workday;

· May involve sitting most of the time, but with some pushing and pulling of arm-hand or leg-foot controls which require greater exertion than in sedentary work

· Lifting no more than 20 pounds at a time;

· Frequent (from one-third to two-thirds of the time) lifting or carrying of objects weighing up to 10 pounds; and

· If someone can perform light work, he or she can also perform sedentary work, unless there are additional limiting factors such as the loss of fine dexterity or inability to sit for long periods

Medium occupation is defined as follows:

· Standing or walking off and on, for a total of approximately six hours in an 8-hour workday;

· Lifting no more than 50 pounds at a time;

· Frequent lifting or carrying of objects weighting up to 25 pounds at a time; and

· If someone can perform medium work, he or she can also perform light and sedentary work.

Heavy occupation is defined as follows:

· Standing or walking off and on, for a total of approximately six hours in an 8-hour workday;

· Lifting objects weighing no more than 100 pounds at a time;

· Frequent lifting or carrying of objects weighing up to 50 pounds; and

· If someone can perform heavy work, he or she can also perform medium, light, and sedentary work.

Very heavy occupation is defined as follows:

· Standing or walking off and on, for a total of approximately six hours in an 8-hour workday;

· Lifting objects weighing more than 100 pounds at a time;

· Frequent lifting or carrying of objects weighing 50 pounds or more; and

· If someone can perform very heavy work, he or shecan also perform heavy, medium, light, and sedentary work.

Other LTD Pitfalls For the Unwary

Social Security Overpayments and Other Possible Offsets

Many claimants apply for SSD benefits and LTD benefits at the same time. In fact, most LTD policies require that a claimant apply for SSD benefits, and the LTD insurer will remind the claimant of this requirement and offer to assist in this process. The insurer is not offering to do this out of generosity; it is doing so because it has a direct financial incentive for you to receive SSD benefits. Because it can take as long as two years to pursue an SSD claim, a claimant’s SSD back benefits can be quite significant. Once the claimant receives the SSD award and back benefits check, the insurance company will expect to recover the full amount of overpayments resulting from LTD benefits that it paid during the same time period. Oftentimes, the overpayment amount equals the full amount of the SSD award. Because the claimant has been receiving only 60% of his or her former salary during this time period, many claimants spend their SSD backpay to pay bills almost as soon as they receive it. Imagine their shock when they receive a letter from the insurer shortly after that informing them that they now owe the insurer the full amount of the check for benefits that they have already cashed and spent!

If the claimant cannot pay the entire overpayment to the insurer in one lump sum, the insurance company will sometimes withhold the entire monthly LTD benefit moving forward until the SSD overpayment is reimbursed. To make matters worse, if the claimant’s policy changes from the “own occupation” to the “any occupation” period at twenty-four months, the insurance company may discontinue benefits during this same time period, leaving the claimant with a large debt and no means to pay it.

Preexisting Condition Exclusion

Preexisting condition exclusions prevent someone from receiving benefits if the condition causing the disability arose prior to the claimant becoming insured under the policy. These exclusions usually apply during the claimant’s first year of eligibility. If the insurance company determines that the claimant potentially has a “preexisting condition,” then the insurance company will “look back” up to three months prior to the claimant’s eligibility for benefits to determine whether the claimant received any medical treatment or medication for the same condition.

These exclusions are very vague and, therefore, they can be applied in a very broad fashion. Prescriptions can often be used to treat a number of different conditions. Insurance companies will often use the fact that a prescription can be given for a particular condition to deny a claimant who subsequently develops that condition, even if the prescription was not used for that condition. For example, a claimant may have been prescribed a medication for anxiety during the look back period. Subsequently, the claimant might develop a back problem with muscle spasms, and the same medication is prescribed to treat this condition. The insurance company may claim that the claimant had a preexisting condition because the same prescription was previously taken.

Mental Health Limitation

Most policies include a mental health limitation that restricts benefits to twenty-four months. Thus, for mental health conditions such as depression, anxiety, or bipolar disorder, benefits will only be paid for twenty-four months. This often leads to gray areas for claimants who have mental conditions manifesting physical side effects. Many claimants with anxiety, for example, also experience high blood pressure as a result of their anxiety. Insurers will frequently invoke this limitation in such circumstances, even though the claimant has a physical condition that prevents them from working. Likewise, many claimants may develop depression secondary to chronic pain. The insurance company may try to invoke the mental health limitation under such a circumstance.

Tips For Pursuing Your Disability Claim

Know Your Policy’s Deadlines

Most policies contain a deadline for submitting an application for benefits. Most LTD policies require that you exhaust your STD benefits in order to be eligible for LTD benefits. In addition, most plans require that you make a separate application for LTD benefits at the conclusion of your STD benefits. When dealing with crippling physical ailments that created a disability in the first place, these deadlines and this paperwork can be confusing and difficult to manage. Make sure you go through your plan and note all deadlines on your calendar. Likewise, be aware of when your LTD policy definition of “disabled” changes from “own occupation” to “any occupation,” as the date will likewise trigger an “ongoing review” request by the insurance company for updated medical information to support your continuing disability under the new definition.

Obtain Plan Documents and Necessary Forms

Every participant is entitled to a copy of the Plan documents from the Plan’s administrator upon written request. Make sure you keep a copy of your written request. If the Plan administrator does not provide these documents within 30 days, you can seek a civil monetary penalty of up to $110 per day in a lawsuit.

You will also need to obtain the necessary application forms. You can typically request the application from the employer’s Human Resources department. You will also be asked to submit an Attending Physician Statement, which is a form that must be completed by a medical care provider who will confirm your disabling condition. You will also need to sign a medical authorization that will allow the insurance company to obtain your medical records. Once the forms are completed, they should be sent to the insurance carrier, along with a list of all medical providers the claimant sees for treatment. The insurance company will begin its investigation once it receives the completed paperwork.

File for Social Security Disability

Nearly all disability insurance policies require a claimant to file for Social Security Disability benefits within 12 months of their disability. They do so because they receive a financial benefit with the offset a favorable SSD award creates for the benefits they owe. Do not use anyone recommended by the insurance company to assist you with your SSD claim. These groups work for the insurance company, not you. Many times, they are not even attorneys, so there is no attorney-client privilege between you and them. This means that they will share information concerning your condition and your SSD claim to your insurance carrier. These SSD advocates have a flagrant conflict of interest. If you choose to hire someone to help you with your SSD claim, please find an attorney on your own who will keep your personal information confidential until you have a chance to decide what should be disclosed to the insurance company.

Assume You Are Being Watched

A new tactic that has become more popular in recent years is for the insurance company to hire an investigator to conduct surveillance. They will often stake out your house for days at a time, hoping to catch you on a trip to your doctor or the grocery store. They are hoping to catch you doing something which you stated in your application you could not do. If you leave your house while your application is under consideration or you are receiving benefits, assume you are being surveilled.

In addition, carriers will frequently send a claims investigator to your home unannounced to conduct an interview. You have a right to refuse the interview until you can schedule a time that is convenient to you.

What To Do On Appeal If Your Claim Is Denied

The claims administrator has 45 days to conclude its initial investigation of the claim, but it may take two 30-day extensions based on elements outside of its control. If the claim is granted, the insurance company will begin paying monthly benefits. If the claim is denied, the claimant will receive a denial letter. This letter should detail all evidence considered by the company, cite the policy language relied upon in denying the claim, and specify the particular reasons why the evidence did not support the claim when applying the policy language. The denial letter will also include important information about how to appeal the denial, such as the appeal deadline and the address to send an appeal.

If it is an ERISA policy, the appeal deadline is usually 180 days from the date of the denial (although some plans have shorter deadlines, which is why you need to obtain and review your plan). Most non-ERISA policies have the same deadline. The appeal process is not simple or quick. A claimant must file their appeal and exhaust their administrative remedies before he or she has a right to file a lawsuit. The administrator has 45 days to resolve any appeal, but may take one 45 day extension. As a practical matter, the insurance company always takes this 45-day extension, because this allows it to hold onto its money without penalty during the interim. If the insurer upholds the denial on appeal, the claimant must bring a lawsuit within the applicable statute of limitations. In Arkansas, the statute of limitations for ERISA disability benefit claims is five years.

In submitting an appeal, it is critical that you understand that this is your last shot to make sure that everything that could possibly be used to support the claim is included in the record in case a lawsuit is necessary. This means that it is not enough to simply write a letter that says “I appeal the insurance company’s denial of my claim.” This means that it is not enough to assume that the insurance company has gathered all of your medical records simply because you gave it an authorization and a list of your medical care providers. This is the point in the process when you have to do the leg work yourself. You must obtain the claims file from the insurance company to determine what medical records it has and has not obtained. You must obtain the medical records that you believe the insurance company has not included in the file. You must review the report prepared by the insurance company’s “independent” reviewer and ask your own physicians to comment as to whether they agree or disagree. You must review the insurance company’s vocational report and determine whether you should hire one to be performed on your own. You must determine whether witness statements from friends and family members would be helpful and, if so, gather them. If photographs will help your claim, then collect them. None of this information will become part of the administrative record unless you submit it during the appeal. Moreover, you must ensure that there is a sufficient paper trail documenting that you submitted this information, or else the insurance company may miraculously lose it or claim that they never received it in the first place.

Even with a level playing field, winning a case against an insurance company is difficult. They have almost inexhaustible resources, employees who are trained in the art of denying claims, countless “independent” physicians at their disposal, and piles of money. With ERISA, however, the playing field is not even remotely level. Every benefit of the doubt is given in the insurance company’s favor. The insurance company has zero risk of any penalty or additional exposure resulting from an arbitrary delay or improper denial of the claim, so, as expected, it will automatically delay claims without cause and deny them for improper reasons.

This is why it is critical that you consider hiring an attorney to assist in your ERISA claim. Lacy Law Firm has administratively handled and litigated thousands of these claims. Please don’t try to do it for the very first time on your own. Call someone who does them every day, because the insurance company certainly denies them every day.

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