ERISA Long-term disability (LTD) insurance is a crucial safety net for employees who may face extended periods of inability to work due to illness or injury. When these benefits are provided through an employer-sponsored plan, they often fall under the governance of the Employee Retirement Income Security Act (ERISA). This federal law sets standards for the administration of various employee benefit plans, including LTD insurance.
What is ERISA?
ERISA is the Employee Retirement Income Security Act of 1974. It is a federal law that governs most employee benefit plans. Although it was originally designed to protect retirement and pension benefits, it has been interpreted differently by the courts. ERISA is currently used as a shield by insurance companies to unfairly deny claims.
ERISA applies to benefit plans from private companies, partnerships, and proprietorships, no matter what their size or number of employees. Government employers and churches are exempted from ERISA’s provisions. There are several consequences of falling under ERISA. Here are some of them:
- No jury trial
- No trial in state court
- No consequential damages
- No punitive damages
- No right to depose expert witnesses
- No right to depose insurance company witnesses
- No right to testify on your behalf
How Does ERISA Affect Long-Term Disability Claims?
ERISA imposes strict rules on how disability claims are handled. And unfortunately, these rules often work against claimants. Insurance companies and plan administrators must follow certain procedures, but these procedures are designed to limit your ability to challenge a denial. Here’s how ERISA impacts long-term disability (LTD) claims:
- Strict Deadlines: ERISA enforces specific time limits for claim submissions, appeals, and insurer responses. Missing even a single deadline can lead to an automatic denial, leaving you without benefits. Insurance companies rely on these deadlines to reject claims quickly, so it’s critical to stay on top of the process.
- Deferential Standard of Review: If your claim is denied and you take legal action, the court will often side with the insurance company unless you can prove their decision was “arbitrary and capricious.” This means they can deny your claim with minimal justification, and unless you have overwhelming evidence, the courts won’t intervene.Â
- Limited Legal Remedies: ERISA does not allow you to seek punitive damages or compensation for emotional distress. Even if an insurance company unfairly denies your claim, your only legal recourse is to recover the benefits owed to you—nothing more. Unlike non-ERISA cases, where bad faith insurers can be penalized, ERISA protects insurance companies from facing real consequences.
Does ERISA Protect My Long Term Disability Benefits?Â
While ERISA was intended to safeguard employee benefits, it provides more protection to insurance companies than to claimants. ERISA regulations establish guidelines that insurers must follow, but these same rules can make it harder for employees to receive the benefits they deserve. Here’s why:
- Plan Administrator Authority: The company that provides your disability benefits also decides whether to approve or deny your claim. Since they’re looking out for their bottom line, they have every reason to find ways to reject claims. Unless a court rules that they clearly misused their power—which is tough to prove—their decision usually stands.
- The Appeal Process Is Strict: ERISA limits how you can fight a denial. You must submit all your medical records, expert opinions, and other evidence during the initial claim and appeal. If you don’t, you won’t get another chance to add new proof later, even if your case goes to court.
- Federal Courts Favor Insurers: ERISA cases go to federal court, where there are no jury trials. A judge will review your case based on the existing records, and because ERISA rules often lean in favor of insurance companies, getting a ruling in your favor can be tough.
If your claim is denied, acting fast is key. ERISA rules make it harder to win an appeal, so having strong medical evidence from the start is crucial. Working with an experienced ERISA attorney can also improve your chances of getting the benefits you deserve.
Claim Denied!
Before any legal action can be taken, all administrative requirements under the plan must be met. The plan governs what procedure must be followed regarding your benefits. If a claim is denied, the plan will usually allow at least one appeal. The appeals process allows you to submit additional records and provide additional evidence supporting your disability.
The Appeal Process
An appeal may be written by you or by a lawyer. The appeals process can be complicated, and it is best to approach the appeal after fully understanding the issues involved in your denial. If you choose to handle an appeal on your own, it is strongly recommended that you consider the following issues:
- If you are given the right to appeal, you must do so. The failure to appeal can be viewed as a failure to exhaust all remedies before filing suit.
- Request a copy of the entire file relating to your claim, as well as the insurance policy, from the insurance company. You have the right to a free copy of this file.
- Submit any additional records you have that would assist your claim. In most cases, this is your only chance to submit favorable evidence for your claim. Include any articles, journals, letters from your doctors or others who know about your condition, or anything else that would assist your claim. Once you file a lawsuit, the opportunity to provide new information is usually lost.
Appeal Denied
After you have exhausted all administrative remedies available within the plan, you have the right to file suit under ERISA. Unlike most civil suits, the courts will review the denial of benefits under a standard deferential to the insurance company. The insurance company’s denial will be upheld unless the court determines that it abused its discretion in its review of your claim. There are exceptions to this general rule. Understanding how to deal with common problems in long-term disability claims can be invaluable in navigating the process successfully.
Why Legal Help is Important
For many claimants, a lawyer who is experienced in handling long-term disability claims can significantly improve their chances of receiving the benefits they deserve. Legal professionals can help claimants understand their policy terms, gather necessary evidence, and effectively challenge claim denials.
At Raval Trial Law, we understand the complexities of long-term disability claims and the challenges posed by insurance companies. We are dedicated to advocating for people who need help to secure the benefits they need and deserve. If you’re facing difficulties with a long-term disability claim, contact us to learn how we can assist you in navigating this challenging process and fighting for your rights.
FAQs
Yes, ERISA is a U.S. federal law that governs employee benefit plans including long-term disability (LTD) insurance, offered by private employers. It does not apply to benefit plans in other countries, as different nations have their regulations for employee benefits and disability insurance.
Generally, government employers, including federal, state, and local agencies are exempt from ERISA. This means LTD policies provided by public employers follow different laws and protections. Instead of ERISA, these plans may be governed by state laws or specific government benefit programs, which often offer different rights and appeal processes than ERISA-regulated plans.
Yes, ERISA covers most employer-sponsored long-term disability (LTD) plans. If your LTD insurance is provided through your job at a private company, ERISA likely applies. However, if you purchased an individual LTD policy outside of work, ERISA does not govern it.
If your long-term disability plan is employer-sponsored and from a private company, it is likely subject to ERISA rules. It means your claim must follow ERISA’s strict filing deadlines, appeal procedures, and review standards. However, ERISA compliance can make it harder to get approved, as insurance companies have significant control over the process.
An ERISA long-term disability lawyer helps claimants navigate the complex ERISA claims and appeals process. They ensure that all necessary medical evidence is submitted on time, challenge unfair denials, and protect your rights against insurance companies that try to avoid paying benefits. Because ERISA limits legal options, an experienced lawyer can make a big difference in strengthening your case and improving your chances of success.
The minimum ERISA bond is typically 10% of the plan’s assets handled by fiduciaries, with a required minimum of $1,000 and a maximum of $500,000 per plan. If the plan holds employer securities, the maximum bond requirement increases to $1,000,000. The ERISA bond is a type of insurance that protects employee benefit plans from fraud or dishonesty by those managing the funds.
