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Is Your Insurance Benefits Claim Governed by ERISA?

ERISA stands for the Employee Retirement Income Security Act which was passed by Congress and signed into law by President Ford in 1974. When the Employee Retirement Income Security Act ("ERISA") became law, it was codified as a part of Title 29 of the United States Code, and is found in multiple sections beginning with Section 1001. Essentially, the Employee Retirement Income Security Act is a federal law that supersedes state laws and regulates employee benefit plans and determines the rights of beneficiaries under those plans. This includes disability, life, health or long-term care insurance benefits that are provided to employees as a benefit of their employment by employers. The statute defines an "employee welfare benefit plan" as "any plan, fund or program . . . established or maintained by an employer or by an employee organization" which provides employee benefits. An "employee welfare benefit plan" subject to the Employee Retirement Income Security Act is easily created by an employer when establishing a plan to provide group insurance benefits to its employees. In fact, insurance policies and benefits obtained through an employer typically fall under this law.

However, there are exceptions to ERISA governing an employer provided group benefit plan. For instance, if the employer establishing the plan is a religious organization, or if the employer is a governmental entity or agency, your group benefit plan and any benefits claims filed are exempt from ERISA. As such, group benefit claims of employees of a city, county, state or federal government, etc., such as teachers, police officers, city officials and other types of governmental workers, are likely considered exempt from ERISA. However, whether an employer is a religious organization or governmental entity or agency is not always a clear cut determination. Many times this depends upon how an employer is funded, such as whether a hospital is funded by a state government. There are other exceptions to ERISA governance, such as those plans that meet the requirements of the "safe harbor" provision, and those plans maintained solely to comply with applicable workers compensation, employment or disability laws and plans maintained outside the United States primarily for the benefit of non-resident aliens or unfunded benefit access plans, however, the most commonly exempted benefit claims are those of religious or governmental workers.

However, even if your policy is not governed by ERISA, your insurance carrier will often assert that it is governed by ERISA, or certain ERISA language may even be inserted into your insurance policy/plan. Thus, you cannot rely on your insurance policy/plan documents or insurance carrier alone to provide the necessary information to determine whether your benefit claim is in fact governed by ERISA. It is highly recommended that you consult with a professional versed in ERISA law before determining that your claim does not fall under ERISA. This is because whether or not ERISA governs your benefits claim is hugely significant in the legal realm. If a person fails to abide by ERISA deadlines, or to exhaust administrative remedies, for example, this could result in the person's ability to provide information to support the benefits claim being completely foreclosed upon or severely restricted, and/or result in a person waiving his/her right to pursue a lawsuit related to the benefits claim.

Furthermore, whether or not your benefits claim is preempted by ERISA greatly impacts your rights to damages and your rights in court as a whole. Your insurance company (or other administrator) is motivated to argue that ERISA governs your claim. The lack of exposure that an insurance company enjoys under ERISA is due to ERISA depriving employees of access to state laws that provide for greater protections and damages when a benefit administrator denies benefits to employees under benefit plans. The damages available to an employee who must file a lawsuit under ERISA are significantly reduced when compared to an employee whose benefit claim is not covered by ERISA as a result. The only damage that an employee is guaranteed in court if successful in a lawsuit filed under ERISA is the plan benefit itself (e.g., the disability benefit, life insurance benefit, long-term care benefit, or other benefit at issue). There is no access to compensatory, punitive, or other damages that are available under state laws to deter unlawful conduct by insurance companies. As such, if individuals lose their home, must file for bankruptcy, are penalized for withdrawing from retirement funds, incur significant late charges or damage to their credit, suffer worsening in their health, or incur other damages because of an insurance company's (or other administrator's) wrongful denial of their employee benefit, the insurance company will not be responsible for these damages despite having caused the losses by its unlawful actions. Damages have been limited in other ways as well.

Once in court, an employee does not have a right to a jury trial, and will only be permitted a bench trial (with a judge) on rare occasions. Normally, an ERISA benefits lawsuit is decided on written briefs that are limited to arguing the information contained within the paper file of the administrator who has denied the employee benefits at issue. The judge will virtually never meet the employee, the employee will not have the opportunity to testify and explain the situation to the judge and neither will the employee's doctors, family members or other critical witnesses with knowledge about the benefit claim and wrongful behavior of the administrator denying the benefits. It is therefore critical to submit all information to the administrator (usually an insurance company) for consideration during the application and appeal process so that if a lawsuit becomes necessary to enforce an employee's right to the benefits at issue, the court involved will review the information. It is too late to wait until a lawsuit becomes necessary to submit evidence of the employee's right to the benefits, and the evidence will never be reviewed by the court unless it was first submitted to the company for consideration. The paper file reviewed by the judge is created and maintained by the ERISA administrator that is denying the benefits, and many times employees (now plaintiffs in a lawsuit) are not even permitted by the judge to test the completeness of the record compiled by the administrator (now a defendant in the lawsuit) through discovery that is traditionally available to plaintiffs in lawsuits. Discovery is normally allowed to ensure that documents or information has not been withheld by the party in control of the documents or information in order to improve its case or mislead the court into believing something that is not true or accurate. This provides yet another advantage and protection to the defendant administrator in court. Additionally, once in court, the question before the court is not whether the employee is entitled to the employee benefit at issue, but whether the administrator was so unreasonable as to be arbitrary and capricious in denying benefits. Thus, the type of information submitted with the administrative appeal is hugely important to the success of any subsequent ERISA lawsuit.

The determination of whether or not your benefits claim is governed by ERISA is not always straightforward, and may involve complicated legal analysis of plan documents and your employer's status under ERISA statute. Additionally, the impact of whether or not ERISA governs your benefits claim is hugely significant and greatly affects your legal rights. If you have questions about what law governs your benefits claim, or the significance of the law governing your benefits claim, contact one of our experienced attorneys for a free consultation.

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