ERISA stands for the Employee Retirement Income Security Act which was passed by Congress in 1974 and signed into law by President Gerald Ford on Labor Day, September 2, 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. There have been a number of important amendments to ERISA since its 1974 enactment, including the COBRA and HIPAA laws. 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 what is considered to be an employee benefit plan governed by ERISA, who is an ERISA administrator responsible under ERISA for the employee benefit plan, and who is an ERISA participant (employee) and beneficiary covered under ERISA. One of the primary goals in the enactment of ERISA was to promote the interests of employees and their beneficiaries and to assure that employees received promised benefits from their employers – this was expressly written by Congress into the ERISA statute itself. In addition to ERISA setting minimum standards required for ERISA employee benefit plan creation and administration, it requires ERISA administrators to provide participants with certain plan information, it creates fiduciary responsibilities of the ERISA administrator to plan participants, requires ERISA plans to establish a grievance and appeals process for participants to obtain benefits under their plan, and gives participants the right to bring a lawsuit in federal court to pursue plan benefits and breaches of fiduciary duty by the ERISA administrator/plan. The regulations enacted by the United States Department of Labor pursuant to ERISA further provide for very specific strict deadlines, claims procedures, and internal structuring that the ERISA administrator (or insurance company) shall abide by and create to promote fairness and consistency in claim determinations involving ERISA benefits.
Unfortunately, despite the purpose and true intent of ERISA articulated by Congress to protect employees, ERISA has had the devastating effect of providing lesser protection to employees and their beneficiaries than they had prior to the passage of ERISA. ERISA administrators (including insurance companies acting as administrators) are well aware of the advantages of a benefit claim being governed by ERISA and take advantage of the lack of exposure that it allows the company to enjoy.
To begin, the lack 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 an insurance company or other administrator denies benefits to employees under benefit plans (which, again, includes things like disability, life, and long-term care insurance benefits). The damages available to an employee who must file a lawsuit under ERISA are significantly restricted as a result of ERISA preempting (superseding) state laws. 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, 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 ERISA 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. The insurance company will only be required to pay for the employee benefit itself, and the employee will never be reimbursed or “made whole” for the injuries suffered as a result of the insurance company’s refusal to pay the employee benefits when they were due. Furthermore, the standard to be compensated for attorneys fees incurred in prosecuting the lawsuit to obtain wrongfully withheld ERISA benefits is even much harder to meet than most state laws. Penalties created under ERISA for a failure of an ERISA plan or administrator to comply with ERISA are granted by the courts in such limited circumstances and reduced amounts that the effect is to not penalize administrators at all for failures to comply with the specific requirements of ERISA, which defeats the entire purpose of a legal penalty for failure to comply. The impact of ERISA’s limit on access to damages by employees who have been wrongfully denied employee benefits cannot be understated and has the perverse effect of providing absolutely no motivation for an administrator or insurance company to approve employee benefits and allowing an ERISA administrator to walk away unscathed even when it is found by a court to have illegally denied plan benefits. Why would an administrator or company pay the benefits when there is no penalty or other exposure to the company if a court finds that the benefits were wrongfully denied? The company is only required to pay the benefits it should have paid in the first place in court, even if a court finds its behavior to have been so egregious as to be arbitrary and capricious, which is in and of itself a very difficult standard to prove under the law and a hurdle for employees who must pursue a lawsuit against these large companies.
The limited access to damages in Court is only one of the ways that ERISA changes the landscape of employee benefits law. 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 extensive briefings that are limited to arguing the information contained within the paper file of the administrator or insurance company 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, nor will the employee’s doctors, family members or other critical witnesses with knowledge about the benefit claim and wrongful behavior of the ERISA administrator denying the benefits. It is therefore critical to submit all information to the ERISA 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 administrator or insurance company 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 or insurance company (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. Furthermore, once in court, the question before the court is not whether the employee is entitled to the employee benefit at issue. Instead the court will review the paper file to determine whether the ERISA administrator was so unreasonable as to be arbitrary and capricious in denying benefits. If the ERISA administrator can point to facts that show that it was reasonable to deny benefits (even if it was wrong to deny benefits) then the court will defer to the decision of the administrator and uphold the denial of the employee benefit. Sometimes the reason by the administrator determined by the court to render the decision reasonable under the law is so contrived that it is nothing short of unbelievable – often this includes an in-house medical report or a “bought and paid” for report drafted by a doctor or other expert that only testifies for insurance companies which was drafted to be used by the insurance company to support a denial of benefits. Separately, and of great significance, is the requirement that an employee must exhaust his or her administrative remedies before filing a lawsuit based on its employee benefit claim. This means that when an ERISA employee benefit is denied, an employee must first complete the appeals with the ERISA administrator within the required timeframes before the employee ever has a right to pursue his or her claim in court, no matter how unreasonable the ERISA administrator acts during the claims process. A failure to complete the appeals process within the necessary timeframe before filing a lawsuit acts as a complete bar to the right to pursue a lawsuit in the claim.
Cases involving ERISA benefits are highly technical and insurance companies are very aggressive in denying these benefit claims. The differences between your insurance benefit claim being governed by ERISA or by state law is hugely significant to your case, and an ERISA benefit case must be handled much differently than an individual insurance benefit case. We know, because we see this in our daily practice of insurance benefits law. If your benefits claim is governed by ERISA, it is seen as an advantage to the insurance company and a disadvantage to the individual with the rights to pursue the case. Insurance companies and other ERISA administrators have both in-house attorneys and outside counsel that provide advice on how to specially handle ERISA claims and have the resources available to ensure that your benefits claim is scrutinized in a way so as to lessen your chances of obtaining the benefits in court as much as possible. Much of our practice is devoted to getting ERISA benefit claims approved by insurance companies and other ERISA administrators prior to a lawsuit becoming necessary, by representing individuals in the filing of their applications for the employee benefits at issue, and aggressively handling administrative appeals with the insurance company if those benefits have already been denied at the initial stage. However, we also regularly litigate these cases in federal court, both at the district court and appellate court levels. ERISA litigation can take years of aggressively briefing and developing the case before the Court. It is critical that in choosing an attorney to assist you with your ERISA benefit claim, you select an attorney who has significant experience in this very specific body of law. A lack of knowledge as to any one of the nuances of this very specific and complex law which is constantly changing could be devastating to your success in obtaining the benefits from the ERISA administrator who has endless resources available at its fingertips. It is highly advisable that you consult with an ERISA attorney prior to exhausting the administrative appeals process with your insurance company (or employer) because the appeals process is your opportunity to present evidence for your trial with the insurance company, and any reviewing court will ultimately review only the information submitted to the insurance company during the administrative process. Waiting until a lawsuit to present evidence is far too late in these cases. Knowing what information to develop and submit for consideration to the insurance company / administrator is absolutely critical to your success in securing your employee benefits, and years of legal experience in ERISA law by an ERISA attorney provides an irreplaceable and vital perspective on what information is legally significant to your case. An experienced ERISA attorney can take charge of gathering and developing the necessary information for your case, and strategically utilize this information to level the playing field between the employee and the ERISA administrator with complete control over the benefits claim, despite the state of ERISA law which shields the insurance company from exposure and fails to protects the interests of the employee. If you have questions or concerns related to your employee benefits, contact one of our experience ERISA attorneys at www.dilawgroup.com.