ERISA and Long Term Disability FAQ

September 24, 2019 | J. Price McNamara
ERISA and Long Term Disability FAQ

Q: What damages can an ERISA long term disability insurance lawyer recover in court, if a disability insurance company wrongfully denies my long-term disability benefits claim?

A: As you might expect, as a long term disability insurance attorney, this is a common and frequent question I get from clients, and usually one of the first questions most clients ask. The answer depends in part on whether your claim is governed by the federal ERISA statute or state law.  Whether or not a claim is governed by federal ERISA statute or state law generally depends on whether or not the disability insurance policy is part of an employee benefits plan as opposed to a privately purchased disability insurance policy. Generally, an employer-provided long term disability insurance policy is governed by ERISA, while a privately purchased policy is governed by state law. I say "generally", because there are exceptions. For instance, ERISA does not govern long term disability insurance policies issued by church or governmental employers. State law applies to those. There are a few instances in which ERISA may not apply to an employer-issued policy, so you should consult with an experienced ERISA long term disability insurance attorney to determine whether your particular situation is governed by ERISA or state law. If your long term disability claim is governed by state law rather than ERISA,  and if we win at trial, you will be entitled to be put back on benefits going forward, plus receive whatever back pay is due. We can, and always will REQUEST that the court award a penalty equal to the amount of back pay owed, in addition to the actual amount owed, plus attorney's fees. But the court can award benefits with OR without awarding the penalty and attorney's fees, depending upon how egregious the court finds the denial to have been. If your long term disability claim is found to be governed by ERISA instead of state law, all of the above applies, with the exception of the penalty. In other words, attorney's fees may be awarded under ERISA if we win AND the court finds the denial to be egregious enough, but the court cannot award penalties in addition to attorney's fees under ERISA. The federal ERISA statute simply doesn't allow penalties. Unfortunately, whether the claim is governed by state law OR ERISA, unlike in a typical personal injury case, damages for pain and suffering, loss of enjoyment of life or mental anguish caused to the victim by the insurer's wrongful denial or failure to pay long term disability benefits cannot be recovered. Nor can punitive damages be recovered, aside from the penalty described above, and again, only if state law applies instead of ERISA. If your case is governed by ERISA, you cannot file a lawsuit until you have first gone through the administrative appeal process. The administrative appeal is when you ask the disability insurance company to reverse their own denial of your claim based upon your arguments and any new evidence you submit with those arguments for consideration.

Q: How can a long term disability attorney build a strong ERISA long term disability administrative appeal?

A: Beginning with the potential end in mind (federal court), your ERISA long term disability attorney will want to use the administrative appeal process to gather, create and introduce all available supporting evidence into the administrative record. Any evidence you submit to the insurance company in the process becomes part of that record. That record is ultimately filed into the court record if a lawsuit becomes necessary and forms the only evidence the court can consider. So where to start? The process an ERISA attorney should follow (and what we always do), described below, will help guide you to develop the nuts and bolts of a strong, well-supported administrative appeal. Analyze The Insurance Company’s Denial Letters We analyze the reasons given by the insurance company for denying the claim. This serves as our primary roadmap for what and where our focus needs to be. Analyze The Long Term Disability Insurance Company’s Claim File Or Administrative Record  The insurance company is required to provide upon written request, and free of charge, its entire claim file/administrative record. It’s typically over a thousand pages long.  We review every page, and we always find information there helpful to the case. It consists of all medical and other evidence the insurer gathered through authorizations signed by the claimant, through private investigation, including surveillance video, and the insurance company’s own consulting medical, vocational rehabilitation and other expert opinions and reports. The insurance company is required to include all evidence generated in connection with the claim whether or not the insurance company relied upon it to support the denial. Much more is there than is mentioned in the insurance company’s denial letters. We often find evidence that directly contradicts the insurance company’s denial, or a lack of evidence to support reasons it gave to support a denial. We have even found evidence that the insurance company’s own expert directly contradicted a denial of benefits. In fact, the court found in one client’s case that the insurance company illegally withheld from my client its own expert’s report, which directly contradicted the denial of benefits. Without reviewing every page of that 1000 plus page record to find the buried report, our client would not have received the benefits she needed and deserved. We also need to determine what supportive medical or other available evidence we deem important is not in the record and include any such evidence as part of our appeal. That way it becomes part of the administrative record which can later be considered by the court if the claim is denied on administrative appeal. Analyze The Long Term Disability Insurance Policy, Plan and Summary Plan Description  If the client is unable to supply these documents, you can request them directly from the insurance company or the Plan Administrator. We look at the policy definition of disability. The definition can vary from policy to policy. This definition drives what the claimant must prove to be considered disabled under the policy. Most policies have variations of two definitions for disability. Typically, for the first 24 months, a claimant only has to be unable to perform their “own occupation.” The definition of “own occupation” is found in the policy. Usually, it will state that the definition is based on how the job is performed in the national economy as defined by the Dictionary of Occupational Titles, not how the claimant actually performs his or her own occupation. In most policies, after 24 months, a claimant must prove that he or she cannot perform “any occupation.” Usually the definition includes “any occupation” that the claimant can perform based on his or her education, background and skills. The “any occupation” standard often also includes a salary percentage requirement. This provision means that the company cannot deny benefits on the basis that the claimant can perform the duties of any job, at any wage. Instead, to support a denial, the insurance company must identify occupations that will pay the claimant usually at least 80 percent (typically) of their pre-disability income. We also analyze all other ERISA Plan and insurance policy language (they’re not all the same). We regularly find helpful contradictions and technical violations there. We also regularly find provisions that contradict the insurance company’s stated reasons for denying a claim. We sometimes find that the insurance company wrongfully denies a claim based on policy language of an older or newer version of the policy that doesn’t even apply to your case. Or, we may find that the insurance company is seeking to use an unfavorable policy amendment that doesn’t apply to the case to wrongfully deny the claim. In some cases we find that a provision the insurance company is using to deny a claim is ambiguous, or contradicted by other provisions, making the denial legally unenforceable. The entire policy should be read carefully to determine any provisions that undermine the insurance company’s claim denial. Perform a Client Interview and Gather Other Basic Information  We interview the client to determine details about educational background, former work history, occupational duties at the time of disability and the nature of the disability. This lets us get to know them better and gives us our foundation to build upon. We determine all medical history and explore what family members, coworkers or friends can provide affidavits describing their observations of the claimant’s mental or physical manifestations of disability. We then schedule interviews with those people to prepare the appropriate affidavits. A claimant’s affidavit is prepared, describing in detail the nature, intensity, frequency and duration of all pain, physical restrictions and limitations, all mental or physical effects of any prescribed medication, how all of these things affect physical functioning, concentration, memory, the need for breaks or rest, etc. The more detail the better. We get the claimant’s official written job description from the employer’s human resources department and include in the affidavit the client’s comments on whether the job in actual practice is different, and if so, how. If the insurance company claim file contains surveillance, we have the client comment on that as well and include it in the affidavit. Gather And Analyze Medical Records To See How Well They Support the Claim For Disability and Supplement where needed We gather, review, study and summarize the relevant medical records, physician reports, diagnostic studies, etc. Here, we look for areas of potential strengths, weaknesses or the absence of evidence needed for claim support. The focus is to determine where we need to build evidence that supports disability as defined in the policy and addresses the reasons the insurance company gives to support its denial of benefits. When Physicians write their reports, they are not necessarily attempting to cover all information in the kind of detail needed to support a disability claim. They often rely on computer programs when preparing their notes that simply do not have fields concerning the evidence necessary to support a claim. So the support needed may be weak or absent. They often don’t state any opinions specifying physical restrictions in enough detail. The insurance companies then cite “lack of evidence” to support the disability. That evidence may in reality exist, but is just not stated in the records. Insurance companies know this and exploit it. Sometimes the records contain plain errors that hurt the claim. These need correcting. Wherever we find weaknesses, the absence of important evidence or errors in the medical records, we correct the problems using a number of different approaches depending on the case at hand. For instance, we may need to get detailed input from treating Physicians, as well as other medical experts as needed for the particular case. We may need to ask treating Physicians to address certain issues not previously addressed specifically and in detail in a report. We may need to push to have certain medical diagnostic tests run to offer unequivocal proof of the existence of a disabling condition. We may need a physician to address in writing the disabling side effects of prescribed medications not previously addressed. In some cases, we may need to retain additional Physicians of various specialties to provide an opinion. We sometimes meet face-to-face with treating Physicians to determine their opinions on relevant details. We sometimes ask them to write a report addressing whether the claimant’s affidavit (attached to the report) is consistent with what the physician would expect given the medical condition at hand, or whether any surveillance affects his or her opinion regarding disability. Whatever the weakness or absence of evidence or error in the medical records might be, we do everything we can to correct it. Decide What Additional Evidence May be Helpful  At this point, we determine what, if any additional medical or other forms of evidence not forming part of the administrative record might be helpful to support the case. This varies from case to case, but may include a functional capacity evaluation as evidence of the claimant’s physical restrictions, further medical diagnostic studies to provide objective evidence of a disabling medical condition, additional affidavits of the claimant, family members or coworkers regarding any important issues discovered not addressed in their initial affidavits or which came to light afterward. An expert vocational rehabilitation evaluation is sometimes warranted to rebut an insurance company’s similar expert’s opinion regarding a claimant’s ability to perform a certain occupation, or what Dictionary of Occupational Titles occupation best resembles the client’s actual job, or what items the insurance company’s expert failed to consider. Conduct Legal Research We conduct nationwide computer research, combing for judicial opinions factually similar or otherwise supportive of the claim and our legal arguments. We save these so we can later cite to them and quote portions of them to support our arguments to the insurance company, and later to the court if necessary. Construct The Best Argument We then again analyze and dismantle the reasons given by the insurance company for denying the claim. We do this by using everything helpful we find from all of the above efforts, and assemble it into a concise, impactful argument. It’s a blended argument of our strongest facts, woven together with our strongest legal arguments, citing relevant policy provisions, the administrative record and our new evidence which will now be submitted and become part of that record. It’s constructed much like a legal brief filed in court, tailored to follow the same pattern the court will use analyze the case. The insurance companies will know you have built a solid case. Final Review Before we submit our administrative appeal argument and supporting evidence to the insurance company (which will ultimately be our argument to the court), we examine our argument again in detail to determine whether it triggers ideas for any additional evidence which may be supportive. Submit the Best Argument and Await a Decision After we feel that we’ve left no stone unturned, and have crafted our very best arguments in favor of the claim, we submit our administrative appeal, along with all supporting documentation that was not already part of the original administrative record, to the insurance company. The insurance company has 45 days to render a decision, with one 45 day extension which it commonly takes, giving the claimant a written decision with reasons. If the insurance company reverses its denial, great! Make sure they calculate benefits and any offsets accurately and for the full period of back pay owed. If it doesn’t, your efforts and argument will still be useful in the lawsuit that follows. Be sure to request an updated copy of the administrative record and make sure it includes all of the evidence you submitted. This will help to avoid a later argument in court about the completeness of the administrative record to be considered by the judge.

Q: What is so different about an ERISA long term disability case?

A: The process starts when someone becomes disabled from working, files an initial application or claim for long term disability insurance, usually without attorney assistance, and receives a written denial of their claim by the disability insurance company. Disability insurance policies purchased by individuals on their own, independent of their employment (most are not), are not governed by ERISA. For individual disability insurance policies not governed by ERISA, if the insurer denies the claim, the claimant can go directly to state court and file a lawsuit. No "administrative appeal" to the insurance company is required, and there is no requirement that the lawsuit be filed in federal court. Normal state court procedure, including all typical discovery methods are available. The claimant has the right to a jury trial, and all parties can introduce traditional evidence, including live witness testimony. Bad faith penalty remedies are available under state law that are unavailable under federal ERISA law. Typical litigation. However, if the claim is governed by ERISA, as most are, a mandatory administrative appeal process is required by ERISA before a claimant can file suit to challenge a denial of benefits. The claimant must file the administrative appeal with the same insurance company that denied the claim. Then that same insurance company, which also must pay benefits if it reverses itself, decides whether or not to reverse itself and pay benefits – crazy but true. WARNING 1: The deadline for filing an administrative appeal on a denied long term disability claim is 180 days from the date of the written denial. Missing an administrative appeal deadline is as fatal to a claim as the passing of a statute of limitations with very few exceptions. Missing it means the claim is over, and the denial cannot be challenged. If the insurance company again denies benefits following a timely administrative appeal (a very common outcome), the claimant can only then file a lawsuit, which must be filed in federal court. State court is without jurisdiction. While beyond the scope of this guide, which focuses on the administrative appeal, a bit about the lawsuit that follows helps highlight the importance of the administrative appeal.  An ERISA long term disability lawsuit in federal court is different from others. It doesn’t follow the typical federal procedural path. Most federal district courts use special scheduling orders tailored specifically to the unique way ERISA cases reach court resolution. ERISA has its own statutory venue rules. Discovery is restricted, really almost nonexistent. The parties have no right to a jury trial. No witness testimony is presented. The only “trial” at all is a trial on briefs referencing the administrative record filed with the court, either on cross-motions for summary judgment or simply motions for judgment on the administrative record. The court reviews a denial under an “abuse of discretion” standard, requiring it to give great deference to the financially- conflicted insurance company’s decision. Courts have even upheld the insurance company’s administrative appeal decision while expressly stating that it is contrary to how the court would have ruled independently on the evidence. Choice of venue and choice of law considerations are critical because they can impact the standard of review, as some states have laws prohibiting “abuse of discretion” review and such laws apply in ERISA cases. Most of the governing substantive law is either ERISA specific or federal common law jurisprudence, with much disagreement on many issues among and even within federal jurisdictions. WARNING 2: But most important, and most pertinent to the impact of the administrative appeal, the federal judge in an ERISA case cannot consider any evidence that was not made part of the administrative record, during the administrative appeal process, before suit is filed. The insurance companies and their attorneys know this. Most claimants and many attorneys don’t. So most claimants and many attorneys file “administrative appeals”, but submit no supporting evidence beyond medical records. They basically argue how impossible it is for the claimant to work, and how unfair the denial is after they paid policy premiums for years. This does absolutely nothing to help their claim. It wastes the best and only opportunity to build the best case for reversal either on administrative appeal or in court if the insurer denies the claim again.

Q: Will the insurance company ever offer to settle my long term disability insurance claim?

A: They might, and might offer to do so in a number of different ways. This can occur while a lawsuit is pending, during an administrative appeal of a denial or termination of benefits, or even while they are paying you your benefits without ever having denied your claim. Lump-Sum Settlement Considerations: Sometimes insurers are willing to settle a long term disability benefits case on a lump sum basis, but they are not required to do so, and sometimes will not consider doing so at all. A lump sum settlement can take place while a lawsuit is pending, during an administrative appeal of a denial or termination of benefits, or even while they are paying you your benefits without ever having denied your claim. If we ultimately attempt lump-sum settlement at some point, which we will often do if the client wishes to, the demand is calculated as follows: all back pay owed, plus the present value of what the insurer would owe for the duration of the policy payment provisions, plus (if after a denial or termination of benefits) attorney's fees, as well as a penalty, assuming state law applies (no penalty if ERISA applies). That being said, the insurer will virtually never settle for that full amount, but the decision of whether or not to accept a certain amount offered in settlement will always be your choice. I will offer recommendations to you in that respect as your attorney, based upon my evaluation of our strengths, weaknesses, and likelihood of success at trial. My opinion on that is always on a case-by-case basis, and after I have the benefit of reviewing the entire administrative file, as each case is unique. Regardless of my opinion or recommendation, however, the choice of settling or going to trial will always ultimately be yours to make.

Q: What Happens if I Win My Long Term Disability Case at Trial?

A: If we go to trial after a denial of benefits after an administrative appeal has been concluded, the court cannot award prospective or future amounts owed under the policy. The court is limited to rendering an award of back pay owed, ordering the insurer to put you back on benefits going forward, along with attorney's fees, and a penalty as described above (but the penalty applies only if state law governs, not under ERISA law). When the insurer puts you back on benefits going forward, it can still again claim at some future point in time, and often will, that you are no longer disabled under the terms of the policy. Common reasons they give for stopping your benefits again are: Your condition has improved, and you are now able to work; The policy definition of disability has changed from being disabled from your “own occupation” to being disabled from “any occupation”; The insurance company has conducted video surveillance through a private investigator, and claims that it proves you are not disabled. If you have any questions, please schedule a Free Denial Review with the Law Offices of J. Price McNamara by calling or filling out our online contact form.
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J. Price McNamara


Losing my own brother, then my father and sister after long, disabling illnesses just a few months apart drove a career change for me. Before that experience, I never truly understood the place you’re in. I never understood the dramatic impact that receiving (or not receiving) the disability and life insurance benefits you paid for and counted on can have on your life especially when you need to focus on family and healing. What I experienced with my own family now drives the way I view my clients and my work, and I will never forget it!

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