Suing Your Insurance Company Under ERISA

In order for you to get your ERISA disability insurance claim approved you must follow some mandated administrative steps. These steps include but are not limited to, submitting a timely appeal, and depending on the insurance company’s policy, possibly a second appeal. If and when your appeals are denied a lawsuit can be filed. All of these steps have time limitations that must be adhered to, or you will lose your right to continue to the next step of your claim.

Pre-Litigation Internal Appeal

Before filing suit you must pursue an internal appeal. The internal appeal is required by Federal law; if you do not pursue it, you cannot file suit.

Most internal employee benefit appeals are denied. Therefore, it is likely that your appeal will be denied as well. This does not mean that you do not have a good case.

The insurance companies are required by law to have an appeal process, so they do. However, there is very little detriment to an insurance company to deny an appeal because most people do not find attorneys and most people do not sue. Even when suits are filed the courts often give deference to the insurance company’s decision, so the disability claimant is faced with a significant challenge.

The Lawsuit

If your internal appeal has been denied, you may file a lawsuit. The litigation of your claim will follow these general steps:

  1. File Suit:

    2. File a complaint against the Plan and/or the insurance company. The complaint will seek a declaratory judgment to require the defendant to pay or reinstate benefits, pay back benefits (with interest), and pay attorney’s fees incurred prosecuting the suit. Under Federal law you are not entitled to recover any other amounts. That is, you may not recover compensation for pain and suffering or punitive damages; you can only receive what the Plan should have paid you in the first place. (This is one of the major reasons why insurance companies deny claims and then deny appeals—if the insurance company loses in court, it only has to pay the benefits it otherwise would owe, plus, perhaps, attorney’s fees and interest.)

  2. Defendant Answers:

    3. Now that the Complaint has been served the insurance company defends the lawsuit; the insurance company’s attorney will file an answer.

  3. Administrative Record:

    4. Once our law firm receives the answer, we will demand that the insurance company prepare and provide the administrative record of your claim. Generally, the only evidence that is allowed to be presented in court is the administrative record of your claim, plus evidence relevant to the insurance company’s conflict of interest. That is, the Plan provisions, your claim for benefits, all correspondence regarding your claim for benefits, internal insurance company reviews, records, reports, analyses, etc., and information regarding "other benefits" (SDI, Social Security) you applied for or received, the medical records the insurance company obtained or you submitted, and employment records which the insurance company obtained or you submitted. Medical and other records after the denial of your appeal are generally inadmissible. New evidence is generally inadmissible, except evidence that shows the insurance company’s conflict of interest.

  4. Scheduling Conference:

    5. Within 90 to 120-days after the complaint is filed, the court will hold a scheduling conference. At that time deadlines and dates for various matters, including motions and trial, will be set. You need not attend this conference. After the conference we will notify you of the dates which have been set.

  5. Standard of Review:

    6. A critical issue in ERISA benefit is the standard of review. Sometimes the standard of review is "de novo." In this case, the trial court weighs the evidence without regard for or deference to the insurance company’s decision. If the plan (or insurance policy) grants plan fiduciaries discretion to determine eligibility for benefits or to construe plan provisions, the trial court uses the "abuse of discretion" (sometimes called "arbitrary and capricious") standard of review. This means that the trial court will defer to any reasonable opinion of the insurance company. When the trial court uses an unreduced abuse of discretion standard of review, the insurance company usually wins.

    However, when the plan fiduciary has a conflict of interest because, for example, the insurance company both pays the claim and decides who is entitled to benefits, or when the plan/insurance company does not follow ERISA’s procedural rules, the trial court is required to consider that conflict of interest as a factor in deciding the case and may consider evidence outside the administrative record.

  6. Discovery:

    7. Discovery (depositions, interrogatories — questions to be answered under oath, etc.) in ERISA cases is limited, if permitted at all, to facts and circumstances regarding the plan fiduciary/insurance company’s conflict of interest. Thus, such discovery will not involve you, your disability, or your medical condition. Instead, it will involve the insurance company, any the doctors who evaluated your or your records, and facts such as how often the doctors work for the insurance company, how much they are paid, and how frequently they conclude the claimants are not disabled.

  7. Mediation/Settlement Conferences:

    8. There commonly are one or more mediations or settlement conferences in the case.

  8. Summary Judgment Motion:

    9. If the case does not settle, the insurance company usually files a motion and asks the court to grant summary judgment in its favor. Because the insurance company is filing the motion, we file a cross-motion. Frequently, both sides’ summary judgment motions are denied.

  9. Trial:

    10. If the case is not otherwise resolved, the matter proceeds to trial. The judge decides the case; there is no jury. Usually the evidence presented is the administrative record plus, where appropriate, evidence regarding the nature and extent of the plan/insurance company’s conflict of interest. If you win the trial, the judge will issue an order that your benefits be paid retroactively with interest and that your benefits be reinstated prospectively. You only get a lump sum payout of past benefits; you do not get a lump sum payout of future benefits. If you prevail at trial, a motion to request an award of attorneys’ fees will be filed with the court.

  10. Court Appeal:

    11. Many cases are not finally resolved in the trial court, since the judgment is appealed to a federal circuit court of appeals.

This provided a general overview of the process so that you have a better idea of what will be happening in the future. There may be other developments or issues in the case.