Long Term Disability Overview under ERISA


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A federal law known as ERISA (Employee Retirement Income Security Act) is a comprehensive and complicated law originally enacted to protect employees’ rights to their fringe benefits. Ironically, it is now widely accepted that ERISA protects insurers, not claimants, as intended. Here are some reasons why ERISA isn't much help to long-term disability (LTD) claimants.

ERISA Disputes Take a Long Time

ERISA disability disputes can be very drawn out. Before being able to file a lawsuit, a disability claimant who was denied benefits must “exhaust" (use up) his or her "administrative remedies” (internal appeals) by writing to the insurance carrier to request an appeal. This is a big deal, because denied claimants have 180 days to appeal and, after an appeal request, insurers have up to 90 days to consider the appeal. By the time the internal appeal has concluded, 270 days may have elapsed. During that time, the disabled person is without income from his or her job.

For this reason, it makes sense to file an internal appeal with the insurance company as soon as you have been denied benefits.

SSDI Won't Improve Your Bottom Line

SSDI stands for Social Security disability insurance. If the disabled person seeks Social Security disability benefits while receiving LTD benefits, the long-term disability insurer usually is able to deduct the amount of the SSDI from the amount it owes the claimant. If the disabled person does not apply for SSDI, the long-term disability carrier may argue that the disabled person breached a LTD policy requirement, because policies usually require that a claimant apply for Social Security disability.

Appeals Based on the Claim File

Since appeals are based on medical evidence in the claim file, it is crucial that the claim file be "stacked" with evidence supporting the claim early on.

ERISA allows insurers discretion to administer their own policies in a way they sit fit. If such discretion is given under the plan, then a denial can be overturned only by a showing that the insurer abused that discretion—a very tough standard.

Limits to Lawsuits in Federal Court

If the insurance company denies your internal appeal, then a lawsuit in U.S. District Court is the final option. But a lawsuit under ERISA does not actually amount to “one’s day in court” because claimant's are not usually allowed to testify, and cases are decided by judges, not a jury of one’s peers.

Instead, cases are decided by federal judges based on briefings of attorneys who make their arguments based on the medical evidence in the claim file—that is why getting a lot of evidence into the claim file in the first place is so crucial.

Drawn Out, Unfair Process

The reality is that few disabled persons have the stamina or resources to put up a fight against a strong, well-educated insurance company. Insurers know this. That's why it usually makes sense to hire an attorney help you appeal an LTD denial. Most disability lawyers take long-term disability cases on a contingency basis, meaning if you don't win, you don't have to pay the lawyer. 

Changing ERISA

Supreme Court Justice Bader, as well as many respected commentators, have expressed that ERISA is unfair and needs revamping. My goal is to repeal or amend ERISA so that disabled claimants don’t twist in the wind while insurers delay. After all, the best result for a disability insurer would be your death after a denial for which no benefits were paid. 

From the author: Oregon Injury and Insurance Dispute Attorney
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