The McKennon Law Group PC periodically publishes articles on its California Insurance Litigation Blog and Disability Insurance News that deal with frequently asked questions in the insurance bad faith, life insurance, long-term disability insurance, annuities, accidental death insurance, ERISA and other areas of the law.  To speak to a highly skilled Los Angeles long-term disability insurance lawyer at the McKennon Law Group PC, call (949) 387-9595 for a free consultation or go to our website at mslawllp.com and complete the free consultation form.

The Employee Retirement Income Security Act of 1974, otherwise known as ERISA, governs most employer-sponsored benefit plans, including plans that provide health insurance, disability insurance and life insurance to employees.  ERISA protects employees and requires that plan and claim administrators adhere to strict standards and deadlines when resolving disputes.  As such, litigation under ERISA is very different from other forms of litigation, even other insurance litigation.  In this blog article, we briefly outline the top five issues to keep in mind when litigating an ERISA claim, including whether ERISA applies; ERISA’s 180-day mandatory appeal deadline; the standard of review; the administrative record; and calculating recovery.

1) Does ERISA Apply?

Determining which law governs your health, life or disability insurance claim is the first step in pursuing life, health or disability benefits that have been wrongfully denied.   Keeping that in mind, the issue to keep an eye on (at first) is whether ERISA applies.  As a general matter, ERISA does not apply to all employer-sponsored benefit plans and ERISA carves out specific exceptions for certain types of employers.  For example, ERISA does not apply to plans that are established or maintained by a government or church entity.  Absent these exclusions, ERISA most likely applies to an employer-sponsored plan.  Again, determining whether ERISA applies to your claim is important because, as discussed below, ERISA claims are different from “regular” insurance litigation because ERISA imposes different requirements on claimants and administrators.

2) ERISA’s 180-day Mandatory Appeal Deadline

ERISA imposes strict time limits and deadlines on ERISA claimants, including an obligation to appeal an initial denial within 180 days.  Once the insurer has denied a disability, life, or health insurance claim governed by ERISA, the insured must appeal the denial within a specific time frame.  Depending on the type of coverage at issue, i.e., disability or life insurance, that deadline may vary.  For health insurance and disability claims, the time limit to appeal is 180 days.  Failure to timely appeal may foreclose any further recovery, as claims under ERISA are required to “exhaust administrative remedies” before bringing a lawsuit.  The insured must also keep in mind the varying deadlines to bring a lawsuit after an unsuccessful appeal.  These deadlines are different from plan to plan and the insured is best served by contacting an attorney as soon as possible following a denial to ensure that the statute of limitations does not run before litigation is started.

3) What Is the Standard of Review?

Generally, ERISA cases may be governed by one of two standards of review: (1) de novo or (2) abuse of discretion.  Under a de novo standard of review, the court looks at the terms of the policy and the evidence on the record and evaluates whether the insured satisfied the terms, without deference to the insurer’s decision.  As such, de novo review is a more beneficial standard of review for the insured because the court gives no weight to an insurer’s initial denial decision.  Under the abuse of discretion standard, the question the court asks is different: whether the insurer’s decision is supported by evidence on the record and is not otherwise arbitrary and capricious.  The abuse of discretion standard of review is less beneficial to plan participants because the court gives more deference to the insurer’s decision.  Whether the insurer’s decision was ultimately correct is essentially irrelevant; it only matters whether the decision was so incorrect as to be deemed arbitrary and capricious.  Under ERISA, the de novo standard of review applies unless the plan contains a discretionary provision.  However, in some states, like California, the de novo standard of review may still apply to disability and life insurance claims, even if there is a discretionary policy provision.

4) The Administrative Record

ERISA cases are decided based on an administrative record, typically limited to the facts, records and other evidence before the insurance claims administrator when it made the claim decision.  Given that the court decides based on a limited record, traditional discovery is not usually available.  However, some limited discovery may be warranted in special circumstances.  For example, in some ERISA cases, the court may allow discovery to determine whether there is evidence of bias.  Evidence of bias may include situations where the insurer denied a long-term disability claim based on the report of a physician beholden to the insurer.

5) Calculating Benefits

Calculating benefits in ERISA cases can be complex, particularly with long-term disability claims.  For example, disability plans provide coverage in the unfortunate event that a disability prevents you from earning a living through your chosen occupation.  Most disability plans do not cover your entire monthly salary, but instead cover only a portion, i.e., 60% of pre-disability income, pretax.  However, this amount is also offset by any state or federal disability benefits the insured may be receiving, including Social Security Disability Insurance benefits, State Disability benefits or Workers’ Compensation benefits.

Overall ERISA cases are complex and the above are just a few things to keep in mind when making and litigating an ERISA claim.  Having an experienced ERISA disability, health and life insurance attorney matters.  If your claim for health, life, short-term disability or long-term disability insurance has been denied, you can call (949)387-9595 for a free consultation with the attorneys of the McKennon Law Group PC, several of whom previously represented insurance companies and are exceptionally experienced in handling ERISA claims.