The Employee Retirement Income Security Act of 1974 (ERISA) provides standards for private employer-provided group insurance plans, including disability, life, accidental death and dismemberment, pension and health insurance plans. One of ERISA’s critical protections is its provision of a federal cause of action for participants and beneficiaries to recover benefits due under a plan.

Understanding ERISA Claims and Insurer Obligations

ERISA imposes fiduciary duties on plan administrators and insurers – they are required to act in the best interests of plan participants. This includes:

• Providing complete and accurate information: Insurers must ensure that plan participants receive necessary documentation, such as Summary Plan Descriptions (SPDs) and explanations of benefits.
• Processing claims promptly and fairly: Insurers must adhere to established timelines for processing claims and appeals, providing clear and detailed reasons for any denials.
• Upholding fiduciary duties: Insurers must act with the utmost care, skill, prudence, and diligence when managing plan assets and handling claims.

Unfortunately, insurers often mishandle ERISA claims, which can cause financial hardship because of a claim denial or by an undue delay of benefits. Insurers can mishandle claims in many ways:

• Disability insurers cherry-picking claimants’ medical records and intentionally interpreting them in a way that is unfavorable to their claims.
• Insurers giving more credence to medical reviewers than to the claimants’ own treating doctors. Insurers will pay “independent” peer review specialists, or “paper review” doctors and nurses who never interact directly with the claimants or their treating physicians and provide opinions based on nothing more than reviewing the medical records available to them.
• Insurers sometimes mailing time-sensitive notices to the wrong address or not mail notices at all, then lapsing a life insurance policy based on failure to pay a premium or provide information within a certain time.
• Insurers improperly relying on exclusions or other policy provisions in a manner not tenable under existing law or not consistent with the applicable facts.

When insurers fail to meet these obligations, plan participants can seek recourse through the process set forth by ERISA:

Administrative Appeals

Step 1: Review the Denial Letter

When an ERISA claim is denied, the insurer must provide a written denial letter detailing the specific reasons for the denial, referencing the plan provisions on which the denial is based, explaining the procedure for appealing the decision and giving a date by which the appeal must be filed. This letter is crucial as it outlines the grounds for the denial and the steps the participant must take to challenge it. To submit an effective appeal, you must first know what issues or items the appeal should address.

Step 2: File an Appeal

ERISA mandates that plans establish a fair and reasonable process for participants to appeal denied claims. You typically have 180 days from the date of receipt of the denial letter to file an appeal. The appeal must be thorough and include:

• A detailed explanation of why the denial is incorrect: This should address the reasons provided in the denial letter and cite relevant plan provisions and medical evidence.
• Supporting documentation: Include all relevant medical records, expert opinions, personal statements and any additional evidence that supports the claim.

Step 3: Await the Decision

The insurer is required to review the appeal and issue a decision within a specified timeframe. For a disability claim, for example, the decision must be issued within 45 days, unless the insurer has a legitimate need for more time, in which case it can take up to 45 more days as long as it provides written notice of its need for more time (“special circumstances”) before the first 45-day deadline. If the appeal is denied, the insurer must provide a detailed explanation of the reasons for the denial and notify the participant of their right to file a lawsuit in federal court under ERISA.

Filing a Lawsuit in Federal Court

Once your appeal is denied, you have exhausted your administrative remedies and can file a lawsuit in federal court. ERISA grants federal courts jurisdiction over these claims, though some plans allow claimants the option of filing suit in state court.

Damages Available Under ERISA

ERISA provides for only specific, limited damages:

• Recovery of benefits: You can seek payment of the benefits due under the plan.
• Statutory penalties: For particular violations, such as failure to provide requested plan documents, you can seek statutory penalties.
• Attorney’s fees and costs: ERISA allows you to recover attorney’s fees and costs by making a motion for the court to order the insurer to pay your fees and costs. The court does not automatically award fees and costs – it requires a demonstration of some success on the merits of the case, and the court has broad discretion in whether to award fees and costs and if so, how much to award.

Evidence and Administrative Record

ERISA cases are often decided de novo, meaning that the court essentially steps into the insurer’s role of reviewing the information included in your initial claim, the insurer’s claim file, and your appeal and decides whether a claim denial was appropriate without any deference to the claim administrator’s decision. The administrative record is complete when the insurer issues its final determination on your appeal, and you will only be able to admit additional evidence that goes outside the administrative record in limited circumstances. For example, if you had a claim for Social Security Disability Income benefits pending at the time the insurer denied your appeal, then the Social Security Administration later issues a decision on your SSDI claim, the court may use discretion to admit the SSA decision into evidence.

In cases that are not decided de novo, the court determines whether the insurer’s decision was an abuse of discretion. This standard of review is highly deferential to the insurer, meaning the court will find in the insurer’s favor as long as it determines that the insurer had at least some reasonable basis for denying your claim. For example, it is an abuse of discretion for an insurer to purposely exclude important evidence, like MRI or x-ray imaging when providing records to an independent review specialist. However, this standard of review is more difficult for ERISA plan participants and their beneficiaries as insurers or employers have broad discretion in deciding claims.

Additional Remedies and Considerations

• Extra-Judicial Complaints: You can file a complaint with certain administrative agencies. For example, you can submit a complaint to the Department of Labor’s Employee Benefits Security Administration (EBSA), which oversees ERISA compliance. While the EBSA does not represent individual participants, it can investigate potential violations and take enforcement action against insurers. Additionally, you may submit a complaint to the appropriate state agency that oversees insurance matters, for example, the California Department of Insurance.
• State Law Claims: ERISA generally preempts state law claims related to employee benefit plans. However, you may still be able to pursue state law claims in certain limited situations. You can also pursue recourse in state court if your policy is exempt from ERISA. For example, group insurance plans provided by religious and government organizations and self-funded policies are typically not governed by ERISA.

Conclusion

When your insurer or employer mishandles your ERISA claim, you are not without recourse. By understanding the steps involved in filing administrative appeals, pursuing litigation in federal court, and exploring additional remedies, you can protect your rights and secure the benefits you are entitled to. Given the complexities of ERISA, seeking legal counsel experienced in ERISA litigation can significantly enhance the likelihood of a successful outcome. If your ERISA claim has been denied or you are considering submitting a claim, reach out to the experienced ERISA attorneys at the McKennon Law Group PC for a free consultation.