In this several-part blog series titled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment & disability claim, from navigating a claim, to handling a claim denial, through the subsequent appeal and litigation. In Part Fifteen of this series, we discuss a court’s awarding of interest on unpaid benefits. Under the Employee Retirement Income Security Act of 1974 (“ERISA”), a prevailing party is entitled to interest on the benefits that they are awarded by the court.
Under federal law, “A district court may award prejudgment interest on an award of ERISA benefits at its discretion.” Blankenship v. Liberty Life Assurance Co. of B., 486 F.3d 620 (9th Cir. 2007). “[T]he interest rate prescribed for post-judgment interest under 28 U.S.C. § 1961 is appropriate for fixing the rate of pre-judgment interest unless the trial judge finds, on substantial evidence, that the equities of that particular case require a different rate.” Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1164 (9th Cir. 2001). The base level of interest provided by Section 1961 is the “weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of the judgment.” At times, that rate of interest can be quite low, sometimes even lower than 1%. As such, it may be in someone’s best interest to attempt to find an exception to this default rate of interest.
As the court in Blankenship explained, a prevailing party may be entitled to a higher rate of interest if there is “substantial evidence” that the individual would have obtained a higher rate of interest on the funds, had they been paid in a timely manner. See Blankenship, 486 F.3d at 627-28. “Substantial evidence is defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Id. at 628. This naturally raises the question, What evidence is sufficient to persuade a court to award the party a higher rate of interest?
In Blankenship, the court awarded a 10.01% interest rate based on a declaration that the prevailing party “was forced to replace the $6,093.82 per month he would have received with his own personal funds. Those funds would otherwise have been invested in a Vanguard mutual fund in which he had already invested over one half million dollars, and which had a 10.01–percent return since its inception in June 2000.” Id. at 628. As Blankenship makes clear, forgoing a clear investment opportunity is one way of obtaining an award based on a higher interest rate.
Whereas a clear investment opportunity is generally required to convince a court to stray from Section 1961, some courts have awarded higher interest rates for other reasons. For example, in Hart v. Unum Life Insurance Co. of America, 2017 WL 4418680 (N.D. Cal. Oct. 4, 2017), upon an ERISA plaintiff’s motion for attorneys’ fees, costs and prejudgment interest, the court found that the balance of equities weighed in the plaintiff’s favor, entitling her to an award of 10% prejudgment interest. The court noted that the plaintiff had submitted a declaration explaining that defendant Unum’s wrongful termination of her benefits caused her to lose her house, car and health insurance and to rely on her daughter for financial support. Id. at *3. The court held that her attestation set forth a “believable narrative and constituted ‘substantial evidence’ warranting a higher rate of prejudgment interest.” Id.
In Bosley v. Metropolitan Life Insurance Co., 2017 WL 4071346 (N.D. Cal. Sep. 14, 2017), upon an ERISA plaintiff’s motion for attorneys’ fees, costs and prejudgment interest, the court found that the balance of equities and the compensatory nature of prejudgment interest weighed in the plaintiff’s favor, entitling him to an award of 10% prejudgment interest. Id. at 3. The court noted that the plaintiff sought prejudgment interest to help compensate him for the losses he incurred because of MetLife’s wrongful denial and withholding of his long-term disability benefits for over three years. The court recognized the declaration that the plaintiff had submitted, which detailed how MetLife’s denial of his claim had contributed to financial difficulties that ultimately led him to move to Missouri for more affordable housing. Id. The court found this hardship and loss sufficient to compel an award of the higher rate of interest.
Ultimately, an ERISA dispute may take years to resolve. This means that years’ worth of disability or pension benefits may be at stake. The value of a sizable life insurance policy may be in dispute. If the interest has been accruing for several years, the difference between 1% and 10% is significant. It can be the difference between $3,000 and $30,000. As such, this is one aspect of the litigation, or any settlement negotiations, that a party should not ignore.
McKennon Law Group PC has significant experience in handling ERISA and non-ERISA insurance cases in which an insurer denied a claim. We have significant experience in obtaining the maximum possible award for our clients. If your insurer or plan administrator has denied your claim, please contact us for a free consultation so that we may assess your matter.