The McKennon Law Group PC periodically publishes articles on its Insurance Litigation and Disability Insurance News blogs that deal with frequently asked questions in insurance bad faith, life insurance, long term disability insurance, annuities, accidental death insurance, ERISA and other areas of law.  To speak with 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 www.mckennonlawgroup.com and complete our free consultation form today.

Long-term disability insurance may be the most important type of insurance policy one can buy.  In the unfortunate event that an unexpected disability prevents you from working, long-term disability insurance provides a substitute income in your time of need.  However, insurers deny claims for long-term disability benefits more often than not.  In fact, the U.S. Department of Labor estimates that insurers deny a whopping 75% of long-term disability claims.  See our previous blog on the topic at https://mslawllp.com/prevalence-of-benefit-claim-denials-is-astounding/.  Of course, insurance companies are playing the odds, counting on people not having the stamina, or the resources, to challenge every claim that is denied.  At McKennon Law Group PC, we know insurance companies hate to see us representing their insureds because our years of experience, formidable reputation and dedicated and passionate legal advocacy help even those odds.

In this blog, we cover the important subject of attorneys’ fees, so you can better determine the best option to suit your individual needs.  We briefly explain the benefits and drawbacks of the two basic fee structures for long-term disability claims: “contingency” and “hourly.”  Of course, keeping in mind that less expensive is not always better and having a skilled and experienced disability benefits attorney handle your matter can make difference between getting hundreds of thousands of dollars in benefits and fees or nothing.

When Does the Insurer Cover My Attorneys’ Fees in an ERISA matter?

As a preliminary matter, there are instances where you may not have to pay for attorneys’ fees at all.  If your long-term disability plan is governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), then your insurer may be responsible for your attorneys’ fees.  ERISA law, as interpreted by the courts, allows for recovery of attorneys’ fees, although whether the attorneys’ fees are covered is at the discretion of the judge.  McKennon Law Group PC has never lost a motion to for attorneys’ fees after it has won an ERISA case.  Although you do not necessarily need to win your case to recover your attorneys’ fees (you only need to show a degree of success on the merits), most courts consider several factors when deciding whether to award attorneys’ fees.  Those factors include the unreasonable nature of the denial, the resources of the defendant, the deterrent effect of the award, whether the award will result in benefits for other employees under the same plan and the merits of each party’s position.

However, even if your attorneys’ fees are covered under ERISA, there are a few important considerations to keep in mind.  ERISA cases require that you go through an appeal process directly to the ERISA plan administrator or to the insurance company.  As a general matter, this requires gathering additional evidence to support your claim and drafting an appeal responding to the insurer’s reasons for denial.  Before an ERISA claimant can pursue litigation, he must complete the appeal process so as to “exhaust administrative remedies.”  Having an attorney early in the ERISA process can drastically improve the chances of your claim’s success by getting a strong appeal letter and evidence in to the administrative record.  However, when it comes to attorneys’ fees, ERISA does not allow recovery for attorneys’ fees spent working on the appeal.  This could affect an attorneys’ desire to handle an ERISA appeal.

How Do ERISA Insurance Lawyers Earn Their Fees?  Contingency, Hourly and Other Fees Arrangements

In general, ERISA lawyers who represent claimants/plaintiffs typically take your case on either a “contingency” or “hourly” basis and there are benefits and drawbacks to both.  It is possible to even pay a fixed fee or a hybrid of both an hourly and contingency fee.  Whichever option you decide, it is important that you fully understand the fee arrangement you have with your attorney, and you should freely discuss any concerns you have at the outset.

When it comes to long-term disability cases, most lawyers work on a “contingency” fee basis.  This means that, when you hire an attorney on contingency fee basis, the attorney is only compensated if you obtain a recovery, typically through a settlement or trial win.  If you lose your case and there is no recovery, you typically would owe no fees or costs that the lawyer covers for you, which is what makes such contingency fee arrangements most attractive to clients.  Typically, such a contingency fee is 35% to 45% of your total recovery.  The percentage is usually tied to the stage you are at when the recovery is achieved.  For example, a 35% fee if the recovery is made during the appeal process; a 40% fee if the recovery is made during the first part of litigation and a 45% fee if the recovery is made during the latter part of litigation.  As an example, say you are successful in pursuing your wrongful denial of long-term disability benefits and the total award for past-due benefits is $80,000, then your attorneys’ will recover $28,000, $32,000 or $36,000, respectively.  In some cases, your long-term disability insurer will reinstate your claim for benefits, and you will receive future monthly benefits.  Depending on the type of fee agreement, your lawyer may also receive a percentage of those future benefits.  Most good and highly experienced ERISA disability insurance lawyers will take a fee out of future disability benefits.  The reason:  appeals and especially litigation can take a law firm hundreds of hours in achieving a recovery for a disability insurance claimant and it is not economically viable to take these cases without taking a fee on future benefits.

Alternatively, you may decide to hire an attorney on an hourly basis, although most clients with a denied claim for long-term disability prefer contingency, simply because they cannot afford to pay a lawyer hourly.  Under this option, your attorneys’ fees are paid directly to the lawyer, charged on an hourly basis.  You are required to cover the costs and fees at the outset, but if you are successful on your claim, you receive the total recovery without sharing it with your attorney.  Many times, ERISA disability claimants wish to have experienced ERISA disability insurance lawyers provide consulting services to guide them in the claims process, before a disability claim is denied by an insurer.  In these situations, some ERISA lawyers will handle these matters on an hourly basis only.  Some experienced ERISA disability lawyers like McKennon Law Group PC will provide such consulting services on an hourly basis or on a contingency fee basis, in the latter situation, taking a reduced fee from disability benefits paid in the future.

Is it Possible to Hire an ERISA Disability Insurance Lawyer and Keep All or Most of Your Long-Term Disability Benefits?

Yes, believe it or not.  McKennon Law Group PC has a unique provision in its fee agreements with its clients:  The firm can choose to keep 100% of an award of attorney’s fees as its total fees earned, which, if the fees are sufficiently high, may allow our clients to keep all of most of past-due and future disability benefits.

At McKennon Law Group PC, we work with our clients to find an arrangement best suits their needs and have represented claimants under all of the above fee structures.  We have been told by the insurance industry and by objective mediators that we have a very strong reputation for effectively prosecuting policyholder claims and that we are the most aggressive California law firm they see fighting insurance company claim denials.  We fight for our clients effectively and efficiently.  If your ERISA or non-ERISA 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 and Non-ERISA insurance claims.