MY ERISA DISABILITY CLAIM APPEAL WAS DENIED; WHAT CAN I EXPECT NOW?

So there you are: you submitted an internal appeal of your denied long term disability claim with your insurance carrier or claim administrator and that appeal has been denied. (hopefully, you have used the services of a qualified and experienced disability attorney to submit your appeal – as the appeal is the most important stage of your entire case.)  Likely, your only option now is to file a lawsuit.  If your long term disability benefits are provided by your employer, which means that the EmployeeRetirement Income Security Act (“ERISA”) likely applies to your claim, then the amount of damages you are able to collect in a successful lawsuit might be surprisingly limited.  In most circumstances, the only benefits you might be able to collect is a lump sum recovery of your past due policy benefits, an order from the court requiring the insurance company or claim administrator to continue to monitor and process your claim in accordance with the plan’s terms (which might mean a future termination of benefits) and your attorneys’ fees.  In all likelihood, you will not be able to file a claim seeking damages for emotional distress, pain and suffering, a breach of the duty of good faith and fair dealing (bad faith) or even punitive damages.  These types of damages can be pursued if your disability claim is pursuant to an individual policy or one not governed by the ERISA laws.

Retroactive Benefits

Most often, successful ERISA disability litigation will result in the court awarding all past due benefits to be paid by the insurance company or plan.  However, these past due benefits may be limited to benefits due and payable up to the date of the denial.  In some circumstances, benefits may only be payable until there was a change in definition of disability (for example, when the policy language switches from “own occupation” disability to “any occupation”).  In the unusual circumstance, the judge may order a “remand” of the successful claim to the insurance company for further processing without the award of benefits.   Most courts will award interest on all past due benefits ordered to be paid.

Future Benefits

If you are successful in your ERISA disability litigation, it is highly unlikely you will be awarded future benefits in a lump sum.  Instead, the court will order the insurance company to pay you benefits into the future so long as you continue to meet the definition of disability applicable to your claim.  This order does not prevent the insurance company from subsequently terminating your claim.  Future terminations of previously litigation claims do happen.  If it appears to the insurance company that your disability is permanent and that payment benefits through the term of the policy (usually age 65 or your normal retirement age) is likely, then the possibility exists of reaching a lump sum buy-out of the remaining benefits with the insurance company.  The insurance company is of course not going to pay you the full amount of benefits payable and will instead offer you some percentage of the present value of that future flow of benefits.  Even if you have not been through the litigation process, and do not have an attorney, you should consult with a good ERISA or long term disability attorney to analyze the value of any lump sum offers received from an insurance company.

Attorneys’ Fees

If your claim is governed by the ERISA laws, attorneys’ fees can be awarded to the prevailing party.  An award of such fees falls within the discretion of the trial court judge.  In all likelihood, if you are successful in your disability benefits lawsuit, the Court will award reasonable attorneys’ fees to you. 

Settlement of Disputed ERISA Disability Cases

As is the case with all types of civil litigation, the majority of ERISA disability or life insurance disputes will settle before the court reaches a final determination of the dispute.  A settlement is usually achieved through the payment of a lump sum amount by the insurance company to you.  If this occurs, you will be expected to release any future right to coverage under your insurance policy and that you will dismiss your lawsuit.  Of course, the ability to settle your case depends upon many factors including the strengths of your claim for disability benefits, the factual support for your inability to function, the amount of benefits at issue, your age, and the willingness of the insurance company to resolve your claim. 

The above is meant to provide you with a simple overview of the possible results of your ERISA disability claim.  Feel free to contact our office if your claim has been denied and you require assistance in submitting the internal appeal with the insurance company (which we strongly encourage that you involve an attorney at this early process), or if your appeal has been denied and you have been informed that your next course of action is to file a lawsuit.