Passed in 1974, ERISA is the set of regulations governing employee benefits, including long-term disability insurance. Most people acquire LTD coverage via their employers rather than purchasing an individual policy directly from the insurance carrier. In most cases, employer-sponsored coverage is less expensive than individual coverage; few employers actually cover the entire cost of a policy, but some contribute to the annual premiums.
More importantly, the process for filing claims and appealing denials is different for policies covered by ERISA than those that are not.
Filing a Long-Term Disability Claim
Regardless of the type of LTD policy you have, properly filing your initial claim is important. Errors in your claim can lead to delays in payment — or even a denial of your claim. Your best bet is to find a disability insurance lawyer in New York or your home state to help you navigate the claims process and ensure you meet all of the requirements of your insurer’s claim process.
The first step to filing any LTD claim is to review your policy and the requirements for filing a claim. If you have an ERISA policy, you will most likely have to make a written request to the insurer to acquire a Summary of Plan Provisions and a copy of your policy, if your company’s human resources or benefits office cannot provide it.
One important aspect of filing an ERISA claim is you must stay at work until your doctor determines you are disabled. If you stop working before that determination, you may lose your coverage altogether and will not be able to make a claim. If you have an individual policy, the rules regarding employment may be a bit more lenient, so be sure you understand what you need to do. Ideally, you will have all of your evidence and documentation of the disability in place before you stop working.
Appealing a Denied Claim
The differences between ERISA and individual policies when filing a claim are subtle, but when it comes to appealing a denied claim, there are some major differences between the two policy types.
Under an individual LTD policy, you have the right to take legal action as soon as your claim is denied. With a group policy, you must go through the administrative appeal process and exhaust all of your appeals before you can sue. In addition, ERISA cases are handled in federal rather than state courts. This creates a higher standard for overturning appeals, since the federal courts will only reverse the decision if it is clear the insurance company acted incorrectly or inappropriately. For an individual policy, state laws apply, giving the courts more room for interpretation in terms of whether the denial was justified.
When you make a claim on a LTD policy that is wrongfully denied, you can sue the insurer not only for the payments you’re owed from the policy, but you can also seek damages. Pain and suffering, bad faith, emotional suffering and even punitive damages are possible if you successfully litigate against an insurance company.
In contrast, ERISA rules only allow policyholders to sue for the actual payout you would have received under the terms of the policy. Occasionally litigants have also recouped attorney’s fees, but otherwise, punitive and compensatory damages are not allowed in ERISA cases. Claimants also generally receive interest on the denied benefits.
However, the lump-sum payment could be reduced by retroactive offsets. If you received money from worker’s compensation, retirement funds or Social Security while you were disabled, the court may rule your payment from the insurer be reduced by how much you received from those sources. The court will also decide whether your recoverable benefits begin on the day your initial claim was denied or on the date of court’s judgment, which could amount to a significant difference in payment amounts.
The vast differences between ERISA and individual LTD insurance policies highlight the importance of consulting with a qualified attorney prior to filing a disability claim and making sure the process is handled correctly. The claims process is a complex one, and one mistake could lead to a denial — and a long wait for the compensation you are entitled to receive.
About the Author: Richard Quadrino is a disability insurance attorney with decades of experience handling insurance litigation, class action and bad faith suits.