There are a lot of challenges in an ERISA lawsuit, and probably the single biggest one comes about from what’s known as a discretionary clause.

Disability Insurance Attorneys Dell & Schaefer itemizes the things that are different in an ERISA lawsuit versus one that’s not governed by ERISA.

https://youtu.be/mwEtce4yB6I&w=550

GREGORY DELL: Hi, I’m Greg Dell with Attorneys Dell & Schaefer. And today, attorney Steven Jessup and I are going to talk about the challenges of an ERISA the disability lawsuit. And there are a lot of challenges in an ERISA lawsuit, and probably the single biggest one comes about from what’s known as a discretionary clause. So let’s start with that, and then we’re going to run through probably six or seven different things that are different in an ERISA lawsuit versus one that’s not governed by ERISA.

So just as a background, I mean, this is a very specific video that we’re doing on the challenges. But ERISA, the Employee Retirement Income Security Act governs group policies. And for the purposes video, we’re going to assume that ERISA applies, obviously. So let’s talk about first what is this discretionary clause that’s in a disability policy?

STEPHEN JESSUP: A discretionary clause is something that allows the insurance company when you read it to interpret the terms and provisions of the policies as they see fit. And what that does then, from a legal perspective, it creates what’s known as a standard review.

In trial, a standard review is what the judge the court has to employ to determine who essentially wins the case. This discretionary clause will, if it’s located in the policy, will initiate what’s known as an arbitrary and capricious review. So as a plaintiff, you have to show that, one, that you’re disabled, which we find usually that’s one of the easier things to prove that, medically speaking, there would be a disability.

But then the second step is the hard spot where, most times, the insurance companies will prevail. And that’s whether or not they had essentially a reasonable basis to deny the claim. So it’s a situation where a judge’s hands are tied in finding that, yes, they believe you’re disabled. But if the insurance company provides you with a reasonable review and had a reasonable basis to deny the claim, the judge has to uphold that decision to terminate your benefits.

GREGORY DELL: So when we speak to lots of claimants around the country and we explain the process, when ERISA cases came about, going back into the 1970s shortly after they passed ERISA law, it used to be that when you had in an ERISA lawsuit, the standard was a de Novo review. And a de Novo – review means, like most people would think, it means new. So when you filed your lawsuit, the judge would look at it. The judge would review everything, and the judge would make a determination.

And if that judge thought you were disabled, then you won. And if he didn’t, then you lost. In a case that went to the US Supreme Court, they put in these clauses in the policy – like you said, these discretionary clauses – and the courts basically said, look, with these discretionary clauses in the policies, we now have to have an arbitrary and capricious review.

And we have to defer to the insurance company unless they acted unreasonably. So that’s really tough in these cases. And the reason that I’d say 70% or so give or take are won by the defense because the court can get to the point and say I don’t agree with your decision.

But the way in which you reviewed the file appears to be reasonable. So that’s the challenge here that we go through. Now many states – not many, about 13 states give or take right now – have abolished discretionary clauses and made them illegal in long-term disability policies. We’re trying.

We’ve been pushing through lobbying at a federal level to get the Department of Labor to say, look, we’re not even going to allow this anymore. It’s not happening. But it’s a process where we’re lobbying in multiple states and trying to get these discretionary clauses to become illegal. Let’s talk about what’s another biggest negative or challenge to an ERISA lawsuit?

STEPHEN JESSUP: I think one of the biggest and most people have this concept, whether it’s watching TV or understanding and filing a lawsuit, going to trial, having your day in court is this concept that you’ll be able to tell your story, that a jury is going to listen to you. And they’re going to help decide. Under ERISA, you don’t get any of that. There’s no live testimony, so you’re not going to speak to the judge. Your doctors aren’t.

No one from your insurance company is. There’s not going to be a jury. It’s all up to this judge, like we were saying, to make the final determination. So even in situations where under these policies, since they make you apply for Social Security, you may have that day where you’re speaking to the judge or being asked questions.

Here it’s very, very cold and methodical. And quite often, federal judges don’t even necessarily want to hear from the attorneys. We file motions that the judge decides upon. So there’s not this idea of a day in court that feeling of having justice for what’s been done when your claim’s denied.

GREGORY DELL: Right, well, not having the right to a jury trial is very disheartening. A lot of people think, well, I’m going to go in, and I’m going to let a jury decide. And then we’ll beat up on the company, or at least I’ll get to have my day.

But you do get your day in court and the sense of being able to present your case and your lawyers – that’s why your lawyer is so important – gets to argue what they did wrong in their review. And you have to have an amazing understanding of the case law, which is always evolving, in order to present that. But there is no live testimony.

More importantly, when we take a case that isn’t ERISA, we usually say your case is only as good as your client, meaning the plaintiff, if you’re a credible person and someone that sounds believable, then a jury is going to like you. Here the judge doesn’t even get to see you or hear from you or understand what you’ve been going through, feel your pain. They just don’t get to do that.

You don’t even get to sit in court and let the judge look at you. So the judge doesn’t even really know who you are unless that’s been a part of how you’ve presented your appeal, which is something we always do to let them get that flavor of who the claimant is. But that’s a whole other animal in terms of how you present the appeal.

Now we have plenty of cases where we do the appeal and then get to do the lawsuit. And we have a lot of cases where we just do the lawsuit, and we’re married to the record that were presented. And that’s what has to be presented. Now let’s move on to another issue with ERISA.

How many people call you and say this company screwed me? I’ve gone into financial debt.

I’m losing my car. I’m going to be homeless. How do I pay all my bills? I don’t only want to sue them and get my benefits.

I want to hammer them. I want punitive damages. I want compensatory damages. Let’s go after them. Why is that a problem through ERISA?

STEPHEN JESSUP: It doesn’t allow for it. Under the law, you’re restricted to the past benefits due. So from the time of denial to the time of decision and that can be capped even more.

Say you were denied during an own occupation period. A judge can award benefits into any occupation. So at the end of the day, the most you’re ever going to get in court is the benefits that are owed to you. That’s it. And then you’re placed back on claim.

And the insurance company can start their reviews and everything else that they did to you. And even coupling upon that, there’s no immediate guarantee of attorneys fees. In other areas of law, a prevailing party by right is able to get their fees paid. In this situation, it’s up to the judge whether or not the court wants to award fees and if so, how much.

So realistically, it creates a situation where the insurance company isn’t going to be financially harmed by losing. All they have to do is pay what they owe you. So it creates a scenario where there’s really no incentive not to try to deny and terminate as many claims as possible.

GREGORY DELL: Right, so when we use the expression, we say there’s no teeth in ERISA is that there’s no punitive damages, which means a penalty, a punishment for the company for acting wrongfully. No matter how egregious their conduct was, there’s no punitive damages penalty. There’s no extra contractual damages.

There’s no compensation for anything that happened to you. No matter what, the insurance company is not responsible, and the judge’s hands are tied. It’s not even discretionary with the judge.

It just cannot be done. You can get some interest down the road on a judgment. That in itself is really not even all that much because it’s usually tied to like a treasury rate. According to the law, we’re able to argue and get around that. But the treasury rate’s like 2% right now, and it’s been as low as almost zero.

So it’s not a fear factor whereas when we have a non-ERISA case and we know that we might have a case that might be worth, say, I don’t know, a $7,500 a month benefit. They owe the claimant $100,000, but they can get hit for millions of dollars potentially in punitive damages. And that’s a factor.

The attorneys fees that you touched on – does that sway them? Yes, a firm like ours that’s going to get the much higher level of an hourly rate upwards of $600 – plus an hour awarded by the court is going to add up when you have several hundred hours. But still, is a couple hundred thousand dollars attorney fee bill going to sway them? Yes, it’s going to sway them, and that’s the benefit to have a powerhouse firm behind you because if the mountain dispute’s only $100,000 in attorney’s fees are going to exceed that, then the insurance company is fighting a stupid battle.

But when you have cases that are worth more, sometimes they just look at it with that big picture like we have a legal department. We have a team. We have a budget of a couple million a year to fight cases, and they lose sight of the big picture. And they’re fighting little cases where the attorneys fees are greater than what can be recovered for the claimant.

STEPHEN JESSUP: And also on the flip side, ERISA is a prevailing party. So technically, the insurance company can petition the court to have you pay their attorney’s fees, so there is an insult to injury that can even occur.

GREGORY DELL: Right, so in summary, these are risky. Look, we win these ERISA cases all the time. And then that classifies what’s a win? Not a ton of them go to verdict. A true win is you get a verdict, and everything gets paid. Another type of option is that you reach an amicable settlement, and a client walks away somewhat happy.

The insurance company walks away unhappy because they paid out a certain amount. So we’re able to recover benefits for a claimant. So you should never give up as difficult as these laws can be. But important to understand it’s a tough standard of review. It can be an uphill battle if you have the discretionary clause.

There’s no punitive damages. There are no compensatory damages. There’s no new evidence that comes into the record. There’s no guarantee of interest if you win, and there’s no guarantee of attorneys fees.

So you got to have a real practical approach. That’s always what we’re going to have on these cases. But if you’ve been wronged, we’re going to fight like hell to win your case. I mean, that’s the bottom line no matter how difficult the law can be.

So feel free to call us for a free consultation to review your claim. We’ve handled thousands of these ERISA lawsuits. We’re always available to discuss your claim. We look forward to the opportunity to speak with you.