Those with a long-term disability (LTD) who’ve been plodding through the process of claiming a disability insurance benefit can tell you: it’s no walk in the park. It typically starts with an ERISA denial by the disability insurance company, followed by an ERISA appeal, and finally, the intimidating reality of an ERISA lawsuit.

Challenges abound in any kind of lawsuit, but disability insurance attorney Greg Dell and fellow disability lawyer Steven Jessup reveal the specific roadblocks to fighting in court for your earned disability benefits. As attorneys with the Dell & Schaefer law firm, they’ve handled thousands of ERISA lawsuits and know the ins-and-outs of what it takes to prevail.

The background context of an ERISA lawsuit comes from what’s known as the Employee Retirement Income Security Act, which governs group insurance policies. These policies are typically available through employee packages. It’s an important distinction, according to Greg Dell, because these group disability policies have features that distinguish them from similar private policies – and those features are not always friendly to the disabled claimants.

Discretionary Clauses

One of the most crucial clauses in an ERISA policy is what’s known as a “discretionary clause,” explains Stephen Jessup. This clause allows the insurance company to interpret the terms and provisions of the policies as it sees fit. And what that does, from a legal perspective, is create what’s known as a “standard review.”

In a court trial, the standard review is what the judge employs to essentially determine who wins the case. This discretionary clause, if it’s located in the policy, will initiate what’s called an “arbitrary and capricious” review. This means that, as a plaintiff, the policyholder must show two things:

  • One, you must prove that you’re disabled. Medically speaking, there must be a disability, which is one of the easier things to prove.
  • The second step is the hard one, because the disabled claimant must also prove that the insurance company did not have a reasonable basis to deny the claim. In most cases, the insurance company prevails.

Because of the way ERISA laws are written, according to Jessup, the judges often have their hands tied, so to speak. Even if the judge believes you are disabled, the insurance company can provide proof of a “reasonable review” that includes a reasonable basis to deny the claim – and the judge must uphold the decision to terminate your benefits.

The seemingly unfair basis of this “discretionary clause” is an ERISA law that passed in the 1970s, reveals Greg Dell. Prior to its passage, the standard was a “de novo” court review in which the judge views each case as if it were new. Therefore, when a disabled person filed a lawsuit, the judge would review everything and make a determination. If the judge thought you were disabled, you won. If he didn’t, you lost.

Then, in a case that went to the Supreme Court, several clauses got added to the ERISA law, including the discretionary clause that now requires an “arbitrary and capricious” review. So, unless it can be proven that the manner in which the insurance company reviewed the file was unreasonable, they win.

This happens in roughly 70-percent of the cases, according to Greg Dell. Some states have abolished discretionary clauses altogether and made them illegal in long-term disability policies – but it’s an ongoing struggle. “We’re trying,” he says. “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.”

Your Day in Court (or Not)

One of the biggest misunderstandings about an ERISA lawsuit is that the plaintiff (the disabled policyholder) with “have his day in court.” The concept that the claimant will be able to tell his story and that a jury will listen and help decide the outcome simply isn’t true under ERISA rules.

“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,” explains attorney Stephen Jessup. “There’s not going to be a jury. It’s all up to this judge … to make the final determination.”

It can be very cold and methodical, he notes, and federal judges don’t even necessarily want to hear from the attorneys. They file motions that the judges use to decide the case, and it’s common to receive no justice for what the claimant has endured by having his claim denied.

“The judge doesn’t even get to see you or hear from you or understand what you’ve been going through, feel your pain,” notes Greg Dell. “They just don’t get to do that. You don’t even get to sit in court and let the judge look at you.”

This makes it even more crucial to have proper representation by a competent disability attorney. Your “day in court” boils down to how that attorney presents your case in the motions and how well they can argue what the insurance company did wrong in its review. It takes a genuine understanding of the case law in order to present that, especially since the law is always evolving.

Punitive Damages and Attorney’s Fees

In an ERISA lawsuit, there is also the issue of punitive damages. The plaintiff has likely gone into financial debt while fighting the disability insurance claim denial, maybe is losing his car, about to become homeless. He likely wants punitive or compensatory damages along with his disability payments.

But don’t hold your breath. Under the ERISA law, if you win, you’re restricted to the past benefits due rather than damages for the pain caused by the denial. According to Stephen Jessup, there are no contractual damages awarded, no compensation for anything that was done to you, and no penalty for the insurance company acting wrongfully, no matter how egregious their conduct was.

And finally, to “add insult to injury,” as the time-worn saying goes, there’s not even a guarantee that the court will award attorney fees to the disabled claimant if he wins the case. This provides an incentive for the insurance company to deny as many claims as they choose.

“Realistically,” says Greg Dell, “it creates a situation in which the insurance company isn’t going to be financially harmed by losing. All they have to do is pay what they owe you.”

In spite of all these obstacles, Greg Dell notes that his law firm wins these ERISA cases all the time. However, many of them never even go to verdict. Though a true win is if the claimant wins a verdict and everything gets paid, a more realistic option is that you reach an amicable settlement. The disabled client walks away somewhat happy, and the insurance company walks away unhappy because they had to pay out a certain amount. But the claimant is able to receive an agreed sum of money and move on with his or her life.

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

Anyone who is facing an ERISA lawsuit can reach out to Greg Dell, Stephen Jessup or any other attorney at the disability insurance law firm Dell & Schaefer. They’ve handled thousands of ERISA lawsuits and always offer a free consultation to review your claim. Just give them a call or use the contact form on the company website.