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Frequently Asked Questions

Contact TracyThe following are answers to some of the most often-asked client questions.

What is disability coverage and do I have it?

Disability coverage is intended to pay replace a portion of your work earnings if you suffer an illness or injury which prevents you, either temporarily or permanently, from continuing to work. The coverage may be obtained in one of two ways. It may be purchased directly by you from an insurance company or it may be offered to you as a benefit of your employment by your employer.

If you purchased disability coverage directly from an insurer, you have what is known as an "individual insurance policy." If you obtained the coverage as a benefit of your employment, your coverage is either funded by your employer or funded by a "group insurance policy" purchased by your employer from a disability insurance company. The premiums for a group policy are most often paid entirely by the employer, but sometimes the employer requires its employees to pay some or all of the premiums, usually through payroll deductions.

If you purchased your policy directly from an insurance company and have kept that coverage current by paying premiums, you know you have disability insurance. If you think you may have coverage through your current or former employer, but are not sure, you should review any paperwork provided to you by the employer to confirm your employee benefits. If you do not have any paperwork, you may obtain the information through the employer's human resource department.

What's the difference between short and long term disability?

Short term disability benefits are paid only for a limited initial period of disability, usually six months to one year. They are most often funded directly by the employer, not by an insurance company.

Long term disability benefits are payable for a longer period. Group disability policies usually pay benefits to a maximum of the employee's age 65 or to the employee's normal retirement age as defined by the Social Security Administration. The maximum payment period of an individual policy depends on the specific coverage purchased by the insured. It can be until age 65, for a lesser fixed period, or even for the life of the insured. Some employers self-fund their own long term benefit plans, but most purchase a group insurance policy to fund the benefits.
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Does it matter if my coverage is individual or group?

Yes. The legal framework which governs individual as opposed to group insurance coverage is substantially different. Individual policies are governed by state law which provides a host of potentially recoverable damages if your claim is denied and consequently, affords you substantial leverage in any battle with your insurance company relative to obtaining your benefits.

Conversely, most group insurance policies and plans are governed by a federal law called ERISA which affords limited damages and contains other restrictions which make it far more difficult to establish your claim.

What Is ERISA?

ERISA stands for the Employee Retirement Income Act of 1974, 29 U.S.C. Section 1001, et. seq., although many claimant's ERISA counsel prefer to refer to it as "Everything Rotten Invented Since Adam". ERISA was initially enacted only to regulate and protect employee pensions plans. Subsequently, ERISA was deemed to further cover all group employee insurance benefits such as disability, life and health.
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What's so bad about ERISA?

It is ironic that a statutory scheme which was enacted to protect employee benefits has instead created further vulnerabilities for claimants, but that is exactly what ERISA has done. Just a few of the problems with ERISA are:

ERISA does not allow the claimant to recover damages customarily allowed by state law when an insurer improperly denies a claim such as bad faith/punitive damages, emotional distress damages, consequential damages and attorney's fees.   ERISA limits recovery to the monthly disability benefit which should have been paid in the first place, interest on benefits due to date, and in certain cases, some but not all of the attorney's fees incurred to establish the right to the benefit. 

ERISA does not allow a jury trial.  Instead, the decision on your claim is made only by one person - a federal court judge.

ERISA allows insurance companies to write their policies so that the judge is forced to give any adverse decision made the insurance company regarding your claim substantial deference.  This means that the judge cannot overturn the denial of your claim even if he or she finds that the decision was wrong unless he or she finds also that the decision was also unreasonable or not based on substantial evidence.  As insurance companies have become quite adept at stacking their claim file with evidence adverse to you, it is very difficult to obtain a court reversal of an adverse decision.

These factors place the claimant and his or her counsel on an uneven playing field with the cards stacked in favor of the insurance company.   They also provide serve to provide the insurance company with little incentive to approve ERISA-governed claims.
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Do I need an ERISA attorney to help me?

If you are reviewing this website, you probably already know the answer to this question.   ERISA law is a specialized area in which a very limited number of lawyers choose to practice due to the complexity of ERISA, the uphill battle it presents to claimants and their counsel, and the limited damages which are recoverable.   If you are seeking counsel to assist with your ERISA disability claim, you need an attorney who is experienced in ERISA and in the type of claim you are presenting, be it disability, life, health or pension.  Do not assume that an attorney who specializes in individual disability cases can also handle an ERISA disability case as this is often not true.   Nor should you assume that a lawyer who may have handled a few ERISA cases in the past is competent to handle your case.  ERISA law is in a constant state of flux and you need an attorney who specializes in ERISA and handles these types of cases on a current, day to day basis.  Don't let someone who is not an expert "wing it" with your benefits.  These benefits are too important to you.
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Are all group policies or plans governed by ERISA?

Most but not all, group polices and plans are governed by ERISA.  Certain group plans and policies, however, such as those sponsored by certain religious organizations, professional associations and government agencies are exempt from ERISA.   One of the first things your attorney should do is investigate whether your policy or plan is ERISA-governed or not.  If he or she cannot answer this question for you, you need a different attorney.

My ERISA disability claim was denied.  What do I do next? The ERISA Appeals Process

Before an ERISA claimant can file a lawsuit to attempt to recoup their denied benefits, ERISA requires that the claimant or his or her counsel submit an administrative appeal to the plan administrator (or insurance company), within 180 days of the date  of the written denial of benefits.  If an administrative appeal is not submitted, absent certain circumstances such as the incapacity of the claimant, the right to sue will be lost.  

An administrative appeal is basically a request to the administrator for reconsideration of the adverse decision, but the importance of the process should not be understated.   The administrative appeal not only preserves the right to sue, it is also the claimant’s opportunity to submit valuable information which supports the claim to ensure that information will be admissible at trial if the claim is again denied and the claimant must sue to collect his or her benefits.  Such information could include, but is not limited to, medical records, letters of support from the treating doctors, family members, friends and former co-workers,  information about the claimant’s prior job duties and work experience, and other information which supports that the disability exists, such as a Social Security Award if the claimant has applied and been approved for social security disability benefits.  

ERISA mandates that the claimant be provided a copy of the documents which are already in the possession of the plan administrator when the claim is denied.  Thus, it is always best to write to the plan administrator and ask for a copy of these documents before submitting an administrative appeal.  This allows the claimant to review the evidence upon which the denial was based, respond to that evidence, fill in any gaps which may exist in the record and correct any errors in the record. 

It is very helpful to the claimant to have an experienced ERISA lawyer to handle the appeal process on the claimant’s behalf. 

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What happens if the Administrative Appeal is denied?  The ERISA litigation process

When a claim is denied again following administrative appeal, it is important to confirm that the plan does not require a second administrative appeal before proceeding to litigation.  The claimant or his or her lawyer should review the plan document to see if a second level appeal is required.  Usually,the plan administrator will state in the appeal denial letter that administrative remedies have been exhausted and that the claimant has a right to sue under ERISA.  Obviously, unless the claimant is an attorney, and is experienced in ERISA, he or she will need an attorney to file an ERISA litigation.

ERISA is a federal statutory scheme and thus, litigation takes place in federal, not state, court.  As ERISA does not allow a jury trial, the trial decision is made by one person – the federal court judge assigned to the case.  An ERISA litigation will generally take six to twelve months to resolve.  Most cases settle before trial.   The evidence admitted in an ERISA case is, with limited exceptions, limited to what is known as the “administrative record.”  The administrative record consists of the entire file of the plan administrator relative to the claim up to the time the final adverse decision is rendered, including medical records received by the administrator, all correspondence between the claimant and the administrator and any other third parties, any medical reports obtained upon commission of the administrator, etc.   Evidence that is generated after the conclusion of the appeal or evidence that existed prior to the conclusion of the appeal but was not submitted during the appeal process may not be admissible at an ERISA trial, hence, the extreme importance of preparing a complete administrative appeal while the appeal is pending to ensure that all relevant and favorable evidence is provided to the plan administrator.

Due to the evidentiary limitations imposed by ERISA, discovery is generally limited.  Typically, the claimant and other witnesses relevant to the claim will not be deposed.  Similarly, except in very unusual circumstances, no witnesses will be called to testify at trial.  The judge makes his or her decision based upon briefing submitted by the lawyers for the claimant and the plan administrator, which is in turn based upon the administrative record.  

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The Impact in ERISA litigation of the Standard of Review

The judge is, in large part, guided in his or her decision by the judicial standard of review which must be applied in a given case.  The standard of review is the legal framework that judge uses to decide how much deference to give to the plan administrator’s decision to deny benefits.  Two applicable standards are possible.  Under the “de novo” standard of review, the judge gives no deference to the plan administrator’s decision and conducts an independent analysis of whether the administrative record support’s the claimant’s assertion that disability exists.  This is the most favorable standard of review for the claimant.  Under the “abuse of discretion” standard of review, the judge generally cannot overturn the plan administrator’s decision unless he or she finds that the decision was unreasonable or unsupported by the evidence.    The abuse of discretion standard affords the plan administrator substantial deference from the judge and thus, is far less favorable to the claimant than the de novo standard of review. 

The assignment of which standard of review applies depends on the plan language itself.  If the plan contains a provision which states the plan administrator retains discretion to determine the claimant’s eligibility for benefits, the judicial standard is abuse of discretion.  If the plan does not have such language, the applicable standard is de novo.

In some circumstances, the deference afforded by the judge to the plan administrator can be lessened even if the applicable standard is for abuse of discretion.  Experienced ERISA counsel will know how to present this argument as it depends upon the actions of the plan administrator during the claim and appeal process.  If it can be demonstrated that the plan administrator was clearly predisposed to deny the claim or that the administrator failed to administer the claim and appeal in the manner ERISA requires, less deference to the plan administrator’s decision is warranted.

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Offsets to ERISA Benefits

Many claimants are unaware that ERISA benefits are near always subject to offset by other types of disability income which the claimant may be receiving.  Most typically, these other disability income benefits include Worker’s Compensation Benefits, Social Security Disability Benefits, Disability Pensions, and Third-Party Recovery benefits.  Typically, if the claimant’s plan provides for a disability benefit equal to 60% of the claimant’s earnings at the time of disability, the claimant will assume the benefit will be that 60%.  Not so if the claimant is also receiving other sources of income.   For example, assume that 60% of the claimant’s prior income is $3,000.00 per month, but the claimant is receiving $1,000.00 per month in social security disability benefits.  Under this scenario, the claimant would only receive $2,000.00 per month from the plan administrator/insurance company.   In some cases, the claimant may  even be receiving other disability income benefits which when combined, exceed the gross amount of the ERISA benefit.  In these cases, the plan may owe the claimant nothing or a minimum benefit, usually $100.00 per month, depending on the terms of the ERISA plan at issue. 

Taxability of ERISA benefits

ERISA benefits may be taxable and may not be taxable.  As a general rule, if the insurance premium for the disability insurance is paid for by the claimant with post-tax dollars, the benefit will not be taxable.  However, if the premium is paid by the employer at no cost to the clamant or if the claimant is paying the premiums with pre-tax dollars, the ERISA benefit is taxable.  All claimants should consult with a competent C.P.A. to determine whether their benefit is taxable or not.

Further Questions?

Contact Tracy Collins at (818) 889-2441 or through e-mail

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Tracy Collins
Attorney At Law

5739 Kanan Road,
Suite 415
Agoura Hills, CA 91301

(818) 889-2441 (Phone)

(818) 889-1210 (Fax)

 

FAQ'S

What is disability coverage and do I have it?

What's the difference between short and long term disability?

Does it matter if my coverage is individual or group?

What Is ERISA?

What's so bad about ERISA?

Do I need an ERISA attorney to help me?

Are all group policies or plans governed by ERISA?

My ERISA disability claim was denied.  What do I do next?

What happens if the Administrative Appeal is denied? 

The Impact in ERISA litigation of the Standard of Review

Offsets to ERISA Benefits

Taxability of ERISA benefits