What Can I Gain from a Successful ERISA Disability Claim?

If you end up suing for disability benefits under a group long term disability policy governed by ERISA and win, you can only collect a lump-sum payout of your actual policy benefits (what you would have been paid in the first place), a clarification of your rights under the plan going forward and, occasionally, your attorney’s fees You cannot sue for pain and suffering, emotional distress, bad faith and punitive damages as you can under an successful individual policy.

But, of course, there are gray areas concerning available remedies subject to differing opinions among the courts.

Recoverable benefits

Courts have differed on this point. Some hold that benefits due as of the date of the court’s judgment are recoverable. Other limit recovery to the benefits as of the date the claim was denied. In either case, if you have a good attorney, the final determination of the court should clarify how future benefits are to be determined by the insurance company.

Retroactive offsets

This can be very frustrating for you. Your group disability insurance policy may allow your benefitsto be offset (reduced) by other benefits received by you, such as Workers’ Compensation, Social Security benefits or even retirement benefits. There have been some cases where the courts have not permitted the retroactive application of offsets. But in most cases the offsets are allowed.

Interest paid on past due benefits

Normally this is awarded. The rate of interest is determined on a case by case basis. The more egregious the conduct of the insurance company or claims reviewer, the more likely the court will impose an interest rate favorable to you.

Future benefits

You do not get a lump-sum payout of future benefits. Because the right to future benefits is uncertain (depends on whether you remain totally disabled), future benefits may not be awarded. But there are certain individual situations (for example, where your disability is clearly permanent and the policy benefit period is certain) that you and the insurance company may agree, based on an agreed upon life expectancy, to a lump sum payment of future benefits. Also, there are circumstances where the court may decide to “clarify the right to future benefits”.

What does it mean to “clarify the right to future benefits”?

The best way to explain this is with an example. A situation may arise where you are receiving benefits because of disability which the insurance company has determined to be subject to a 2-year coverage limitation for mental and nervous disorder. The insurance company may advise you that your claim will be paid for a maximum of two years. If you contend that your disability is physiological in origin, and therefore not subject to the mental and nervous disorder limitation, you can litigate that issue presently, and need not wait until the insurer terminates benefits.

Attorney fees

Attorney’s fees are awarded at the discretion of the court.

If you win your disability benefits lawsuit, in all likelihood the court will award reasonable attorney fees. However, the issue of when you have “won” remains an open question. Some courts have been willing to award fees if you “win” on a major issue, while others require a final judgment and an actual monetary award to you.

What are reasonable fees? It is the reasonable number of hours incurred by the attorney in successfully pursuing your claim multiplied by a reasonable hourly rate charged by attorneys with similar experience and qualifications in your area. The court may not award contingent fees in an ERISA case.

Ordinarily, attorney fees are not awarded to the insurance company if you lose your lawsuit. But if the court determines your suit was brought in bad faith, the court has the discretion to award fees to the insurance company or to the plan.

Are there any situations where civil, non-contract remedies are recoverable in an ERISA case?

Some courts hold that when the conduct of the insurance company and its agent is actionable outsidethe claims process, civil remedies may be recoverable. For example, if an investigator hired by the insurance company to observe you trespasses on your property and takes video through a bedroom window, an action may be brought for trespass and invasion of privacy. These circumstances are rare.

How are ERISA disability cases usually settled?

Most lawsuits settle before going to trial. This happens when both parties, after they’ve completed some discovery trial preparation, see a risk of not prevailing. Most insurance companies prefer resolving litigated claims prior to trial. Often this is done through a buy-out of your claim in exchange for a release of any future right to coverage under the group policy. The amount of settlement depends on many factors, including the strength of your case, the present value of future benefits, your life expectancy, the likelihood of your recovery and return to work, and many other variables.