Employee Benefits: What It Means When ERISA Applies to Your Insurance Case

Clay WilliamsSinclairWilliams LLCBirmingham, AL mcw@sinclairwilliams.com

What Is ERISA? The Employee Retirement Income Security Act of 1974 is a

comprehensive and complex federal enactment that applies to most claims for employee benefits.

Was initially envisioned in response to rising reports of corporate mishandling of large pension plans, but was amended at the last minute to address “employee welfare benefits”

Employer-Provided Insurance as “Employee Welfare Benefits”

Usual Forms of Employer-Provided Insurance:

Health and Dental Insurance Accidental Death & Dismemberment Life Insurance (Basic and Supplemental) Long-Term Care Short and Long Term Disability (sometimes called “Income

Protection” insurance)

ERISA Plan or Not? …

The Dillingham Test

Ask if there was a “plan” by inquiring whether “from the surrounding circumstances a reasonable person [could] ascertain the intended benefits, the class of beneficiaries, the source of financing, and procedures for receiving benefits.” Donovan v. Dillingham, 688 F.2d 1367 (11th Cir. 1982) (en banc).

ERISA Plan or Not? ...

Key Inquiry: Employer’s Intent Whether the employer “established or maintained” the plan

with the intent of providing benefits to its employees.

ERISA Plan or Not? …

“Safe Harbor”

29 C.F.R. § 2510.3-1(j): Four requirements--1.Employer or employee organization (a union, for example) makes no contributions to the plan2.Employee’s participation is voluntary3.Involvement of the employer is limited to being a go-between, but does not involve “endorsement” of the plan4.The employee organization receives no consideration in connection with the program, other than reasonable compensation for limited administrative services.

Is it an ERISA plan?

Even if it meets the definition of a “plan” and does not qualify under ERISA’s “safe harbor” regulation, it may not be a plan if the employer is a governmental entity or church organization

So ERISA Applies …What Now?

Welcome to Federal Court and Goodbye to Your State Law Claims!

Federal jurisdiction -- especially if the claim is brought under something other than ERISA § 502(a)(1)(B), so be prepared for removal despite your best efforts to plead otherwise! See 29 U.S.C. § 1132(e).

“Super-preemption” -- Preempts state law causes of action (breach of contract, etc.), and defenses, see 29 U.S.C. § 1144(a). The only exception exists as to policies obtained by governmental or church entities. See 29 U.S.C. § 1004(b).

ERISA’s Own Unique World of “Civil Procedure”

Two Phases to an ERISA Claim:

1)Administrative Process [the “trial”]

2)Action for Statutory Relief under 29 U.S.C. § 1132(a)(1)(B) [the “appeal”]

ERISA’s Own Unique World of “Civil Procedure”1. The “Trial” of your case takes place before the insurance company

administrator, not the Court, in the first instance. This means:

Claimant must present all evidence to insurance company pre-suit and pursue all of the insurance policy’s internal appeals before filing suit

Once suit is filed, you are prohibited from submitting additional evidence. The Court will only look at those documents that were before the insurance company.

Discovery almost never permitted

Deferential standard of review

ERISA’s Own Unique World of “Civil Procedure”2. Exhaustion of “Administrative Remedies” with Insurance

Company:

Appeals must be submitted in writing and on time to the administrator/insurance company

Failure to exhaust or pursue appeal within time set forth in the plan document and/or insurance policy is tantamount to allowing a Statute of Limitations period to pass

ERISA’s Own Unique World of “Civil Procedure”3. Strict Limitation on Remedies:

Generally cannot recovery anything more than the benefit at issue.

Punitive damages are not available

Extra-contractual remedies precluded

10 Common Mistakes Made by Claimants and Attorneys Unfamiliar with ERISA Claims

10.

Filing Suit Before All Remedies Have Been Exhausted

9.

Failing to Identify and Pursue Potential “Ancillary,” “Collateral” or “Follow-On” Benefits When There

is Disability, Such as HWOP, LWOP, or Pension Credits

8.

Delay in Filing For LTD Benefits Because of Policy Offset for Social

Security Disability, Worker’s Compensation, Benefits, or Other

Similar Incomes … and Vice Versa

7.

Failing to Obtain Important Evidence Supporting the Claim

During the Administrative Appeal

6.

Assuming Medical Records Alone or an “Opinion Letter” from a

Physician Are Enough to Support Disability Claims

5.

Failing to Address Vocational Reviews Used by the Insurance

Company/Administrator For Disability Claims

4.

Conceding There is “No Discovery” in an ERISA Case

3.

Ignoring the Insurance Company/Plan Administrator’s

Deadlines

2.

Failing to Identify and/or Missing Contractual Limitation Periods

Hidden in the Policy or Overriding “Plan Document”

1.

Failing to Seek Timely Help from an ERISA Attorney under the

Assumption that an ERISA Claim is no Different from an Ordinary

Insurance Claim

Navigating ERISA benefits is dangerous for the inexperienced … Evidence necessary to establish a claim is not always clear-cut ERISA litigation is subject to a different set of procedural rules Critical deadlines may vary from Plan to Plan, as may

limitations periods. Often these deadlines will be buried within “Plan documents” not given to you unless you specifically ask.

Employee Benefits: What It Means When ERISA Applies to Your Insurance Case

Clay WilliamsSinclairWilliams LLCBirmingham, AL mcw@sinclairwilliams.com