Even when plaintiffs win ERISA disability lawsuits, their attorney’s fees can cut into their awards. In some ERISA disability cases, however, plaintiffs can recover their attorney’s fees (and costs) under federal law.
What do plaintiffs need to show in order to be awarded their attorney’s fees in an ERISA disability lawsuit? In Sec’y of Dep’t of Labor v. King (1985), the Court of Appeals for the Sixth Circuit, the circuit which includes federal courts in Tennessee, set out five guidelines for district courts to apply when deciding whether to award attorney’s fees under ERISA. They include:
(1) the degree of the opposing party’s culpability or bad faith;
(2) the opposing party’s ability to satisfy an award of attorney’s fees;
(3) the deterrent effect of an award on other persons under similar circumstances;
(4) whether the party requesting fees sought to confer a common benefit on all participants and beneficiaries of an ERISA plan or resolve significant legal questions regarding ERISA; and
(5) the relative merits of the parties’ positions.
Sixth Circuit courts regularly use the above guidelines–referred to as the “King Factors”– in evaluating claims for attorney’s fees. For example, in Moon v. Unum Provident Corp. (2006), the Sixth Circuit applied the King Factors in awarding the plaintiff attorney’s fees even though the lower court initially ruled against her claim for long-term disability benefits. After the Sixth Circuit reversed the district court’s ruling (Moon 1), the case was remanded to the district court to decide whether the plaintiff was entitled to attorney’s fees.
On remand, the district court then denied the plaintiff motion for attorney’s fees, again ruling against the plaintiff. However, the Sixth Circuit reversed the district court after applying the King Factors in the plaintiff’s favor. Specifically, the court determined that the insurance company engaged in culpable conduct (“Factor 1”) when it relied on the opinion of a physician who never examined the plaintiff, and who was also an employee of the insurance company. The court also noted that the insurance company’s physician based his findings on “selective information on the administrative record.”
Notably, the Sixth Circuit was sharply critical of the district court’s conclusion that the defendant could not have engaged in culpable conduct, or misconduct, when the district court itself had ruled in favor of the insurance company before the case was appealed for the first time. The Sixth Circuit stated that it was “wholly inappropriate” for the court to “heavily and repeatedly rely on its incorrect decision” to support its conclusion that the plaintiff was not entitled to attorney’s fees.
The Sixth Circuit also found that awarding the plaintiff attorney’s fees would have a “deterrent effect” (“Factor 3”) on other insurance companies under similar circumstances. This was not an unusual case, the court observed, and its award of attorney’s fees could be instructive to other insurance companies. As an example, the court noted that its opinion might prompt insurance companies to conduct more thorough reviews of administrative records, and medical examinations of claimants under “certain circumstances.” Although the court in the Moon case did not articulate what those circumstances generally would include, it did note that the insurance company should have had a physician conduct a physical examination of the plaintiff, especially considering that there was “substantial evidence” in the administrative record indicating she was disabled.
Finally, the Sixth Circuit noted that the plaintiff should be awarded attorney’s fees based on the merits of her position, after rejecting the district court’s contention that Moon 1 was an “extremely close” case.
It is important to note that a plaintiff in a long-term disability case can receive attorney’s fees even if the court does not find that the insurance company acted in bad faith. For example, in Myers v. Mut. of Omaha Life Ins. Co (N.D. Ohio 2017), the court held that, even though it did not find evidence of bad faith, the insurance company was still “culpable” when it failed to explain why it chose to believe interested, non-treating physicians, rather than accepting the plaintiff’s physician’s conclusions. This culpable conduct, according to the court, weighed in favor of awarding attorney’s fees to the plaintiff.