In a dispute over long-term disability benefits, it’s important to determine if the disability policy falls within the scope of the Employee Retirement Income Security Act of 1974 (ERISA).
ERISA is a federal statute that applies to claims for employee benefits, including disability benefits. All else being equal, a claimant will have an easier time overturning a denial of disability benefits if the employee’s disability plan is not governed by ERISA. That is because claimants making claims under policies governed by ERISA face significant hurdles not faced by claimants who have non-ERISA policies.
The most consequential difference between ERISA and non-ERISA disability cases is that federal courts decide ERISA cases under the “arbitrary and capricious” standard of review. What that means is that courts will not overturn a denial of disability benefits unless they find that the denial was without a factual basis. This is a highly deferential standard of review and requires a court to uphold a plan administrator’s denial of benefits if it is supported by only modest evidence in the record.
As well, ERISA claimants cannot recover extra-contractual damages that otherwise may be available under state law. In addition, ERISA claimants typically cannot avail themselves of discovery to learn more about their denial of benefits. Rather, they can only rely on what is in the administrative record, or the claim file, in arguing that they are entitled to long-term disability benefits.
Because it is so important to know if a disability case will be subject to ERISA, one would think that it would be relatively easy to figure out if the policy at issue is subject to ERISA. Unfortunately, that’s not always the case. For example, in Alexander v. Provident Life & Acc. Ins. Co (E.D. Tenn. 2009), the plaintiff’s policy bore the hallmarks of both an ERISA and a non-ERISA policy. In that case, the plaintiff, a doctor, had an individual disability policy through his employer, a medical practice. After he left the medical practice that employed him, he continued the policy and paid all the premiums.