Have you been wrongly denied benefits by your employer-provided health insurance or other benefit plan? Most of the time, individuals cannot bring a claim in state court for the denial of benefits. Instead, they must bring a claim for benefits in federal court under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et. seq. (“ERISA”). The Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et. seq. (“ERISA”) is a federal law that sets the standards for most private, or employer-provided, healthcare plans and pension plans. ERISA applies to employer-provided benefits, including health insurance, short-term and long-term disability insurance, and 401(k) retirement plans. ERISA is a federal law that preempts state law claims for which it provides remedies, replacing the state law claims and giving rise to federal jurisdiction over those claims. Most ERISA litigation involves an individual filing a claim after a denial of benefits. This includes claims against the employer, insurer, or plan administrators or advisors. The first step when a claim for health insurance or other benefits is denied is to file an internal appeal. It is a good idea to hire an attorney to handle the internal appeal. An attorney may help identify problems with the claim and reduce the probability that the appeal will be denied. Generally, if the plan administrator or insurance company denies the employee’s claim for benefits, the employee has to proceed through the plan’s internal appeals process before filing a lawsuit. This process is referred to administrative exhaustion. An ERISA plaintiff must exhaust administrative remedies before filing a lawsuit. During the internal appeal, the benefits plan must comply with ERISA requirements including providing a reason as to why the plan denied the claim. The failure to comply with these ERISA requirements can also result in liability. If an appeal with the benefits plan administrator or insurance company is unsuccessful, individuals whose claims for benefits have been denied may file an ERISA lawsuit in federal court. There are no jury trials in ERISA. Instead, ERISA lawsuits are before a judge. The judge reviews the administrative record to determine if the denial of benefits was proper. The administrative record consists of the documents and information that were considered by the benefits plan in the denial of benefits. In certain cases, the judge will allow discovery outside of the administrative record. It is important to hire an attorney experienced in ERISA to ensure that appropriate discovery is allowed. If the insured individual succeeds in litigation, the judge will order the benefits plan to cover the insured’s claim. This means the successful ERISA plaintiff will recover the amount of the benefit due under the plan. The judge also has the discretion to award attorney’s fees to the successful plaintiff. ERISA does not provide for punitive damages or damages for pain and suffering.
ERISA also prohibits employers from discriminating against an employee to prevent the employee from receiving benefits or in retaliation for the employee’s use of employment benefits. An ERISA discrimination claim can arise if an employer terminates an employee in order to avoid paying benefits upon learning the employee will incur medical bills on the employer-provided health insurance plan. An ERISA discrimination and retaliation claim may also arise when an employer reclassifies an employee as an independent contractor or decreases an employee’s hours so that the employee is not entitled to receive benefits. ERISA allows plaintiffs to name the corporate employer as well as the corporate officers who engaged in the unlawful retaliation and discrimination in their personal capacities. During times of economic uncertainty, as the present time, employers may terminate employees with medical conditions who receive benefits through the employer provided health insurance plan. ERISA prohibits employers from terminating, suspending, disciplining, or otherwise discriminating or retaliation against plan participants who exercise or attempt to exercise their rights under ERISA. Accordingly, in order to minimize exposure under ERISA, employers planning terminations, layoffs, or furloughs should be able to provide a non-pretextual reason for the termination that is unrelated to the employee’s claim for benefits. If the ERISA discrimination or retaliation claim is successful, the plaintiff can seek payment of the denied benefits. A successful plaintiff can also seek equitable relief, including reinstatement to his/her former job (if terminated in retaliation), backpay, front pay, and attorneys’ fees. Most courts have held that compensatory or punitive damages are not allowed in claims for ERISA discrimination or retaliation.
ERISA not only allows employees and former employees to sue for wrongful denial of benefits, they can also sue the benefits plan administrator or manager for breach of fiduciary duty. A benefits plan must name at least one fiduciary—a person or entity—who controls the operation of the benefits plan. For some plans, the fiduciary may be an administrative committee or a company’s board of directors. Insurance plans may make it difficult to determine who the plan administrator is in order to reduce the chance of a lawsuit filed against the administrator. ERISA imposes important responsibilities on the plan fiduciaries because they act on behalf of the participants of the benefits plan, such as the individual employee who receives health insurance through an employer-provided healthcare plan. The main responsibility of fiduciary is to run the benefits plan solely in the interest of the plan participants and beneficiaries. ERISA requires fiduciaries to discharge their duties in the interest of plan participants and their beneficiaries; for the sole purpose of providing plan benefits; with care, skill, prudence and diligence; and in accordance with the benefits plan’s documents. Fiduciaries who do not follow these standards of conduct can be sued for breach of fiduciary duty. The penalties for breach of fiduciary duty include personal liability, civil penalties, removal of the fiduciary, and criminal prosecution. Fiduciaries who do not follow the standards of conduct set forth in ERISA may be personally liable to restore losses to the benefits plan or to restore any profits made through improper use of the plan’s assets. The Department of Labor may assess a penalty on the fiduciary of twenty percent of the amounts recovered from the plan in the litigation. A fiduciary may also be removed and prohibited from acting as a fiduciary to ERISA plans. In extreme cases, criminal penalties may be imposed upon the fiduciary.
Justice John G. Roberts, the Chief Justice of the U.S. Supreme Court, has said, “The Employee Retirement Income Security Act of 1974 is an enormously complex and detailed statute and the plans that administrators must construe can be lengthy and complicated . . . in many ERISA matters, the facts . . . are exceedingly complicated.” Conkright v. Frommert, 559 U.S. 506, 509 (2010). For these reasons, you may want to contact an attorney as soon as your benefits claim is denied. There are deadlines that apply to ERISA claims, and failing to file in time could leave you without recourse. PLF attorneys will pursue your ERISA benefit claims at the pre-litigation stage and in the federal district courts of Illinois and Wisconsin. Our attorneys can also provide you with advice and assistance with pre-litigation claims assessment, appeal, and benefit claims disputes.