Potential Pitfalls of Group Benefits Coverage Under ERISA

November 30, 2012

Potential Pitfalls of Group Benefits Coverage Under ERISA

If you have group medical, disability or life insurance coverage through your employer, chances are good that the Employee Retirement Income Security Act of 1974, more commonly known as ERISA, sets administrative standards and claim hurdles for that coverage. ERISA does not mandate employers to give coverage, but rather sets standards for private pension and employee benefit plans if one exists.

Some people question how effective ERISA actually is in the face of sub-standard coverage or when an insurance claim is denied for improper reasons. Critics argue that ERISA has proven to be over-protective of insurance carriers who have denied claims. ERISAitself, however, claims that it protects all participants and their rights.

ERISA does encourage employers to give coverage by limiting the time and expense of litigation for claim disputes -- this potentially reduces the cost of insurance to employers. However, that leaves fewer and very limited remedies for workers who have had their insurance claim denied.

Denied Claims

An insurance company may deny a claim in whole or part for several reasons. Insurance depends upon the language of the policy, which can be varied and complicated. An insurance company may deny coverage by claiming the injury was preexisting or that the claimants' sickness doesn't prevent them from doing their own occupation or any occupation for which they are trained, educated or suited.

An insurance company may revoke benefits in some cases by claiming, for example, that a person's disability has improved to the point where he or she can work again. Life insurance benefits may be denied if the insurance company claims the deceased committed suicide within two years of the policy being issued or that the insured misrepresented his or her condition on the application. There are myriad provisions and policies that govern coverage, and ERISA maintains very little regulatory control of such provisions and very strict mandatory administrative appeal deadlines.

If a claim is denied, the insurance company must give written notice to the claimant with the reason for the denial of the claim and what information is necessary to perfect the claim.

Administrative Appeals

An initial denial does not have to be the end of the story. After an initial claim denial, participants in a group plan under ERISA must first timely appeal to the insurance company. The claimant must do this in a timely matter. Some types of insurance appeals must be done within 60 days, while most plans give 180 days to file an appeal. In either case, if a claimant misses the deadline, he or she will not receive benefits.

Remember, most claimants make the fatal claim mistake of under-appreciating the importance of doing a full administrative appeal. Whatever occupational, financial, medical, vocational or medication side effect information must be included in the appeal along with ERISA case law to overturn the wrongful denial. Under ERISA, the administrative appeal will be the only opportunity for the insured to get compelling evidence before the court because under ERISA there is generally no discovery once the case is filed in federal court. Your spouse, employer and doctors will not get to testify at trial because, under ERISA, the court looks at the record up to denial and what was submitted on appeal and decides who wins. Top insurance attorney help is crucial at the administrative appeal stage to have any chance of receiving your benefits.

Trial

Once the administrative appeal process is exhausted, a claimant can contest the denial in federal court. Federal law forces these trials to be decided by a judge, not a jury, and cannot be contested in state court. In most cases, the person contesting the denial must prove beyond a reasonable doubt that the benefits under the group plan were incorrectly denied, which is a higher burden of proof than most other civil lawsuits.

Finally, the potential recovery is also greatly reduced under ERISA. Even if the person bringing the claim meets the high burden of proof, he or she can only recover for past benefits due. Even if the insurance company was negligent or intentionally improperly denied a claim, the claimant cannot recover:
-Damages for emotional stress
-Punitive damages
-In many cases, attorney's fees

In addition, even if the denial of coverage led directly to the death of the person not covered, there is no potential action for wrongful death.

Contesting Coverage

Participants in group insurance coverage who are denied benefits can potentially face a steep uphill battle to appeal that decision. If you have had your insurance claim denied, contact a top insurance attorney familiar with insurance claim disputes and disability benefits to discuss your options.

Article provided by DarrasLaw
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