Skip to main content
Disability InsuranceERISA

Does ERISA help you or hurt you?

The broad question is what are the things you have to watch out for when you’re filing a claim and what should you do?  Do insurance companies conduct surveillance?  Yes.  Do they run around with cameras trying to see if you can carry groceries from the grocery store to the car? If you can carry groceries you can do orthopedic surgery.  Yes, they do that. Do they have someone follow you all over the place to show how much you’re driving a car especially if you said that you were impaired in driving an automobile?  Yes, they do that. Is it a good idea then to handle your own disability claim? No, not really. The maxim that applies to lawyers, a lawyer should never represent him/herself on a case, applies to everyone else as well.  It’s always better to have someone advocate for you on your behalf, especially while you are not at your best as you’re facing a disability and an extreme shift in your professional and personal lives as a result of your changed circumstances.

A classic scenario goes like this. The insurance company sues you first, in a county that they perceive is favorable to companies instead of individuals, a location not convenient to you, before you file your claim. They’ll sue you in what’s called a declaratory relief action for the court to declare the rights of the parties under the contract.  Let’s say that they anticipate that there’s going to be an issue about partial versus total disability. Why would the insurance company sue their policy over it? Insurance companies will give you a list of your substantial material duties in your chosen profession and we all know, that will be a long list as every job entails all manner of  responsibilities and actions, great and small.  The insurance company will then say, that you can still perform some or many of the items on that list and therefore you’re not totally disabled.

As a result of ERISA, if you obtain your insurance at the workplace you don’t have as many remedies as you otherwise would have. All of your rights are eliminated under state law, because federal law takes over, and federal law under ERISA doesn’t exist.  There are no protections under federal law. If you obtain any health any disability insurance at work you’re basically going it alone, and you don’t have any unfair claims practices act protections at all, something likely taken into account by insurance companies when considering denial of a claim.

We often see claims that are ERISA Preemption that are so outrageous, people who are obviously disabled, the insurance company simply doesn’t pay, and you can’t sue them for bad faith. If you obtain your insurance in the workplace from your employer or through your employer in any way you basically have no rights to recover damages for wrongful insurance conduct.  It’s not about lawyering. It’s not about lawsuits, ’cause we settle 99 percent of our cases.

It’s about leverage.  If the insurance company understands that the most they would ever have to pay you are your contract benefits under the policy, that they have no exposure to you for extra contractual damages, you don’t have a right to a jury trial, you don’t have a right to seek punitive damages, you don’t have a right to recover for your loss of your home or your life savings, if they realize that you don’t have any of those rights, the value of your claim shrinks.

If your claim is worth four million dollars the insurance company will maybe offer you a million and a half or even less if it’s an ERISA Preemption policy whereas if it’s not an ERISA Preemption policy you, you can settle a case for double or even triple what they would pay on a ERISA policy.  These are some of the realities we are seeing when claims are preempted by ERISA.