Understanding ERISA – Part II

ERISA
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ERISA cases can be complex and difficult, which is why most attorneys do not handle them. The typical ERISA case is the denial or termination of short-term or long-term disability benefits when the disability insurance was provided or obtained through employment. These cases are tried in federal court on the administrative record, on cross motions for judgment with no jury trials.

How ERISA is Different

Known as the Employee Retirement Income Security Act (ERISA) of 1974, ERISA is a federal law that sets minimum standards for most pension and health plans in private industry. ERISA’s stated aim is to ensure that the plans deliver the promises they say they will deliver. However, the purpose of the law has been frustrated by court interpretations of ERISA that apply trust law as a framework and by allowing discretionary authority.

Abuse of Discretion

ERISA cases are tried as trust cases, and the disability policy or plan always provides discretionary authority to the insurer. The claimant must prove entitlement to benefits under the policy and abuse of discretion in denying or terminating benefits. The insurance companies typically abuse their discretionary authority by hiring medical record reviewers to review the medical records, and very often these examiners express an opinion that the disabled claimant is not disabled. In determining whether there has been an abuse of discretion, the courts tend to uphold the denials of benefits based on the opinions of hired medical “record reviewers,” disregarding the opinions of treating physicians.

Few Victories in the Eleventh Circuit

The Eleventh Circuit is a tough circuit in which to get a favorable decision on ERISA cases. There are numerous unfavorable decisions, and the reversal rate is 15 percent and lower in ERISA cases. Occasionally a favorable decision is issued. Our greatest victory in the Eleventh Circuit was Oliver v. Coca Cola Company, 497 F.3d 1181 (11th Cir. 2007), a precedent setting decision which held that it was arbitrary and capricious to add an “objective evidence criteria” to a disability plan:

“We find that Coca-Cola’s denial of Oliver’s LTD benefits claim was arbitrary and capricious, for anumber of reasons. Coca- Cola based its rejection of Oliver’s claim on its contention that Oliver failed to provide ‘objective evidence’ of his disability, stating that the ‘true organic etiology’ of Oliver’s pain had not been determined. Yet much medical evidence, especially as it relates to pain, is inherently ‘subjective’ in that it cannot be quantifiably measured. Indeed, the only evidence of a qualifying disability may sometimes be the sort of evidence that Coca-Cola and Broadspire characterize as ‘subjective,’ such as physical examinations and medical reports by physicians as well as the patient’s own reports of his symptoms.”

Needed Reform in Alabama

Though Alabama cannot change the federal ERISA law, the state does have the authority to regulate insurance, which means it has the authority to fix the problem of discretionary authority. Our state legislators have the authority to ban discretionary authority in ERISA plans and policies. On the insurance side, our State Insurance Department has the authority to ban discretionary authority clauses in insurance policies which has already been done in about half the states If discretionary authority were banned in Alabama, ERISA cases would be tried as insurance contract claims and the only issue would whether the claimant is disabled as defined by the policy. Myron Allenstein

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