You appealed. You sent medical records, letters from your doctors, and evidence showing why you cannot work. The insurance company denied the appeal anyway.
Can you take the insurance company to court? Can you explain your medical problems to a judge, or let a jury decide whether you were treated fairly? If you win, can you recover for the hardship the denial caused? If your coverage came through your employer, the answers will probably surprise you. An ERISA lawsuit is very different from a Social Security hearing and from an ordinary lawsuit against an insurance company.
Yes, you can usually sue after your appeal is denied
Most LTD plans provided by private employers are governed by ERISA, the Employee Retirement Income Security Act of 1974. ERISA lets plan participants sue to recover benefits due under the plan.
In most cases you must finish the plan’s required appeal process first. Lawyers call this exhausting your administrative remedies. There are exceptions, including when the plan failed to follow the federal claims rules, but do not assume one applies to you.
Policies you bought yourself, and some government and church plans, are not governed by ERISA. Those claims can carry different rights and remedies. More: ERISA plan or private policy?
You probably will not get a jury
In ERISA benefit cases there is generally no right to a jury trial. A federal judge decides. The case is often decided on written briefs and the claim file, without live testimony, and you may never testify at all.
That is a big change if you have been through a Social Security case, where you testify in front of an administrative law judge.
The judge may see only what is already in the insurer’s file
In many ERISA cases, the court reviews only the administrative record: the medical evidence, vocational reports, letters, and other material the insurance company considered during the claim and appeal. The court may refuse to look at new medical opinions or test results. Some courts allow more evidence in some situations, depending on the standard of review and the rules in that circuit.
Here is how that plays out. A claimant with severe degenerative disc disease is denied based on a reviewing doctor’s opinion that he can do sedentary work. His appeal does not include a detailed functional assessment from his treating physician. After losing the appeal, he hires a lawyer, who gets a strong opinion explaining why he cannot sustain sedentary work. The court may decline to consider it.
The time to build your medical evidence is during the appeal, not after the lawsuit is filed. More: Should I appeal myself or hire a lawyer?
The judge may defer to the insurance company
Courts apply one of two standards when reviewing an ERISA denial.
- De novo review: the judge decides for himself or herself whether you are entitled to benefits.
- Arbitrary-and-capricious review (also called abuse of discretion): if the plan validly gives the insurer discretion to decide claims, the judge asks whether the insurer’s decision was reasonable, not whether the judge would have decided it the same way.
Which standard applies depends on the plan’s wording and the law that governs it. Some states restrict discretionary clauses in insurance policies. And when the same company decides claims and pays them, the court can weigh that conflict of interest.
Example: your treating physician says you cannot work, and the insurer’s reviewing doctor disagrees. Under de novo review, the judge weighs the evidence fresh. Under deferential review, the judge may uphold the denial if it was reasonable, even if the judge would have ruled for you. More: Why ERISA favors insurance companies.
You usually cannot recover damages for hardship or distress
In an ERISA suit for benefits, you can recover the benefits wrongly withheld and ask the court to clarify or enforce your rights under the plan. The court may award attorney’s fees and costs in appropriate cases. But ERISA generally does not allow punitive damages, damages for emotional distress, or damages for the financial harm the denial caused.
Example: a claimant’s benefits are cut off. She falls behind on her mortgage, runs up credit card debt, and lives under severe financial stress. She wins her lawsuit. The court can award the benefits she should have been paid, and possibly other authorized relief. It generally cannot compensate her for the foreclosure notice or the stress.
Winning may mean a second look, not a check
A court may order the insurer to pay the benefits wrongly withheld. Or it may find that the insurer’s review was inadequate and send the claim back to the insurer to decide again under the proper standard. Even after a win, the insurer can usually keep reviewing your claim under the policy.
Time and cost
ERISA litigation involves a close review of the claim record and detailed briefs on the medical evidence, vocational issues, policy language, and federal case law. Cases end by settlement, judgment, or remand, and how long they take varies widely by court and complexity. Before filing, you need a realistic view of what the claim is worth, how strong the record is, and what the suit will involve.
Do not miss the deadline to sue
ERISA does not set one deadline for every benefits lawsuit. Many plans contain their own deadline, courts enforce reasonable ones, and some start counting from a date long before your appeal was denied, such as the date proof of loss was due. Federal rules require the final denial letter to describe any such deadline and state the date it expires for your claim. Read that letter as soon as it arrives.
Example: a claimant gets a final denial and assumes he has years to sue. His plan measures the deadline from when proof of loss was required. He has much less time than he thinks.
Three things to remember
- An ERISA lawsuit is not an ordinary insurance lawsuit. There is generally no jury, and you may never testify.
- The evidence in your administrative appeal may be all the court will consider.
- Even if the denial was wrong, what you can recover may be limited.
If you have to file suit in a federal court where our attorneys are not admitted, we work with local counsel there.
Was your LTD appeal denied? Don’t assume the decision is final, and don’t wait to find out your options. Call 770-351-0801 or request a free case evaluation.