Every day we are asked similar questions by our clients and prospective clients. They typically revolve around such themes as "how can my insurance company blatantly refuse to pay?" "Why is it that I have to engage a lawyer to fight for my benefits when my doctor has clearly proved that I am disabled?" And, "why can I only sue for the benefits I am owed and no punitive damages?"Unfortunately, we live with a system where insurers can, and do, deny disability claims that should be paid. Lawsuits are often necessary. Even then, people who need insurance benefits most can sometimes wait up to two years before their case goes to court or settles.
The Employee Retirement Security Act (“ERISA"), which is the law that governs most GROUP insurance policies, is stacked in favor of the insurance companies. ERISA imposes significant procedural limitations on the enforcement of group insurance benefits, and limits those benefits to those provided for in the policy. No emotional distress. No punitive damages. No out-of-pocket or consequential damages. And, attorneys fees only at the discretion of the Court. Employer Sponsored Group Policies fall under the Act unless they are a Government or Church Plan. ERISA is a federal body of legislation that establishes minimum standards for retirement, health, and other welfare benefit plans offered by employers to their employees. The Act expressly preempts all state legislation “relating to" an employee benefit plan, and federal courts have interpreted that phrase broadly, finding that a state law “relates to" a benefit plan “if it has a connection with or reference to such a plan." The Act’s pre-emption clause extends to any state law allowing for recovery under an applicable plan. Unfortunately, this has resulted in a situation where ERISA preempts all common law tort actions for bad faith insurance and, consequently, does not allow plaintiffs to collect extra-contractual or punitive damages on claims involving covered insurance plans.
So what does this mean for the insured and the insurance company? For the insured it means that if they are denied health or disability benefits and they sue the insurance company under ERISA, the most they can hope for is that their benefits will be reinstated and back-paid to the time that they were denied; and that their attorney's fees will be reimbursed in whole or part.
For the insurance company it really only means they may eventually have to pay what they should have paid in the first place. This system essentially creates a disincentive to pay the claims until they are challenged.
Clearly, the law is flawed. But it is the law we and our clients must live with. The good news is that we handle these types of matters every day, and have become quite good at it. We understand how the insurance companies and their lawyers work, and we can navigate this system to help maximize the chances your claim will be paid!
If you have been denied insurance benefits call Kantor & Kantor today for a free consultation on 888-355-5596. We care and we can help.