FIGHTING FOR YOUR CLIENTS EMPLOYEE BENEFITS How to Handle an ERISA Benefit Appeal By Talia Ravis, esq. Law Office of Talia Ravis

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1 FIGHTING FOR YOUR CLIENTS EMPLOYEE BENEFITS How to Handle an ERISA Benefit Appeal By Talia Ravis, esq. Law Office of Talia Ravis 1. Purpose. More often than not, insurance claimants seek legal assistance only after receiving a final denial from the insurer. At that point, under ERISA, discovery is no longer available (beyond requesting a copy of the claim file), and no new information can be submitted, which generally makes the case extremely difficult to litigate. That being said, this paper will discuss ERISA generally, and then advise an attorney handling an ERISA appeal how to best advocate for the claimant and ensure success in the ensuing lawsuit that could arise if and when an appeal is finally denied by the insurance company (after all administrative remedies are exhausted). 2. Introduction to ERISA. The Employment Retirement Income Security Act of 1974 (ERISA) is a comprehensive Federal statute that governs most claims related to employee benefits. If your client has a problem getting his work-related medical, disability or life insurance to cover a claim, and has been denied benefits, the claim is most likely covered by ERISA. ERISA was passed in order to standardize the administration of benefits from stateto-state. Employees often had significantly different rights depending on the state in which they worked, while large, multi-state companies often had conflicting obligations. Congress also perceived problems involving possible corruption and self-dealing involving large pension plans. In order to provide Federal oversight of employee pensions and uniform national standards, Congress enacted ERISA to regulate employee pension plans. At the last minute, ERISA was amended to include other employee

2 benefits, including such employee welfare benefits as health care coverage, long-term disability insurance, life insurance and other similar benefits provided to employees by private employers. The intent of Congress in enacting ERISA was to protect the interest of participants in employee benefit plans... by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.. 29 U.S.C. 1001(b). The language of the ERISA statute draws heavily from trust law as well as contract law. Congress instructed the courts to develop a common law of ERISA, using both trust and contract principals. The Department of Labor also has authority to issue regulations governing the processing of ERISA claims. After nearly 30 years of case law, ERISA welfare benefits litigation has become a dangerous landscape, with pitfalls and mine fields full of traps for the unwary. For example, ERISA preempts almost all disputes over benefits that are provided by private employers. ERISA limits the remedy of a claim in a benefits case to the benefits that should have been paid under the plan, plus maybe attorneys fees, but precludes other state law remedies, such as claims for bad faith failure to pay an insurance claim, or fraud and precludes punitive damages or other state law remedies. ERISA also lives in its own world of civil procedure, where normal rules do not ordinarily apply. For example, a claimant must first present all evidence to the insurance company and appeal all of the insurance policies internal appeals before filing a suit. Once a suit is filed, a claimant may not submit more evidence to be considered, and no discovery is permitted regarding the merits of the claim; the Court instead reviews only

3 those documents that were before the plan administrator prior to the issuance of the final denial. Additionally, when reviewing the limited record, most claims are reviewed by the court under a standard of review that is deferential to the decision made by the insurance company that is, under the arbitrary and capricious standard of review. This is determined by discretionary language contained in the policy if the policy contains a provision granting sole discretionary authority to the plan administrator, the arbitrary and capricious standard of review will govern any ensuing litigation. Undoubtedly, this poses an uphill battle for the plaintiff, where it is the plaintiff s burden to show that the insurance company was unreasonable in determining that the claimant is not entitled to benefits under the policy (not a matter of right or wrong). Thus, it is during the appeal process that the attorney has the greatest opportunity to advocate for the claimant, and best prepare the claimant s record in anticipation of litigation. 3. The first question to ask: Does ERISA apply? ERISA preemption. Generally, ERISA will govern a claim for benefits if the policy/plan is part of an employee-group insurance plan. ERISA shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan U.S.C. 1144(a). A savings clause then provides that some state laws are not preempted: nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities. 29 U.S.C. 1144(b)(2)(A). In broad strokes, the case law holds that laws that provide additional remedies or causes of action outside of ERISA are still preempted, while state laws that regulate insurance in other ways may not be.

4 ERISA preemption means that almost all employee benefits plans that provide such benefits as health insurance, life insurance or disability insurance are preempted by Federal ERISA law; however, plans sponsored by governmental employers and churches are not usually preempted by ERISA. 29 U.S.C. 1004(b). If ERISA applies, most claims should be filed in federal court (except for claims that are limited to claims for benefits over which state courts have concurrent jurisdiction), and if a plaintiff files a claim that is properly preempted by ERISA, the defendant may remove the claim to federal court without regard to the well-pled complaint rule. 29 U.S.C. 1132(e). 4. Handling the Appeal. a. First Step: VERY IMPORTANT: Note the Date of Receipt of the Denial Letter. Under the DOL regulations, an insurer is required to allow a claimant 180 days to appeal an adverse benefit determination. The insurance company can determine whether to grant the claimant more than one appeal but one opportunity for the claimant to appeal is required. Keep in mind that if a claimant fails to appeal within the 180-day timeframe, the law clearly states that he will be precluded from filing suit for failure to exhaust his administrative remedies. With so much at stake, a practitioner should be sure to calendar the appeal deadline and ensure that all information is submitted to the claims handler before that date. b. The Internal Administrative Appeal is of Primary Importance, where Discovery/Addition to Record is not Permitted After the Claim Has Been Finally Denied. ERISA limits discovery to the information submitted as part of the claim file (also known as the administrative record ) up to the date of the final denial. That is, no new information can be submitted as part of the record after the insurer has issued its final

5 denial. In effect, if suit is initiated, the only evidence that will be considered is information submitted as part of the claim file up to the date of the final denial. All discovery, including documents produced, depositions and in-court testimony is precluded. I often send requests for production, requests for admission, and interrogatories after filing suit, but lately have even been fighting battles on those fronts. That being said, if an attorney is lucky enough to be able to assist a claimant before they have been finally denied, the attorney has the final opportunity to shore up the claim in anticipation of litigation. I say lucky enough only because most claimants, believing that insurance companies are inherently good and will pay out legitimate claims, try to fight the appeal on their own and only come to my office after they have been finally denied, when my only option at that point is to file suit over a poorly assembled administrative record. c. Documents Which Must be Produced Under the DOL s Regulations Governing ERISA Benefit Administration In handling an appeal, one must first request a copy of the claim file from the insurance company. Pursuant to 29 U.S.C. 1024(b)(4), the insurer is required to produce all documents relevant to the claim, including a copy of the governing plan, medical records reviewed, and generally any information relied upon in making the adverse benefit determination. The insurer is required to produce these documents within thirty days of the attorney/claimant s request; if the request is not met within thirty days, the insurer can be subject to a $110/day fine when properly pled as part of the complaint. Once the claim file is received, the attorney should first determine whether all relevant documents are contained in the claim file. There is a body of federal law defining the term relevant documents but generally, this refers to all medical records

6 submitted by the claimant and/or his medical providers, the plan documents (insurance policy), correspondence between the claimant and insurer, in-house correspondence/claim logs detailing communication between the internal claims handlers, the insurer s internal claims handling guidelines, internal medical reviews and report, and results of vocational evaluations. If any of the aforementioned materials are missing from the claim file, this should be brought to the attention of the claims handler from whom the file was requested, in writing, immediately. d. Shoring Up the Claim Through the Appeal. It is imperative that the advocate submit all relevant, available information as part of the appeal. This includes, but is not limited to the following: Any missing, updated, or new medical records; Journal articles/information from medical journals supporting the disabling effects of the claimant s condition; Questionnaire(s) completed by the attending physician, clearing up discrepancies or responding to the insurer s allegations that the claimant is not disabled under the terms of the policy; Results of a functional capacity evaluation, independent medical examination or vocational expert report (conducted at the attorney s request); Expert opinions The most valuable information that the attorney can submit is information that is received from the treating physician. This is the person who is most familiar with the claimant s condition, and more often than not, the insurer s hired medical reviewer is

7 criticizing the treating physician s opinion regarding the claimant s physical and/or mental capabilities. In every appeal, I draft a questionnaire specifically targeting the insurer s allegations of non-disability and ask the treating physician to respond. If the claimant suffers from a unique or rare condition, I ask the treating physician to point me to up-to-date journal articles on the topic, refer to those articles in the appeal letter and submit the articles as an attachment to the appeal. e. Drafting the Appeal Letter. The appeal letter should weave together the information discussed supra, highlighting the most important points and arguments refuting the insurer s allegations of nondisability. I will often throw in a little ERISA case law here and there, possibly to support a claim that the insurer has somehow violated the DOL regulations, but one must keep in mind that this letter is being read (if read at all) by a claims handler who likely has no knowledge of the law, let alone ERISA and/or the Department of Labor s regulations. I try to make the letter as short and concise as possible, beginning with the strongest arguments, in anticipation that the claims handler will probably stop reading it if it is too long and drawn out. I will highlight relevant portions of the treating physicians notes or responses to my questionnaires, or pertinent information from the medical journal articles. I will quote relevant portions of the policy (i.e. the definition of disability) and elaborate as to why my client s claim should be approved based on those provisions. Most importantly, I will specifically address issues raised by the insurer in its denial letter supporting its claim of my client s non-disability under the terms of the policy.

8 5. Conclusion. The appeal is going to vary drastically from case-to-case. Not all claims are denied on a medical basis often claims are denied due to technical issues based on the policy provisions. To be sure, all of the above depends on (a) at what point the claimant is during the appeal process when they come in to your office and (b) you and/or your client s resources how much money you want to invest in preparing the appeal. More likely than not, the insurer will give the claimant more than one opportunity to appeal. I would recommend taking every opportunity to appeal, as this is the only time you will really be able to advocate and ensure a more successful result in the event that litigation ensues.