ERISA Long Term Disability Litigation and Mediation
Fighting to recover your long term disability benefits in court can be a complex, lengthy, and stressful process. While long term disability litigation should be avoided if possible, you may have no option but to sue if your insurer closes the book on you. Indeed, litigation may be your last opportunity to get the long term disability benefits you deserve.
Below you’ll learn what to expect in your long term disability litigation where ERISA applies, as well as considerations for mediation. This content does not constitute legal advice, nor should it be used as a substitute for consultation with a qualified attorney. Always consult with an ERISA long term disability attorney to discuss your long term disability litigation.
How long will your ERISA litigation take?
If a reasonable settlement is not reached, your ERISA long term disability litigation may last 1 to 2 years or more. Litigating to recover your long term disability benefits is a lengthy and complicated process. There can be many ups and downs along the way. There will always be delays. In fact, some delays are unavoidable, such as the time it takes for a judge to issue a decision. With the right ERISA long term disability attorney, the time expended and the ups and downs endured will be worth the effort.
When, who, and where should you sue?
When to Sue
Read our full-length article here: When Can You File Your ERISA Long Term Disability Litigation?
Generally, if your claim is subject to ERISA, you cannot file your long term disability lawsuit until you “exhaust” all of your “administrative remedies.” This means you must do everything you can to claim benefits from your insurer. You must go through the entire process provided by your insurance company. For example, first you must file a claim for disability benefits. If that claim is denied, you then must appeal that decision using your insurance company’s internal appeal process and receive a final denial.
While typically you must go through the entire administrative process, there are certain limited exceptions that will allow you to file a lawsuit earlier:
- Under the first exception, your attorney would need to show exhaustion would be futile. This is sometimes called the “futility exception.” This is a difficult standard to meet.
- Under the second exception, your attorney would need to show that the insurer failed to follow a reasonable claims procedure, such as the insurer’s failure to render a timely decision. This exception was created under the Department of Labor’s updated ERISA Regulations, effective April 1, 2018. See 29 CFR 2560.503-1(l)(2)(i). Please note there are nuanced circumstances where this exception does not apply, which your attorney will evaluate. See 29 CFR 2560.503-1(l)(2)(ii).
Your long term disability lawsuit must commence within a certain period known as the “statute of limitations.” The statute of limitations is essentially a deadline by which you must file your litigation. Compliance with the statute of limitations is critical. If you file too late, you will very likely be precluded from pursuing your litigation.
The applicable statute of limitations will vary from state to state. However, the time you have to file your long term disability lawsuit also can be limited to a shorter period by your insurance policy. Many states permit the statute of limitations to be altered by contract terms. Therefore, courts often have applied shorter limitation periods found in the policy itself. For example, most policies provide that a litigation must be brought within three (3) years of the date proof of loss is required. The United States Supreme Court has held that such a provision is enforceable because it is not unreasonably short.
Because pinpointing the exact date the statute of limitations will run in a specific case can be quite confusing, the Department of Labor updated its most recent regulations (effective in April 2018) to require your insurer to specify the statute of limitations date in the final denial letter. 29 C.F.R. § 2560.503-1(g)(1)(iv). Even if the final denial letter specifies a statute of limitations date, it is still advisable to consult with the attorney in case the letter contains an error. In summary, you always should seek the advice of a qualified long term disability attorney to determine how much time you have to file a lawsuit.
Who to Sue
In your long term disability litigation, you will be the “plaintiff” and each entity you sue will be a “defendant.” Determining which entity to sue can be a complicated process. The decision often is not straightforward. There may even be multiple defendants. Your attorney’s failure to name the proper defendants could result in dismissal of your lawsuit or an inability to collect all damages and relief you might otherwise be eligible to receive.
An ERISA long term disability lawsuit will usually name the insurance company that insures your long term disability benefits as a defendant. This is because the insurer often is both the administrator of your claim and the party responsible for paying your benefits. However, this is not always the case. Some courts require the long term disability plan itself be sued, rather than just the insurance company.
Even if not required, there are some circumstances where your attorney might additionally advise suing your employer and/or the long term disability plan itself. One example might be because your long term disability plan is funded by your employer – known as a “self-funded” or “self-insured” plans. For self-funded plans, your attorney likely will want to sue the entity that is ultimately responsible for paying the benefits, in addition to the entity that administers the plan (if they are different).
- Example A—Fully Insured: Kate is employed by Employer. Employer provides Kate with long term disability benefits through a plan insured by Insurer. Insurer also is the claims administrator of the long term disability plan. In this example, Kate only needs to name Insurer as a defendant. Insurer is making the decision as to whether Kate is disabled. It also will pay the long term disability benefits if she is entitled to them.
- Example B –Self Insured: Kyle is employed by Employer. Employer provides Kyle with long term disability benefits through a plan administered by Third Party Administrator. Employer does not use an insurance company to insure the benefits. Employer’s plan is “self-insured.” Employer pays any benefits owing out of its own pocket. In this example, Kyle probably needs to name both the Employer’s long term disability plan and Third Party Administrator as defendants. Third Party Administrator makes the decision as to whether he is disabled, but the benefit payments will come from Employer’s long term disability plan.
- Example C – Self Insured/Self Administered: Sam is employed by Employer. Employer provides Sam with long term disability benefits through a plan that is administered by its own Benefits Committee. Employer does not use an insurance company to insure the benefits. Benefits are paid out of its own pocket. In this example, Sam probably needs to name only the Employer LTD Plan as a defendant.
If you lost ancillary benefits (such as health care benefits) due to your long term disability claim denial, tell your attorney. Your attorney will consider adding additional parties to account for those losses.
Where to Sue
You can sue in courts that have appropriate subject matter jurisdiction over your long term disability lawsuit. For ERISA long term disability lawsuits, subject matter jurisdiction exists in all federal district courts under Section 502(e)(1) of ERISA, 29 U.S.C. § 1132(e)(1) and 28 U.S.C. § 1331. Given that subject matter jurisdiction exists in all federal district courts, your attorney must help you decide which district court to file in. The court you choose will be called the “venue.”
Venue is typically possible in any district: (a) where the plaintiff resides; (b) where the employer is headquartered; (c) where the plaintiff worked; (d) where the insurance company is headquartered; (e) where the insurance company or plan administrator administered the claim; and (f) where many important witnesses are located. However, your attorney also should check whether the plan contains a choice of venue provision. If so, your attorney will need to research whether such provision is enforceable and, if so, where you want to file.
Venue is very important. Indeed, the way ERISA is applied varies from court to court. As a result, considerable thought should be given as to the benefits and pitfalls of each possible venue. Choice of venue could affect the standards under which the court reviews your case and weighs your medical evidence, as well as the speed by which your case will be heard and decided. The venue even could impact a court award of attorneys’ fees and interest.
Which standard of review will apply?
A “standard of review” is the rule or framework of rules that the court will use to review the adverse benefit decision in your case. There are two standards that courts use to review insurer decisions in long term disability lawsuits. The first standard is called the “de novo” standard. The second standard is called the “arbitrary and capricious” standard (also known as an “abuse of discretion” standard). The standard of review the court uses can make it much easier or more difficult for you to win.
Read more about de novo vs. arbitrary and capricious standards of review.
What will your complaint look like?
The complaint is a document prepared by your attorney that sets forth allegations about what the defendant got wrong, how you were damaged, and what the court should do about it. With the complaint, your attorney will notify the defendant of your long term disability lawsuit and explain why you are pursuing legal action.
In setting forth the allegations in your complaint, your attorney will seek to formulate a clear, effective disability narrative. Every experienced long term disability lawyer knows this is critical. The complaint should read in a clear and simple fashion, with specific references to your supportive evidence of disability. First impressions are important, and the complaint is your attorney’s opportunity to “stand up” immediately. Indeed, the failure to draft a strong, comprehensive complaint may damage your chances of success and prevent you from collecting all damages and relief you may be entitled to receive.
To prepare the complaint, your attorney must include each “Count” you are alleging against the defendant as a separate a Cause of Action. The section listing each Cause of Action, which requests specific remedies, should be included towards the end of the complaint. If your claim is subject to ERISA, your attorney may include the following Causes of Action:
- Cause of Action for Denial of Long Term Disability Benefits. This is your most important claim. In preparing this cause of action, your attorney must demonstrate that: (1) you made a proper claim for benefits; (2) you exhausted the administrative remedies available (unless an exception applies); (3) you are entitled to the long term disability benefits sought; and (4) you were denied such benefits. Your attorney will request payment of any back benefits, together with interest thereon, in addition to an order clarifying and declaring that the plan is obligated to pay future long term disability benefits to you as required by the plan.
- Cause of Action for Breach of Fiduciary Duty. ERISA permits you to bring separate breach of fiduciary duty claims. In doing so, you are permitted to seek relief against ERISA fiduciaries for breaching duties they owed to you. These claims come up more frequently in ERISA pension matters than they do in ERISA long term disability matters. The cons of making this claim often outweigh the benefits. Your attorney will recommend the best course of action for you based on your unique circumstances.
- Causes of Action for Life, Health and Other Ancillary Benefits. Many employers keep their employees on group health, life insurance, and other benefits when they are entitled to LTD benefits. When LTD benefits are terminated, these benefits usually are terminated also. Your attorney may wish to add extra causes of action to account for your loss of such benefits/coverage, and damages you incurred as a result. If your attorney does this, your attorney may add additional insurers and/or plans as parties to the action.
- Causes of Action for Attorneys’ Fees and Costs. ERISA permits recovery of attorneys’ fees and costs under certain circumstances. Your attorney can add a cause of action stating that the defendant’s failure to pay benefits has forced you to retain attorneys and incur costs, and that you are entitled to recovery of such fees and costs.
How will the defendant(s) respond to your complaint?
After your complaint is filed and served, each defendant will have a chance to respond. In an ERISA long term disability litigation, there are typically three ways a defendant may respond. A defendant will usually respond with a motion to dismiss, an answer, or an answer with counterclaims.
Motion to Dismiss
The defendant may respond to your complaint by filing a “motion to dismiss.” A motion to dismiss asks the court to dismiss your lawsuit without even reviewing the evidence. A motion to dismiss can be made on several technical grounds. For example, a defendant may argue that the statute of limitations was violated, the court does not have the power to hear your case, the defendant was not properly notified, or another person or company should be sued in lieu of the defendant. A motion to dismiss also may be made on the basis that, even if all the allegations in the complaint are true, you are not entitled to the relief requested in the complaint.
A defendant may respond to your complaint by filing an answer. In general, the defendant will either admit, deny, or say it “lacks sufficient information” to respond to each of the allegations made in your complaint. This will help narrow the issues presented to the court because the defendant will admit certain allegations in your complaint are true. You also may get a preview of the defendant’s arguments by reviewing its defenses and any counterclaims.
Answer with Counterclaim
A defendant may respond to your complaint by filing an answer that contains one or more counterclaims against you. The most common basis for a counterclaim relates to an overpayment or offset caused by your receipt of Social Security Disability Benefits, Workers’ Compensation Benefits, or other income. If the answer contains a counterclaim, your attorney must submit a reply. If your attorney fails to do so, the allegations in the counterclaim will be deemed admitted as true.
Will there be discovery?
Neither ERISA nor the Federal Rules of Civil Procedure set forth any specific limitation on the scope for discovery in ERISA long term disability cases. Despite this, courts have generally limited the scope of discovery or have provided plaintiffs access to no discovery at all. The scope of discovery in your ERISA long term disability litigation will heavily depend on the facts of your case, the applicable standard of review, and the court in which your action is filed.
The Administrative Record
At a minimum, discovery will include a copy of the Administrative Record. This is essentially the claim file that your insurer maintained on your claim. It should include all documents considered “relevant” under ERISA regulations, meaning everything submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon.
Without limitations, your attorney should make a request for all documents that:
- were relied upon in making the benefit determination;
- were submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination; and/or
- demonstrate compliance with administrative processes and safeguards designed to ensure and to verify that benefit claims determinations are made in accordance with governing plan documents and that, where appropriate, the plan provisions have been applied consistently with respect to similarly situated claimants, including documents that evidence, record, reflect or refer to internal rules, regulations, guidelines, protocols, training manuals, or other similar criteria.
Your attorney also should request: all notes kept throughout the administration of your claim, including all notes of telephone conversations with you or any treating physician; video and/or photographic surveillance footage; and any third-party investigative reports.
Discovery Relating to the Scope of the Administrative Record
It is common for the Administrative Record to exceed 1,000 pages in length. Your ERISA long term disability attorney will comb through the file to check whether it is complete. The problem is that the Administrative Record provided to the plaintiff often is incomplete. When this happens, parties may argue about what should be in the file, and discovery may become necessary.
Many courts permit discovery regarding the parameters and completeness of the administrative record in ERISA long term disability litigation. This discovery can be critical. Often, information such as internal notes, memorandums, and other internal documentation is so-called “accidentally” omitted from the Administrative Record. The missing documents often contain information that helps establish key points. For example, a careless review of your claim.
The same goes for all plan documents. This includes the policy, the SPD, amendments/addendums/attachments to the plan, and other important documentation relevant to your long term disability claim.
Depending on the facts surrounding your case, the court may consider other information outside of the Administrative Record in limited circumstances. For example, a plaintiff in the Second Circuit must ultimately demonstrate good cause to have the additional evidence considered by the court, but the burden to obtain discovery is much lower. To obtain discovery, the plaintiff just needs to show a reasonable chance that the requested discovery will satisfy the good cause requirement.
As a practical matter, with most courts, to get discovery in an ERISA long term disability litigation, your attorney must point out procedural irregularities and other deficiencies in the insurer’s claims determinations. Unfortunately, to best do this, discovery would help. But, your attorney’s only source of information will be the claim file and any additional information found on the internet or from other litigations against the same insurer.
Your attorney may request more information relating to:
- Internal procedures and guidelines maintained or used by your insurer;
- The unreasonableness of your insurer’s decision-making process (i.e., your insurer failed to consider all evidence, your insurer failed to follow its own internal guidelines/procedures, or your insurer only conducted a cursory, irrational, or biased review);
- The insurer’s inherent conflict of interest as the dual administrator and payor of long term disability benefits and how this influenced the insurer’s decision in your case;
- Third-parties used in connection with your case, such as a third-party doctor reviewing service that provided a so-called “independent” medical review, or a surveillance company hired to spy on you;
- Expert witnesses, including testimony from your physicians or the physicians relied upon by the insurer; and
- Anything else that might be relevant to the facts of your unique case.
Will there be a trial?
There could be a trial. However, most ERISA long term disability litigations are resolved by a motion requesting “summary judgment.” Summary judgment is a decision entered by the court in favor of one party and against another party without conducting a full-blown trial. Both parties can make a motion for summary judgment during or following discovery.
Summary Judgment Will Be Considered First
Before a trial is even considered, your ERISA long term disability attorney will argue that your case should be granted by summary judgment. By contrast, the defendant(s) will argue that your case should be dismissed. The strategy your attorney will employ for your summary judgment motion will depend heavily on which standard of review applies to your case – the de novo standard or the arbitrary and capricious standard.
To be awarded summary judgment under a de novo standard of review, your attorney must:
- establish a prima facie case of your benefit entitlement by a preponderance of the evidence (i.e., the evidence shows that you satisfy the policy’s definition of disability); and
- establish the defendant’s evidence is insufficient to rebut your evidence (i.e, the defendant’s evidence is conclusory, unreliable, lacking foundation, biased, etc.).
To be awarded summary judgment under an arbitrary and capricious standard, your attorney must establish that the insurer’s decision was without reason, unsupported by substantial evidence, or erroneous as a matter of law. This is a higher burden to meet. The court will consider a “combination-of-factors,” including conflict of interest, to determine whether your insurer’s decision should be overturned under this standard. There are two other basic approaches to winning under the arbitrary and capricious standard: (1) argue the insurer’s determination was not supported by substantial evidence; or (2) argue the insurer’s determination was unreasonable and/or unfair. In our experience, the second strategy is usually more successful.
If the judge grants your motion, you win the case. If the judge grants defendant's motion, you lose. If the judge denies both parties' motions, then the case may go to trial.
Going to Trial
If the court does not grant summary judgment to either party, there may be a trial.
Trial is a long and tedious process which the parties usually try to avoid. Trial will involve many hours of intense legal preparation and drafting. Typically, numerous briefs and reply papers must be filed. Live testimony may be necessary from you and/or your physicians. This can result in substantial costs, depending on how much your doctors charge for their time. Oral arguments also may be held.
Will my insurance company pay my attorneys’ fees?
Some attorneys’ fees from your long term disability litigation may be recoverable under ERISA’s fee-shifting provision. In relevant part, ERISA’s fee-shifting statute provides: “In any cause of action under this title … the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party.” ERISA §502(g)(1), 29 U.S.C. §1132(g)(1). However, awards of attorneys’ fees under ERISA are discretionary. Whether or not you can be awarded attorneys’ fees heavily depends on the local law where your court is located.
Will I have the option to appeal?
If you do not win at the district court level, you will have the right to file an appeal in the appropriate Court of Appeals. Bringing your case to the Court of Appeals can be a lengthy and stressful process – one in which many plaintiffs are unsuccessful. With all of that said, if you have a strong appeal, a good long term disability attorney will advise you to pursue it. In our practice, we have been very successful with the appeals we have decided to take. This is largely because of our extensive experience, but also because we spend substantial time building the evidentiary record and establishing the legal issues at the lower levels.
If you are not successful in the Court of Appeals, you have the option to bring your case to the United States Supreme Court. Note, however, that the United States Supreme Court on average agrees to hear only one or two ERISA cases per year.
Will there be settlement discussions?
At any point during your long term disability litigation, either party may wish to begin settlement discussions. Generally, your attorney will be the one to initiate discussions by making a settlement proposal or “demand.” The amount of the demand will depend on many factors. These usually include: present value; the standard of review; the risks involved for both parties; the merits of your claim; and any other factors that may be important to you. The defendant can ignore, reject, or make a counteroffer. Thereafter, the parties may exchange proposed settlement figures until they reach a mutually agreeable settlement amount. This may be done with or without the help of a mediator.
Informal Settlement Discussions
Often, the parties will engage in informal settlement discussions without the assistance of a mediator. When this happens, the parties’ attorneys will usually exchange their respective positions on the merits. They also will discuss risk, valuation of the benefits, and any other damages at stake. These discussions can be successful, but the parties may reach an impasse if they cannot understand or respect each other’s positions.
Many times, the parties may agree to hire and work with a private mediator. Often, the parties will split the cost of the private mediation. In some instances, the defendant may agree to cover the cost, if asked.
An effective private mediator will serve as a neutral liaison between the parties that assists them in reaching an agreeable compromise. Usually, the parties must agree on the mediator to be used, which enables the parties to hire an individual having specific experience with ERISA long term disability issues. This familiarity can be very beneficial for both parties.
If the parties pursue court-sponsored mediation, the court will select a mediator without the approval or input of the parties. This can be problematic because the mediator selected may have little to no experience dealing with ERISA long term disability issues. On the flip side, court-sponsored mediation is usually free or low-cost for the parties.
The court may assign a neutral Magistrate Judge to effectively serve as a mediator and conduct a mediation. Except, the mediation is conducted in a court setting and is instead called a “settlement conference.” The parties will have no control over the Magistrate Judge assigned. Certain Magistrate Judges are highly skilled mediators, but others may be less effective or inexperienced in ERISA long term disability issues. The biggest con is that some Magistrate Judges, after many years serving on the bench, may be less flexible than a mediator might be in conducting a mediation. Another con is that the courtroom setting in which the settlement conference is conducted can be very intimidating and scary for plaintiffs. The environment may not foster the most productive settlement discussions.
What should you expect at a mediation?
There are steps you can take to prepare for a successful long term disability mediation or settlement conference. Remember:
- Neither party is obligated to accept a settlement proposal.
- Your attorney requires your approval to accept or reject any settlement offer on your behalf.
- The mediator or magistrate judge is neither your friend nor foe. Rather, the mediator or magistrate judge is simply a neutral individual interested in hearing both sides of the story and getting the matter resolved.
- The mediator or magistrate will highlight the strengths and weaknesses in your case to help you understand risk.
- The mediator or magistrate may push you to try to understand your opponent’s point of view.
- The mediator or magistrate may discuss what your long term benefits and other claims are “worth.”
- The mediator or magistrate may ask about your work history, medical condition, treatment, plans for the future, and anything else that may be relevant. The mediator or magistrate is simply trying to better understand the facts, rather than trying to harass you.
- Do not be discouraged if the defendant makes a “low ball” offer at the beginning of the mediation or conference. This often is done as a tactic to see if you will snatch the low hanging fruit. Most times, the opening offer has little bearing on the ultimate amount of the settlement.
- The mediation or settlement conference may last for many hours.
What happens if settlement discussions are unsuccessful?
Not every long term disability litigation settles via initial informal discussions, or even at a mediation or settlement conference. This often is the case. If a settlement is not reached, you must battle your litigation out in court. For this reason, you want an experienced ERISA long term disability attorney that will be ready to fight for you.
ERISA long term disability litigations are like no other. They have their own rules, procedures, and standards. Riemer Hess's experienced ERISA litigation team will zealously advocate on your behalf in court. We understand how stressful litigation can be, and are we are here to help. Contact an ERISA long term disability litigation attorney at Riemer Hess today to discuss your options.