FAQs – Answers to Frequently Asked Questions about ERISA and Disability Insurance

What is ERISA?

ERISA is short for the Employee Retirement Income Security Act of 1974. It is the federal law that governs both how employers manage pension plans, and how health and disability benefits provided through employee welfare benefit plans are administered. The purpose of ERISA was to encourage employers to provide benefits to their employees by giving them more discretion in administering their benefit plans and providing a uniform legal review process across the nation.

ERISA applies to employee benefits provided or sponsored by private companies. ERISA does not apply to employee benefit plans provided by governments or churches. The employer can choose to pay the benefits itself, in which case it is called a self funded plan. Or, it may buy an insurance plan to provide benefits.

If ERISA applies, then State Laws about good faith and fairness in claims handling do not apply.
ERISA has its own laws and regulations about how benefits claims are to be handled.

If your claim for long term disability benefits is denied, you will have the opportunity to appeal the decision.  Under ERISA, you must go through all of the available appeals before you can sue your company’s benefits plan or the insurance company providing benefits.  Because all ERISA claims are governed by federal law, the benefit plan or insurance company has the right be in federal district court. If you file your case in the state superior court, it will most likely be removed to federal court, so you may as well start off in federal court.  While federal courts are perceived as being more corporation and defendant friendly, they also have a lot more experience with ERISA rules and procedures.

In an ERISA benefits appeal, you have to submit all of the medical evidence and arguments you ever want the company or a court to consider before the appeal deadline or ask for an extension in which to submit additional information. Except in rare circumstances, the court cannot consider anything that is not in your claim file at the time of the last denial of benefits. The insurance company or claims administrator does not have to consider an appeal that is submitted late, and a judge cannot consider any new doctors reports. Even if you come into court in a wheelchair with no legs, the judge cannot consider whether you are able to walk unless that fact has been provided to the insurance company or claims administrator  during the claim and appeal process. This is why it is important to get help in filing your appeal for long term disability benefits.

The insurance adjuster was really mean to me, and my credit was ruined when they denied my claim. Can I get compensation for emotional distress or pain and suffering if I sue the insurance company?

If your benefits are from your private employer, you can not recover emotional distress because your claims are under Federal law called ERISA. Under ERISA, the only things you can recover are the benefits the insurance company owes you, along with interest that has been less than 1% for the past several years. Since should not have to sue for your benefits, if you win your case, you can also recover a reasonable amount of attorney fees and costs.

If your insurance benefits are from your government or chuch employer, and your employer has funded the benefit plan by buying an insurance policy, your claims are under California Insurance law and regulations. Under California law, if you prove that you are owed benefits, and you prove that the insurance company was unreasonable in denying your claim, you can receive compensation for emotional distress and financial harm you suffered as a consequence of the conduct of the insurance company. If your insurance company was unreasonable in withholding benefits, you may also be able to recover attorney fees.

Yes, if you bought your own disability or life insurance plan in California. Your claim is goverened by California Insurance law and regulations.

Where do I start if I can’t work any more?
If you become disabled while employed, ask your HR department if you have short term  disability benefits through work. If not, apply for California State Disability Insurance benefits.  Also, ask your HR department if you have long term disability insurance available and when you would be eligible.

Useful Links to Insurance Information at the California Department of Insurance:

Compare Homeowners Insurance Coverages and download sample policies on the California Department of Insurance website

Fair Claims Settlement Regulations on the California Department of Insurance website

Insurance Agent & Broker License Look up on the California Department of Insurance website

Insurance Consumer information on the California Department of Insurance website