By Matthew DeGioia, Esq.
If you are thinking about applying for a Long-Term Disability Insurance claim, it is helpful to know what type of insurance you have. In general, there are two types of Long-Term Disability Insurance: ERISA disability insurance and individual disability insurance.
ERISA disability insurance plans, otherwise known as “group” insurance plans, are provided by employers as a benefit of employment based on an agreement they have with your disability insurance carrier. Group disability insurance coverage typically comes at no cost (or reduced cost) to you, as your employer is generally responsible for paying premiums. By contrast, an individual disability insurance plan is a policy that individuals purchase directly from the insurance carrier.
Let’s dive deeper to examine the distinctions between each type of plan.
ERISA Disability Insurance
When you think of an ERISA disability insurance policy, think of “predictability.” ERISA, otherwise known as the Employee Retirement Income Security Act of 1974, is a federal law that governs employee benefit plans. The law provides uniform requirements that insurance companies and employers must follow to ensure that employees are offered adequate procedural protections when filing their Long-Term Disability claims. A significant benefit of having a disability insurance policy protected by ERISA is that every appeals process is intended to look identical. Every claimant who files an ERISA disability insurance claim is entitled to the same appeal rights, including the right to file an appeal within 180 days, the right to receive a decision from the insurance carrier in a timely manner (typically 45-90 days), as well as the right to a full and fair review. The benefit of being protected under federal law is that it limits the opportunity for surprise.
Unfortunately, the other side of the coin of “predictability” is “limits.” If your insurer denies your ERISA disability insurance claim, you must exhaust all of your administrative remedies through your insurer’s appeals process before filing a federal lawsuit. This means you have to file an administrative appeal within the time limits provided before you can have a federal court review the insurance company’s adverse benefit decision. In addition, when it comes time for a federal court to review your case, the court will only consider the administrative record – that is, they will only view all of the evidence that you submitted to the insurance carrier. They typically will not entertain the submission of new evidence in federal court. This is why you must submit all of the medical evidence you want to be considered to your carrier when you file your administrative appeal.
Further, under ERISA, a federal court will typically review your case to see if the insurer abused its discretion (unless there are particular circumstances, policy language, or local state laws that require the court to review your case de novo). Instead of considering whether you meet your policy’s definition of disability, a federal court will only evaluate your case to determine whether the insurer’s denial decision was wholly unsupported by the evidence – a standard of review that often causes insurers to prevail in federal court. Finally, even if you win in federal court, most of the time, the court will remand your case to the insurer to make a new decision instead of awarding your benefits outright. In the rare instance where the federal court does overturn the insurer’s denial decision, you are entitled to receive your past-due benefits plus interest.
Individual Disability Insurance
While an ERISA disability insurance policy is intended to provide predictability, an individual disability insurance policy is designed to be “customizable.” You can tailor this policy towards your needs and priorities for when you become disabled to work. For example, many ERISA disability insurance policies provide benefits in the amount of half to two-thirds of your pre-disability income. By contrast, you can tailor your individual disability insurance policy to provide a larger monthly payout. Also, under many ERISA disability insurance plans, you are limited to collecting disability benefits for only two years if you have a disability caused or contributed by mental illness, or other subjective symptoms such as fibromyalgia, chronic fatigue syndrome, etc. Your claim may also be terminated at the two-year mark if you cannot prove that you cannot perform the material duties of any occupation in the national economy. By contrast, you can tailor your individual disability insurance policy so that your benefits are payable regardless of the nature of the medical impairment that you are filing your claim under. Further, individual disability insurance policies can be “portable” – they can remain in effect regardless of your employment status. By contrast, many ERISA disability insurance plans require you to allege disability as of a date that you were working full-time with your former employer, making it more difficult for claimants who have long left their employment to prevail on a Long-Term Disability claim.
In addition, policyholders of individual disability insurance coverage have more legal recourse since their claims are subject to state law. They can bring an action for breach of contract, negligence, bad faith, or other causes of action in state court, and are even entitled to a jury trial. In addition, individual disability insurance policyholders do not have to exhaust their administrative remedies before filing a lawsuit against an insurer. They are also permitted to present new and material evidence in court. Further, the standard of review implemented by state courts is typically more favorable than in an ERISA claim. Finally, if you prevail under state law, you can oftentimes recover both compensatory and punitive damages, depending on the extent of the insurer’s bad faith in administering your claim.
Of course, the benefits of an individual disability insurance policy come at a high cost. While employers typically pay the premiums of group disability insurance policies, you will have to pay your premiums with your after-tax dollars. This is why many people opt to pursue group disability insurance coverage instead of individual disability insurance coverage.
Navigating the nuances of different disability insurance claims can be tricky. If you need help applying for a Long-Term Disability insurance claim, filing an appeal, or figuring out what your rights are, I am here to help. Please get in touch with me to set up a free consultation today.
About Andalman & Flynn, P.C.: Founded in 1998 in downtown Silver Spring, Maryland, Andalman & Flynn has forged a distinguished reputation for legal excellence. The firm represents individuals seeking disability benefits throughout the country and practices family law throughout Maryland and the District of Columbia. The firm focuses on cases that impact the rights of everyone, and are there for clients when responsive legal help is most critical. The firm has provided legal analysis on national and local television and radio, and their attorneys often testify before legislative bodies and are routinely invited to contribute to prominent legal publications. For more information about Andalman & Flynn, please visit the website at andalmanflynn.com or call 301.563.6685