What PI attorneys should know about LTD and ERISA, but don’t

Many personal injury lawyers I know avoid handling their clients' long-term disability (LTD) claims that involve employee and retirement benefits for a variety of reasons: They may have a very specialized practice, limited bandwidth, or simply may not be attracted to the LTD claims process. Filing an LTD claim can be complex -- unforgiving time deadline and proof of loss requirements along with terrible and very confusing ERISA claim, administrative appeal and federal court ERISA filings.

But LTD and Employee Retirement Income Security Act claims are part of nearly all employee benefit packages and are very important. Once a plaintiff receives an injury award, they may be stunned to realize its net value may not be as adequate as anticipated to maintain a quality of life. LTD benefits can be a disabled person's lifeline when they are unable to return to work. They need a strong disability advocate who can act quickly because there are unforgiving limits on time, payment amounts, and what's required to get benefits.

Understanding the background and purpose of this area of law should reinforce its importance. For lawyers who have not presented or litigated LTD claims, do not disregard their availability -- along with your injury award, you can help your clients by referring them to a legal professional who specializes in ERISA health, life insurance, accidental death and dismemberment, and group short and long-term disability.

Defining a Long-Term Disability

When it comes to individual or group-sponsored LTD insurance benefits, the definition of disability varies according to the terms and limitations of the individual policy or group certificate. Long-term disability is generally defined as when an insured, as a result of an injury or illness, cannot perform the important duties of his or her regular occupation, or in some cases you are unable to do any occupation by which you are trained, educated or suited taking into consideration your station in life at the onset of the claim.

The Social Security Administration's site (SSA.gov) offers guidance in identifying and categorizing qualifying injuries and illnesses. Be careful as the list is never final. New qualifying illnesses arise and evolve regularly -- we saw proof of that in 2020 with COVID-19 pandemic.

The Background of ERISA

ERISA was enacted by the U.S. government in 1974 to regulate retirement plans offered by employers. It also provides provisions regarding other benefits, including disability insurance plans offered to employees through the company. It generally does not apply to privately purchased disability insurance packages outside of a company's benefits package purchased from an agent or broker.

ERISA assures that employers provide specific information regarding the company's disability insurance plan. This includes outlining instructions on how to file an LTD claim in the event of an illness or injury, what is specifically covered and what is not covered, and information regarding the appeals process if a submitted claim is denied.

Look at the Time

ERISA also set a time limit of 45 days for insurance companies to make determinations on each group claim. Extensions can be made under specific circumstances.

The deadline for appeals is also set by ERISA. Employees also have the right to file a federal ERISA lawsuit following a denied administrative appeal. At this point, an administrative hearing will be called and decided by a judge. This chain of events can quickly become very complex, and clients may turn to their civil trial or injury attorney for guidance. If this complex area is not an area you practice in, refer out your individual or group disabled client to a lawyer or firm specializing in individual and long-term disability litigation.

Digging Deeper Once an ERISA Complaint Is Filed

The federal judge will review the claim either de novo or for an abuse of discretion, and will consider the underlying complete file of the policy holder and the holder's plan, claim, denials and both sides administrative appeals.

During this process, it is vital the policy holder provide all necessary documentation including contact information between employee and employer, and all doctor reports, chart notes, subjective and objective testing, X-rays and MRI's, medications, restrictions and limitations and a full comprehensive rebuttal to each and every reason the insurance companies denied the claim. The process is precise, and failing to follow the exact protocol of ERISA may lead to a denial of the claim.

Monthly Disability Payments

Long-term disability insurance covers people against the financial impact of unexpected, injuries or sicknesses that leave them out of work for an extended period or permanently. People covered by long-term disability insurance can receive periodic monthly payments for as long as they are disabled and their carrier agrees, or a single lump sum payment that will theoretically reduce all of their future expected benefit payments to a single number with the surrender of their certificate or policy.

To evaluate any lump sum long-term disability payment offer, it helps to understand its variables. Broadly speaking, lump sum offers depend on three factors:

• the amount of future expected benefits,

• the current discount rate, and

• a mortality assessment before the end of the policy period as a result of the disabling condition.

These calculations are difficult to understand if LTD is not your main practice area. Experienced long-term disability claims lawyers, however, keep their fingers on the pulse of what constitutes a reasonable discount rate under present economic conditions. For example, the volatility of the world markets in 2020 was staggering; the COVID-19 pandemic and the general election results alone caused fluctuations on economic rates. In staying up to date, seasoned and experienced long-term disability lawyers protect their clients against an insurance company assuming an unreasonably high discount rate to justify paying a lower lump-sum than a disabled policyholder deserves.

Without the advice of a seasoned disability professional, beneficiaries of these policies risk falling prey to tactics insurers use to undervalue a lump sum, relative to what a beneficiary would otherwise receive over time. Injury attorneys generally like resolutions via lump sum, but negotiating directly with a disability insurance company is different than with another defendant. These cases are difficult, time intensive, loaded with fatal time deadlines and proof requirements.

Many clients have sought my disability firm's expertise out of necessity, when they realized that their injury attorney was not the right person to handle their individual LTD benefits or their group disability ERISA claims. It is better for everyone involved for a personal injury attorney to refer their clients to a legal professional who specializes in individual LTD and group ERISA claims.

This is the personal injury attorney's chance to make the 'E' in ERISA stand for "exceptional service." A strong, proper referral will strengthen your reputation and, more importantly, continue to help your clients even after your personal injury representation has concluded. 