ERISA is a complex federal law that controls many group life insurance plans and affects the way attorneys handle claims, appeals, and litigation. Among the many rights the law gives to plan members and participants is the right to bring a suit to recover plan benefits.

In this article, our ERISA attorneys have prepared a guide to help you better understand how ERISA litigation works. If you have issues with a denied ERISA claim, call us at (888) 510-2212 for a free consultation.

What Is ERISA Litigation?

ERISA litigation is the process of taking legal action under ERISA. It involves filing or defending a lawsuit in federal court and taking all legal court proceedings involved in the case.

How Does ERISA Litigation Work?

Fiduciary Duty

The employer and the insurance company may be liable for a denied ERISA claim. The threshold question is whether the employer and the insurance company acted as fiduciaries when handling an employee’s life insurance coverage. ERISA Section 3(21)(A) provides that a person is a “fiduciary” to the extent that the person:

1. exercises any discretionary authority or control with respect to the management of the plan or exercises any authority with respect to the management or disposition of plan assets; 
2. renders investment advice for a fee or other compensation with respect to any plan asset or has any authority or responsibility to do so;
3. has any discretionary responsibility for the administration of the plan.

Under ERISA, an entity is a fiduciary with respect to an ERISA plan to the extent that it has any discretionary authority or discretionary responsibility in the administration of the plan. Anyone who exercises discretionary control or authority over the plan’s management, administration, or assets is an ERISA fiduciary, even if that person is not listed as a plan fiduciary by a benefit plan. In a situation where an employer answers beneficiaries’ questions about the meaning of the terms of the plan or explains life insurance coverage provisions, it engages in plan administration and, therefore, acts as a fiduciary.

Actions in Courts

ERISA litigation is usually initiated in federal courts. Even if a life insurance denial lawsuit is filed in a state court, it will most likely be transferred to a federal court of that state because federal issues (ERISA) are involved. State law claims are preempted by ERISA. ERISA actions must be filed within a certain deadline outlined in the Plan documents.

Trial Rights

ERISA trials are very different in that most of them are decided by a judge based simply on the pleadings filed with the court. The court reviews the administrative record and decides whether the insurance company’s denial of benefits was wrongful. The administrative record consists of all the documents the insurance company has in its file and all the documents it reviewed in denying the claim.

Administrative Exhaustion

Before filing an ERISA lawsuit, a claimant must exhaust her administrative remedies first. When faced with an ERISA life insurance claim denial, the beneficiary will have to file an administrative appeal before starting litigation. The administrative appeal is a mandatory step in the ERISA appeal process. The administrative appeal must be filed within the deadline indicated in the Plan documents. The deadline is usually 60 or 180 days from the date on the denial letter. If the appeal is denied and the Plan documents do not allow for a second appeal, the claimant may then move forward with litigation.

Life Insurance Payout

If the beneficiary whose life insurance claim was wrongfully denied prevails in ERISA litigation, he/she can recover the denied death benefit. The benefit amount is the same amount that would have been paid if the claim had been approved initially. The court will have discretion regarding whether to grant prejudgment interest and set a rate.

ERISA Litigation Damages

ERISA litigation does not allow for consequential damages or punitive damages. The remedy is usually limited to the denied benefit itself and reasonable attorney fees. If, for example, a surviving spouse cannot make mortgage payments and loses her house due to a life insurance claim denial, she cannot recover damages for the lost house even if she prevailed in her ERISA litigation for wrongful life insurance claim denial.

ERISA Attorney Fees

ERISA cases allow for reasonable attorney fees to be awarded to the prevailing party if certain factors are present. When a plaintiff wins a life insurance case against an insurance company, he/she is presumptively entitled to attorney fees. Ultimately, the court will have discretion whether to grant the plaintiff’s motion to award attorney fees when the plaintiff is successful on the case’s underlying merits. Many courts rely on the following factors in deciding whether to grant attorney fees in ERISA litigation: 

1. The degree of the insurance company’s fault or bad faith;
2. Whether the insurance company can pay the winning party’s attorney fees;
3. Whether an award of attorney fees to the plaintiff would serve as a deterrent for other insurers from denying similar claims; 
4. Whether the winning party’s award of attorney fees would benefit all participants and beneficiaries of an ERISA plan. 
5. Merits of the parties’ positions.

Who Can Sue Under ERISA?

By statute, only four parties may sue under ERISA: plan participants, plan beneficiaries, the Secretary of Labor, and plan fiduciaries. Many ERISA lawsuits are filed by an employee/ former employee or a beneficiary of a group life insurance policy against their employer or insurance company.

When Can You File a Lawsuit: ERISA Statute of Limitation

ERISA does not provide a statute of limitations. Usually, the plan’s insurance policy has a provision that designates separate deadlines for filing administrative ERISA claims, appeals, as well as litigation. Failing to file in time could leave you without any recourse.

ERISA petitioners whose ERISA life insurance claims have been denied must exhaust the mandatory administrative review process before bringing a court action for judicial review. A plan’s participant’s cause of action under ERISA §502(a)(1)(B) does not accrue until the plan issues a final denial. However, a plan and its participants can agree to commence the limitations period before that time.

If your ERISA claim has been denied, please consult an ERISA life insurance attorney to see the limitations provision. Generally, the plan can adopt any limitation period, but a contractual limitations provision is enforceable as written so long as the limitations period is of reasonable length and there is no controlling statute to the contrary.

What Is The Litigation Process In A Federal ERISA Lawsuit?

You can only initiate ERISA litigation after you have been denied your employer-provided life insurance benefits initially and on appeal. Before commencing litigation, you must exhaust all administrative remedies, which usually involve an internal appeal filed to challenge the insurance company’s decision. We recommend consulting with an ERISA attorney before filing an appeal. 

An ERISA lawsuit is filed when your attorney sends a summons and a complaint to a federal court. The insurance company has 21 to 42 days to respond. The plaintiff and the insurance company may still discuss and reach a settlement when litigation is ongoing. If no settlement is reached, the case will proceed.

In most ERISA cases, they are decided by a judge during a bench trial. A bench trial is a trial before a judge only and involves reviewing the administrative record and legal briefs submitted by both parties. ERISA litigation may resolve in favor of the beneficiary, the insurance company or the judge may send the case back to the insurance company for re-evaluation. The losing party may file an ERISA appeal.

What Are The Possible Outcomes Of An ERISA Lawsuit?

If a beneficiary to a denied life insurance claim wins their ERISA lawsuit, the insurance company will be obligated to make a full payment of the denied claim, interest, and sometimes the beneficiary’s attorney fees. ERISA has a fee-shifting provision that gives the court discretion regarding awarding attorney fees. This fee-shifting provision does not require that the party win the case to receive attorney fees, and the court may grant attorney fees to the party that showed some degree of success on the merits.

How Our ERISA Attorneys Can Help With Your Lawsuit

It is important to consult with an experienced life insurance attorney if you are considering filing an ERISA lawsuit or appealing a denied life insurance claim. If your ERISA claim has been denied, call our law firm at (888) 510-2212 for a free consultation. We have successfully reversed many denied ERISA life insurance claims on appeal and will help you collect the life insurance payout you are rightfully entitled to.

Our lawyers work on a contingent fee basis, meaning you will pay attorney fees only if we win your case. Only then will we charge a reasonable legal fee. We take pride in offering competitive contingent fee structures and will work with you to ensure you are comfortable with the fee.

Here are a few cases successfully handled by our ERISA lawyers:

• Denied ERISA claim due to material misrepresentation on Portability Application – We recovered $145,000 in a denied life insurance claim. 
• Denied ERISA claim based on employer and insurer negligence – We recovered $850,000 for a wrongfully denied claim based on employer misrepresentations. 
• Denied ERISA claim based on failure to provide statement of health – We recovered $150,000 in a denied life insurance claim. 
• Denied ERISA claim for ex-spouse – We recovered over $400,000 for an ex-spouse whose claim was unfairly denied. 
• Denied claim due to material misrepresentation during the contestability period – We recovered $150,000 on appeal. 
• Denied claim due to beneficiary dispute – We recovered $1.1 million for our clients who successfully challenged the beneficiary designation.
• Denied ADD claim due to Insured’s alleged drunk driving when the insured died in a fatal car collision – We recovered $160,000 on appeal. 
• Denied ADD claim due to Insured’s alleged overdose of prescription medications – We recovered $320,000 on appeal. 
• Denied ADD claim due to Insured’s alleged commission of a misdemeanor while driving and involved in a fatal car collision – We recovered $175,000 on appeal.
• Delayed ADD claim recovered where the insurance company investigated a fatal fall and suggested that sickness may have contributed to the fall – We recovered $500,000 while the claim was under review. 
• Denied ADD claim due to the insured person’s failure to convert his group policy to an individual policy following termination of employment – We recovered $95,000 on appeal.  
• Delayed ADD claim due to the insurer’s alleging that the decedent’s illegal use of cannabis contributed to his fatal motorcycle crash – We recovered $62,000 on demand.