The Employee Retirement Income Security Act (ERISA) is a federal law that governs employee rights under employer-provided pension and insurance plans. As a result, ERISA applies to most employer-sponsored long-term disability benefits. ERISA sets up procedures for making claims and appealing the denial of claims, including specific timeframes that the insurance company must follow.

The U.S. Supreme Court has ruled that when ERISA applies to an insurance policy, it preempts other state laws that provide remedies for the wrongful denial of insurance benefits. For example, under California law, if an insurance company denies benefits in bad faith, the claimant may recover damages from the insurance company. ERISA, however, does not provide a similar remedy concerning employer-sponsored long-term disability benefits. Therefore, ERISA preempts or overrules the California law in this situation.

Another example of preemption occurs when a claimant receives a denial of benefits. Under ERISA-governed insurance policies, claimants in this situation cannot immediately file a lawsuit based on the denial. Instead, claimants must first go through an administrative appeal process with the insurance company. This process can take months, while the claimant continues to go without benefits. The ERISA requirements preempt any state laws that allow claimants to appeal their denials of benefits immediately.

Likewise, claimants whose insurance company has wrongfully denied benefits can seek their attorney’s fees to be paid by the insurance company in court. However, ERISA drastically reduces the ability of claimants to get attorney’s fees, making it a rare occurrence. This is yet another example of how ERISA can preempt state laws.

As a result, claimants for benefits governed by ERISA lose some of the remedies and protection they might have in an insurance claim not governed by ERISA. In this respect, ERISA protects insurance companies, not the claimants entitled to long-term disability benefits.

Obtaining long-term disability coverage can be essential to protecting your future. However, when you initiate a claim under this coverage, you need to be aware of your rights and responsibilities, which may necessitate legal counsel. At Bonnici Law Group, we offer you client-centered representation at all stages of the long-term disability benefit claims process. When you need the kind of help that only an experienced long-term disability benefits attorney can offer you, contact Bonnici Law Group at 858-261-5454 or help@bonnicilawgroup.com.