SQUARING ERISA LONG
TERM DISABILITY
INSURANCE COVERAGE
WITH WORKERS’
COMPENSATION CLAIMS
Jonathan M. Feigenbaum
Jonathan M. Feigenbaum
Phillips & Angley
One Bowdoin Square
Boston, MA 02114
617-367-8787
JonF@phillips-angley.com
www.phillips-angley.com
Discovering LTD Coverage
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You are representing a client in a workers’
compensation claim. You learn that the
client was provided long term disability
benefits insurance through the employer.
Now you have an opportunity to recover
additional income or benefits for your
client. You must examine the benefits and
detriments of seeking long term disability
coverage for your client with great care.
Why is LTD Coverage
Important?
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More benefits to client.
Could pay to normal social security
retirement age.
Not work related dependent.
Sometimes easier proof.
Often integrates with other benefits,
health, life etc.
ERISA
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On September 2, 1974 (Labor Day)
Congress enacted the Employee
Retirement Income Security Act (ERISA).
Although the statute uses the word
retirement in its title, ERISA governs both
retirement benefits (pensions) and
employee welfare benefit plan. Those are
benefits that private sector employers
provide to employees; government
employees and those employed by
churches are not subject to ERISA.
ERISA – How Does It Work?
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ERISA long term disability litigation is
truly a creature of its own. It ‘s a blend of:
trust law
contract law
disability insurance law
federal common law of its own
ERISA Protects
Employees, right?
This must be good for
employees!
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It is hereby declared to be the policy of this
chapter to protect interstate commerce and the
interests of participants in employee benefit
plans and their beneficiaries, by requiring the
disclosure and reporting to participants and
beneficiaries of financial and other information
with respect thereto, by establishing standards
of conduct, responsibility and obligation for
fiduciaries of employee benefit plans, and by
providing for appropriate remedies, sanctions,
and ready access to the Federal courts. ERISA
Sec. 2., 29 U.S.C. 1001(b)
ADAM
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A 16th Century Interpretation of Adam
What Is ERISA?
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"Everything Ridiculous Imagined Since
Adam." This court does not take so dim a
view of the Employee Retirement Income
Security Act of 1974. Instead, this court is
willing to believe that ERISA has lurking
somewhere in it a redeeming feature.
Florence Nightingale Nursing Service,
Inc. v. Blue Cross/Blue Shield of Alabama,
832 F.Supp. 1456, 1457 (N.D.Ala. 1993).
We Hate It, Insurers Love it, Why?
Because We Have Polar Opposite
Goals!
We can’t be touched!
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Told you so!
It’s Simply Unfair to the Injured.
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No Jury Trial
No Damages – All actions are equitable
No Consequential Damages
No Punitive Damages
No Make Whole Remedies
Federal Court Jurisdiction
Almost Suspension of Fed. Rules of Civil Procedure
Extremely Difficult Burden to Obtain Discovery
Rarely Live Testimony
Claims Usually Decided on Cross Motions
Insurers are treated as fiduciaries and their decisions will only be
overturned if “arbitrary and capricious,” not just unfair or
probably wrong
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Semien v. Life Ins. Co. of
America, 436 F.3d 805, 815 (7th
Cir. 2006).
Congress has not provided
Article III courts with the
statutory authority, nor the judicial resources, to engage
in a full review of the motivations behind every plan
administrator's discretionary decisions. To engage in
such a review would usurp plan administrators'
discretionary authority and move toward a costly system
in which Article III courts conduct wholesale
reevaluations of ERISA claims. Imposing onerous
discovery before an ERISA claim can be resolved would
undermine one of the primary goals of the ERISA
program: providing "a method for workers and
beneficiaries to resolve disputes over benefits
inexpensively and expeditiously." Perry v. Simplicity
Eng'g, 900 F.2d 963, 967 (6th Cir. 1990) (internal
citation omitted).
ERISA PREEMPTION, IT DOESN’T
GET MUCH BROADER
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Section 514(a) of ERISA states that the
statute "shall supersede any and all State
laws insofar as they may now or hereafter
relate to any employee benefit plan" that is
covered by ERISA. Section 514(b)(2)(A)
The Savings Clause
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29 U.S.C. § 1144(a). The saving clause
states as follows:
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Except as provided in subparagraph (B)
[the deemer clause], nothing in this
subchapter shall be construed to exempt
or relieve any person from any law of any
State which regulates insurance, banking,
or securities.
The Deemer Clause
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29 U.S.C. § 1144(b)(2)(A). The deemer clause
states as follows:
Neither an employee benefit plan... nor any trust
established under such a plan, shall be deemed
to be an insurance company or other insurer,
bank, trust company, or investment company or
to be engaged in the business of insurance or
banking for purposes of any law of any State
purporting to regulate insurance companies,
insurance contracts companies., banks, trust
companies, or investment
The Genesis of the Trouble
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'The six carefully integrated civil
enforcement provisions found in 502(a)
of the statute as finally enacted ... provide
strong evidence that Congress did not
intend to authorize other remedies that it
simply forgot to incorporate expressly.'
"Pilot Life Ins. Co. v. Dedeaux,, 481 U.S.
41, 54 (1987).
The Hidden Menace.
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Would a reasonable employer pay
premiums to an insurer if that employer
really understood how long term disability
benefits are calculated and paid? Would
an employee make a partial or full
payment toward the premium?
The Nightmare, offsets and other
recoveries.
Who wants reimbursement?
-Health Plan
-Comp Insurer
-LTD Insurer
-All or some of the above.
The Real World Issue
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To figure the amount of monthly benefit:
1. Multiply the Insured's basic monthly
earnings by the benefit percentage shown
in the policy specifications.
2. Take the lesser of the amount:
a. determined in step (1) above; or
b. of the maximum monthly benefit
shown in the policy specifications; and
3. Deduct other income benefits, shown
below, from this amount
Other Income Benefits
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Other income benefits means those benefits as
follows.
1. The amount for which the insured is eligible
under:
a. Workers' or Workmen's Compensation Law;
b. occupational disease law; or
c. any other act or law of like intent.
2. The amount of any disability income benefits
for which the insured is eligible under any
compulsory benefit act or law
An Illustration of Benefits and
Offsets.
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$4000.00 monthly wage.
LTD payment 60% or $2400.00 per month
Comp payment $2000 per month.
SSDI payment $1000.00 per month.
A portion of the recovery from the third
party tortfeasor.
After offsets, client receives minimum which
is sometimes $50 per month.
Trujillo v. Cyprus Amax Minerals Co. Retirement
Plan Committee, 203 F.3d 733 (10th Cir. 2000).
Victory for the insurer, defeat for worker.
The Supreme Court Speaks
Again.
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Sereboff v. Mid Atlantic Medical
Services, Inc., 126 S.Ct. 1869, 1874
(2006).
A Partial Win for the Injured.
 Popowski
v. Parrott, 461 F.3d
1367 (11th Cir. 2006). The
Eleventh Circuit (combined into
one opinion)--interpreted
Sereboff and held that one type of
reimbursement/subrogation
provision could be enforced while
another could not.
What Does One Do?
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Read the documents.
Plan Ahead.
Advise your client well.
Get other counsel involved as necessary.
Negotiate a settlement that that your client can
accept.
Tell your client about Sereboff.
Warn your client that repaying $$ does not equate with
continued benefit payments.
Fight back!
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Help your clients achieve
justice. Sleep well at night!