Reinstating your Long Term Disability Benefit: The ERISA 502(a) LAWSUIT

Most individuals become familiar with the phrase 502(a) lawsuit by receiving a letter from an insurance company denying access to their long-term disability benefits.

The traditional language often used by long-term disability insurers advises clients that they have “exhausted their administrative remedies”, and now have the ability to file a lawsuit under Section 502(a) of the Employee Retirement Income Security Act, otherwise known as ERISA.  The 502(a) lawsuit is one that often confuses clients because many individuals think that a lawsuit must end in a trial or hearing.  In fact, the 502(a) lawsuit does not allow for a jury trial or even a hearing in a federal court where testimony is taken.

The traditional format for 502(a) cases, involves the Judge’s review of the “administrative record” to determine whether the insurance company’s behavior was arbitrary.

The 502(a) lawsuit usually ends with the attorneys filing Motions based upon the administrative record, which contains arguments in favor of, or against, the conclusion that an individual is disabled.  The “administrative record” is a phrase that is used to represent all of the activity and data that was supplied by both the insurance company and the claimant during their appeal.  It is based upon that information (and no other) that the court makes an informed decision as to whether the insurance company behaved arbitrarily (or disregarded the claimant’s evidence).

There are only a few ERISA 502 Litigation Attorneys & law firms that are equipped to move forward on a 502(a) lawsuit.  In each state, you may only find a handful of attorneys or law firms that focus on this unique area of the law as a substantial part of their practice.

As I have said in previous blog posts, the most important feature in long-term disability prosecution is doing a very thorough and well-documented appeal.  Not everyone has the luxury of finding a lawyer to help them do the appeal, so some people try to do the appeal on their own.

Although I do not discourage people from trying, I have seen far too many cases where people attempted to do their own appeal, or hired a neighborhood lawyer with no ERISA litigation experience, resulting in a terrible outcome.

If you have received a letter that says that your administrative remedies are exhausted and you are entitled to file a 502(a) lawsuit, you should have your case evaluated by an Attorney who will take the time to go through the administrative record and determine whether or not there is a reasonable argument to be made in favor of the reinstatement of your benefits.

Occasionally, Insurers will engage in settlement discussions or participate in mediation to resolve long-term disability cases after a 502(a) suit has been filed.  Only by hiring a qualified and diligent lawyer who is familiar with ERISA, can you improve your chances of engaging in settlement dialogue with a long-term disability insurer.

At McDonald & McDonald, we successfully litigate, mediate, and settle long-term disability cases for our clients every day.  We welcome your phone call and the opportunity to evaluate your case, regardless of whether we were involved in the previous administrative appeal.

If your administrative remedies have been exhausted & you need to file a 502(a) lawsuit, please contact us as soon as possible to discuss how we can help you.

3 Responses

  1. Jean O'Brien
    I have been in contact with a ERISA lawyer here in my state and it sounds that he just wants to go after a lump sum settlement he put some numbers out which were considerably less if I were to draw until I'm 66.i realize the risk if I were to lose long term if I was again approved but I'm currently receiving ssi disability so why would there be a risk?with the lump settlement what is the fair norm that a firm would require?thank u for your time
  2. cjmcdonald
    That’s a good question. What an insurance company will do or won’t do in a Long Term Disability (LTD) negotiation depends on the strength of your case. If it is well explained why you are disabled, and you can direct the court to some <strong>unreasonable behaviors on the part of the insurer or plan administrator</strong>, you have a better chance of winning. But, keep in mind that most courts review these cases under the arbitrary and capricious standard, which is a less demanding standard of review. In plain English, it’s easier for a court to conclude that the decision is reasonable if it appears to be based on evidence in the file. I tell many of my clients that the court is less interested in how sick you are, and more focused on how reasonable the insurance company behavior was. Keep in mind, I said reasonable….not correct! Litigation results are always uncertain and victory is never assured! Some insurance companies make the choice to litigate very easy by failing to offer you a reasonable settlement. So what is reasonable? It’s hard to say. I don’t have a percentage or a number in mind. You have to focus on the strength of your case. A smaller settlement amount may seem more reasonable in an environment where your disability is not well explained. Sometimes even the clients own doctor has trouble explaining why a claimant would not be able to be a telemarketer or secretary or perform any job. That being said, a good lawyer can tell you his/her average settlement range, but the final number is always driven by the risk in the file. Regarding your social security comment….I encourage you to do some simple math. If you are only receiving $200.00 per month from the LTD Insurance carrier because of the social security payment, you know that converts in $2400 per year. If you are 45 years old, then the contract has $48,000.00 worth of remaining benefits (paid until age 65). If that does not represent a lot of money to you…then abandon the appeal and the litigation. But, if you are not interested in giving the insurance company a $48,000 profit, then you should persist. Finally, what if the government stops your disability payment in the future, or the Government can’t pay future payments? Consider all the possibilities when making any choice! I hope this answers your question.Good luck! Joe McDonald
  3. Jean O'Brien
    I ask about the percentage amount only because a lawyer friend of ours who doesn't do this type of work stated that it was too much.i understand there's plenty of work involved but don't want to be taken advantaged of .the simple math you said to do I'm almost four times that scenario.thank u very much!!

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