When you no longer can work due to a physical or mental conditions, it is disheartening when the insurance company, which may have received disability premiums for years, refuses to pay your claim or terminates it after paying a while.   Since you cannot work, you lack resources to hire an attorney paying by the hour. You opt to obtain contingent fee representation, which is risky for the attorney, as the attorney is only paid out of the benefit recovery.  This helps but then if you do receive benefits you will have to survive on less than the full benefit. You have heard that if you file a lawsuit after exhausting the claim process, you may see the court award attorney's fees at least for the time your attorney spent fighting your case in court. That gives a ray of hope to at least get back some of what you must pay the attorney.

Unfortunately, fee awards are not automatic under ERISA, even when the insurer is caught "red-handed" failing to conduct a full and fair review.  A recent case illustrates that which is Sami v. The Guardian Life Ins. Co. of Am., 23-cv-20168-ALTMAN/Reid (S.D. Fla. July 22, 2024).  The insured was covered by a Guardian disability policy when he suffered a transient ischemic attack in 2016. He could no longer perform his own occupation, and so his claim was paid. After two years, the definition of disability in the policy changed to the inability to perform any gainful occupation. Guardian still found this claimant disabled and continued to pay the claim. Almost 4 years later, Guardian changed its mind and decided that the claimant was no longer disabled and terminated benefits.

This caused a good bit of distress to the claimant. It was learned that Guardian paid a physician to review medical records, and that served as the basis to terminate the claim.  The claimant dutifully followed the appeal process, but Guardian refused to change its mind, and suit was eventually filed in January 2023.

It was argued to the court that Guardian did not perform a full and fair review, because it developed evidence during the appeal process, which it did not first share with the claimant before deciding the claim.  The minimum standards of a full and fair review require that before a final decision is made, the insurer must provide the new evidence to the claimant with time to respond to that evidence. Since Guardian did not do that, a full and fair review was not performed. Because of that violation, the court found that the appropriate remedy was a remand to the plan administrator. Guardian was given more time to decide the claim despite its unfair conduct, and it still does not have to pay benefits.

Since the claimant then was not going to receive benefits, at least he wanted to receive attorney's fees for the time spent in litigation. However, the court noted that ERISA does not require an award of fees outright, but rather it is within the district court's discretion to decide that. The court only found the claim procedure violation, and there was no proof that Guardian incorrectly and unreasonably denied the claim. There was also no proffering of facts in favor of the various factors the court might consider in awarding fees. Accordingly, the court refused to award any attorney's fees and only remanded the case back to Guardian for further review.

The frustration to claimants is palpable with two observations readily apparent:

1. What incentive does an insurance company have to conduct a full and fair review, if a court must remand the matter back to the insurance company for another "bite at the apple"? Why should an insurer ever perform a fair review? Doesn't a remand seem more like a reward here? The fairer remedy would be to require payment of back benefits, and remand for consideration of ongoing benefits.   Otherwise, the insurer profits from bad conduct with the delay in ever paying the claim.
2. If suit is filed, and an award of attorney fees is refused when the claimant wins, doesn't that add incentive for the insurer to a risk of litigation since at the most it will only have to pay its own attorney's fees? In Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010) the Supreme Court held that even a partially prevailing party is eligible for fees.  The Court noted, without discarding the five factors noted by many courts, that a claimant need only show “some degree of success on the merits” before a court may award attorney's fees under §1132(g)(1)”.  Without fees the profit incentive is again enhanced.

There are ways to minimize the possibility of a remand and enhance the ability to obtain a fee award. The court did not find it had enough to work with here apparently.  Change is needed to minimize the profit motive of insurers when a full and fair review is not conducted. Otherwise “No fees for you!”