While only one area of federal law, the Employee Retirement Income Security Act of 1974 (ERISA) invades many other areas of the law including personal injury, domestic relations, medical care, labor and employment, worker's compensation, and social security claims. If a benefit has been or will be paid, and the government or a church are not involved, then beware of the dangerous hidden current of ERISA.

The ERISA benefits that usually sneak into another area of law are short term disability, long term disability, medical or health insurance coverage, life insurance, severance pay, retirement (401k, etc.), and pension benefits. Many perfectly good cases with able counsel have been ambushed by ERISA and drowned. When ERISA destroys a case, it bars a recovery for mental anguish, pain and suffering, punitive damages, or any other extra contractual damages, other than interest and equitable relief. There is also no right to a jury trial. Your case may be dismissed for failure to follow procedures in a document your client may not even have. You also have to watch out for the court you are in if ERISA pulls you under. State courts have limited ERISA jurisdiction. Some relief may only be provided by a federal judge. The victories achieved in ERISA cases excessively favor ERISA entities. So, the question is how can you survive that dangerous ERISA current that will sooner or later pull you and your case under?

The Preemption Bomb

Preemption is powerful with ERISA. It levels all state law claims like a bomb levels buildings.

There are two types:

• Complete Preemption – Complete preemption is where federal law completely supplants state law. For example, if a suit is filed for long term disability benefits in state court alleging breach of contract and bad faith, ERISA may govern and take over the breach of contract claim. It is treated as if it is an ERISA claim and is grounds to remove the case to federal court under 28 U.S.C. §1331.
• Conflict Preemption (or, Defensive Preemption) – Conflict preemption (or, defense preemption) annihilates any state remedies that are not specifically permitted by ERISA. Bad faith went missing in action after tangling with ERISA many years ago. Thus, the bad faith claim above would be blown out of the case by ERISA conflict preemption. Despite the power of preemption, it does have its limits. In Hendrix v. UnitedHealth Grp. Inc., Civil Action No. 4:17-CV-1834-KOB (N.D. Ala. Apr. 6, 2018), it is illustrated that ERISA does not always have a death grip on personal injury claims. In this case, a wrongful death claim managed to slip away and live to fight another day.

Can ERISA Destroy Your Case?

Yes, ERISA can destroy your case if it is somehow tied up with it.

Examples:

• Auto Accidents – Auto accident cases with policy limits offered by the negligent party's insurer can be ruined if the medical bills are also the limits or more. In fact, counsel can be shafted out of the fee as well!
• Divorce – A simple divorce where the parties agree the spouse will receive a part of the pension may cause a loss of the pension. And, a divorced spouse who was not supposed to be the beneficiary on a life policy may still be the beneficiary.
• Worker's Compensation – A worker's compensation claim may be reduced by an ERISA long term disability claim and vice versa.
• Medical Care – An employer's receipt of employee money intended to pay a health premium, may be diverted for the employer's use resulting in large unpaid medical bills. Yet ERISA may seize that case.

Do not underestimate the power of ERISA on your cases.

What Can You Do To Spot Trouble?

• Change your assumptions. Do not assume ERISA never applies! Assume any person who works may have an ERISA benefit plan even if they do not mention it. Check the employer's website, and/or call the Human Resources department. Check the Department of Labor site for a form 5500. Assume, until demonstrated otherwise, that any medical payments made are governed by ERISA. Assume, in any divorce that a pension may exist. Find out the work history of the parties. Look at prior divorces.
• Keep a database of cases/situations handy.
• Consult an attorney who regularly does ERISA.

Is There a Safe Harbor? Yes, there are two of them.

There are two places of refuge! While ERISA stalks about, know that there are two safe places if your facts can reach it. The Department of Labor, which has authority to provide regulations to further ERISA statutory purposes, has adopted a safe harbor regulation at 29 C.F.R. § 2510.3-1(j). This safe harbor excludes certain group insurance policies from ERISA's gambit.

The safe harbor criteria are:

• No contributions are made by an employer or employee organization;
• Participation in the program is completely voluntary for employees or members;
• The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and
• The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.

If you can satisfy every provision, the safe harbor is open, and your case is safe from ERISA.

There is also one other safe harbor. At 29 C.F.R. §2510.3-1(b), payroll practices are also exempt from ERISA. They are “[p]ayments of an employee's normal compensation, out of the employer's general assets, on account of periods of time during which the employee is physically or mentally unable to perform his or her duties, or is otherwise absent for medical reasons (such as pregnancy, a physical examination or psychiatric treatment);….”

Know Your ERISA Weapons – Get the Enemy's Playbook.

1. The Written Plan Document Request

Make a written request for the plan document and the summary plan description on behalf of a participant or beneficiary. These documents must be produced by the plan administrator, and you want both. The plan document controls, but the summary is what is given to employees. Inconsistencies in the summary may give greater rights to your claim.

It is often difficult to know the entity which is serving as the plan administrator before litigation. Therefore, it is prudent to make such a request of all potential plan administrators:

• The employer,
• The owner of the employer (if it is a wholly-owned subsidiary),
• The insurance company; and
• Any other claim decision maker.

The request must be made in writing on the plan administrator to trigger ERISA's compliance provisions. A refusal to provide a plan document within 30 days of a written request permits a federal court judge to impose penalties of up to $110 per day after the first 30 days. 29 U.S.C. § 1132(c); 29 U.S.C. § 1024(b)(4).

By having the plan document, you have the main ERISA playbook. You will better know your client's rights and how to fight. Read it carefully and know it. Note any matter that the plan decision maker does that is inconsistent.

ERISA is supposedly “administrative.” Decisions during the claim process are what the court is to review. Given this, it is only fair to have the plan document and the summary plan description. This document will control subrogation make whole issues, common fund issues as to attorney fees, and it may have a limitation of action provision shortening the statute of limitations.

2. Written Request for the Claim Manual

Given the “administrative” nature of ERISA, another weapon in your arsenal is to make a written request for the claim manual, guidelines, and protocols before litigation. The Department of Labor contends a rule, guideline, protocol, or similar criterion serves as a basis for making a benefit determination, or appeal decision must be produced upon . See §§ 2560.503-1(g)(v) (A) and (j)(5)(i); 65 FR at 70251. Also see §§ 2560.503-1(h)(2)(iii) and 2560.503-1(m)(8)(i).

Is it possible to obtain penalties for failure to provide the claim manual? The DOL advisory opinion letter 96–14A says it is possible! It notes:

• The legislative history of ERISA suggests that plan participants and beneficiaries should have access to documents that directly affect their benefit entitlements under an employee benefit plan. n2 Consistent with this Congressional intent, it is the view of the Department of Labor that, for purposes of section 104(b)(2) and 104(b)(4), any document or instrument that specifies procedures, formulas, methodologies, or schedules to be applied in determining or calculating a participant's or beneficiary's benefit entitlement under an employee benefit plan would constitute an instrument under which the plan is established or operated, regardless of whether such information is contained in a document designated as the “plan document.” Accordingly, [*4] studies, schedules or similar documents that contain information and data, such as information and data relating to standard charges for specific medical or surgical procedures, that, in turn, serve as the basis for determining or calculating a participant's or beneficiary's benefit entitlements under an employee benefit plan would constitute “instruments under which the plan is . . . operated.”(Emphasis added).

There is also a second advisory opinion letter within Exhibit A, 1998 ERISA LEXIS 24. Based on this information, Prudential should have produced both the employability analysis and its claims manual. The term “other instruments” is defined, and so the DOL's interpretation of this in connection with providing regulations for a full and fair review was within its authority. The DOL is precisely interpreting 29 U.S.C. §1024(b)(4), and more particularly the term “other instruments,” within its congressional authority, to include a claim manual and the employability analysis. Thus, it makes sense to obtain this document and if refused it may give rise to a claim for penatlies!

3. Written Request for the Claim Record

Another way to know your enemy's thinking it to have the entire claim file. Before you formulate your counterattack, you want this in hand with the other two or three documents. ERISA requires production of the claim record or “administrative record” after any adverse action (claim or appeal denial, assertion of a right of subrogation, suspension of benefit payments etc.) If there are claim procedure violations, it may give you leverage to throw off the adverse consequences of ERISA.

Know How to Exhaust – Why Is That Critical and How Is That Good For My Case?

Normally, lawyers do not have a problem being exhausted, but they do have a problem exhausting ERISA claims. This defense kills more cases than any other defense. While the ERISA statute does not mention any requirement of exhausting administrative or claim remedies, courts have imposed exhaustion requirements believing this reflects the “… intent of Congress that pension plans provide intrafund review procedures.”

Accordingly, carefully examine the plan document and letters denying the claim to evaluate what exhaustion is required. There are time limits that the plan may impose, which run from the date the letter was received (as opposed to the date of the letter), and if those time frames have passed and the plan administrator is not willing to accept any further appeals or exhaustion effort, then the case may be in very deep trouble. Exhaustion requires following the procedures including time frames.

Because a trial judge is typically reviewing the claim decision made under a deferential standard of review, it is best to think of the plan or claim administrator as your initial paper trial. The trial judge is conducting a review similar to an appeal to a higher court, which examines the record created by the trial court.

The exhaustion process can be good for your case. It can be the time for you to jam the record with as much favorable information as possible. It is also the time to shred every evidentiary basis relied upon by the plan or claim administrator to deny the benefit claim. I often tell my clients to think of their claim process as an opportunity to put into a large expandable folder any evidence or documentation favorable for their case. The more you have in the folder, the more likely you are to win. Of course, the ERISA plan or claim administrator knows this as well.

Finally, exhaustion is so highly revered, that it is also important to plead claim exhaustion (or futility with particularity) to avoid an early motion to dismiss on this ground. Your case has a fighting chance if you do that. Otherwise, it will suffer a death akin to passing the statute of limitations.

Know Your Reward – Benefits, Fees, Penalties, and Equity

The relief your client needs must be in line with the ERISA statute at 29 U.S.C. § 1132. ERISA only permits claims for benefits, interest for past due benefits, clarification of rights as to future benefits, breaches of fiduciary duty, equitable relief when other relief is not available, statutory penalties, and attorney's fees. Extracontractual damages, such as mental anguish and punitive damages, are not permitted. Also, jury trials are not permitted.

While the weapons are limited, in some cases, your client may well fare better under ERISA. For example, a breach of contract claim under state law will not yield attorney's fees, mental anguish, and punitive damages in most instances. ERISA may provide attorney's fees.

Be wise where you file suit. You can sue in both state and federal court, but state court is very limited as to the relief allowed. A state court can only provide benefit relief, so as noted above, it may be useful to include alternative equitable relief in the lawsuit, as opposed to a benefit claim only. Further, if a statutory penalty claim has accrued, only a federal judge can award penalties.

What's the Takeaway?

If you get caught in the current of an ERISA case against your will, refer to this ERISA Survival Kit, so you can survive. While the law is a jealous mistress, ERISA is more like a hostage taker! It is different than most of the litigation since you usually “try” your case before you file your lawsuit. However, by knowing your plan document and administrative record well, and by following some of these thoughts, hopefully you may be able to survive handling an ERISA benefit claim.

As always, if this seems overwhelming or too time-consuming, we encourage you to refer your client's ERISA case to one of our experienced ERISA disability attorneys.

We receive ERISA case referrals from attorneys all over Alabama, Mississippi and beyond. We regularly practice in federal courts throughout Alabama and Mississippi. And we will come meet with your clients at your office. Clients appreciate that we are willing to come to them and meet face-to-face. And those visits enhance your relationship with them as well.

Our ERISA lawyers have been handling ERISA benefits claims for over 25 years. ERISA claims are our focus. Let us handle your client's ERISA claims, so you can concentrate on all the others.