Many people receiving disability insurance claim denials believe they can file an ERISA lawsuit and receive well-deserved justice for denied benefits. While this is often true, especially if you work with a competent disability attorney, it’s not quite as cut-and-dried as one might imagine. There are several potential outcomes when taking a long-term disability (LTD) case to court.

Policyholders typically move forward with a lawsuit after receiving an ERISA denial and an unsuccessful ERISA appeal. But they incorrectly assume that winning a case in court will give a guarantee of continuing benefits for the life of the policy. Disability lawyer Greg Dell and fellow attorney Alex Palamara debunk this faulty assumption and discuss the available remedies in an ERISA lawsuit, along with the pros and cons of each one.

ERISA Laws

When the holder of a denied disability insurance policy takes the claim all the way to letting a court decide the final outcome, the judge has several options at his or her disposal. Current ERISA laws that govern these claims removed the right to a jury trial, meaning that a single federal judge holds the power to determine the verdict in each case. Attorney Alex Palamara explains that this was apparently set up to keep the cases moving more quickly, since a jury trial can take days or even weeks while a bench trial can take one day. He also notes that federal judges tend to be pretty conservative, which has implications in the outcome of a trial.

“I believe that the insurance companies helped pass the ERISA laws,” states Palamara. “I think they thought to themselves that if a federal judge is deciding the case, (and most federal judges are pretty conservative people to get appointed to these positions), they’re going to be siding more along with the insurance companies.”

With that in mind, there are four potential remedies that a judge can choose from when a case reaches the courtroom: the policyholder wins, the insurance company wins, the case is remanded back to the insurance company, or the judge approves a proposed settlement offer between the two parties. Following is a deeper look at each of these realities.

Judgement in Favor of the Plaintiff

First and foremost, the judge could side with the plaintiff (the disabled policyholder), which gives him a victory in court. This sounds like the ideal objective, but the truth is that the claimant seldom receives guaranteed benefits until the age of 65 or Social Security retirement age. Greg Dell explains that the judge only has authority to approve benefits from the time those benefits were denied to the time of judgement (or sometimes, until the time that the medical documentation proves that the policyholder is disabled.)

Even after winning, it’s a continual battle to prove, sometimes over and over again, that the disability continues. The claimant goes back to the month-to-month evaluation, meaning that even after a litigation period of three years or more, the insurance company could still cut off benefits a month later.

It could even be the same month, notes Alex Palamara. “They could be performing reviews during the pendency of the lawsuit. If they know the lawsuit is going downhill, they could start performing new reviews of your claim … and they can be ready and lined up so that the month after they have to pay you all the back benefits, they’re ready to deny you again.”

Also, when the judge awards benefits, there is an appeals process in which an appellate court can render a decision overturning the favorable victory of the lower court. Either party can drag it out all the way to the Supreme Court if they choose to do so, explains Alex Palamara.

Decision for the Defendant or Remand Back to the Insurance Company

The judge could alternatively decide in favor of the defendant (the insurance company), meaning that the policyholder loses his chance of receiving disability payments. But the third thing that could happen is that the case is remanded back to the insurance company for a further review of the claim. Greg Dell reveals that this happens in more than 50 percent of the cases, and that it’s a very scary thing. It’s one of the only types of court cases in which the judge has that kind of option.

Alex Palamara explains it further as the insurance company getting another “bite at the apple” to review information they may have missed or that was now provided to them during the trial. It gives them another attempt to solidify their decision and deny the claim. And guess what? The policyholder gets to appeal all over again, and then they’re back before the judge.

Another issue that arises is whether the judge awards attorney fees to the prevailing party. The prevailing party typically gets awarded attorney fees, according to Alex Palamara, so if the claimant loses, there’s no guarantee that the insurance company will have to pay their own legal fees.

Even though judges tend to realize that a single person who makes an average salary is going against a multi-billion-dollar company, it’s not unheard of for the judge to order attorney fees to be paid by the plaintiff. It’s definitely something that a disability insurance attorney will fight to prevent when there is a remand judgement.

Proposed Settlement

The fourth potential outcome of an ERISA lawsuit is a settlement, which happens in about 90 percent of these cases, according to Greg Dell. If a claim is particularly strong and there’s a good chance of winning, it may be best to let the judge decide. But even then, your medical records must continue to prove an ongoing disability that has to be defended until the time of retirement.

Here are the potential benefits to accepting a settlement rather than taking your chances on a favorable judgment from the court.

  • A settlement gives you certainty, where there was none before. You know what you have in the bank and what you will be receiving. You no longer have to deal with the insurance company, and you are relieved from the burden of proving to the them that you are still disabled.
  • You can return to work if you choose to do so or if you want to just try it out without worrying about losing your benefits. “If a settlement is taken, you can go to work the next day,” states Alex Palamara.“I’d wait for the check to clear, and once the check clears you can do whatever you want. You can go to the insurance company and do backflips in their front yard. I wouldn’t recommend it, but it’s something you can do. Because there’s notakie backsies, as they say in settlements … you could go back to work the next day.”
  • There is resolution within a reasonable amount of time. It takes a minimum of 18 to 24 months to get a verdict in an ERISA lawsuit. If there is an appeal, you’re looking at another a minimum of a year to another 18 months. So that means it could be a minimum of three years for the case to won (or lost.)

Although the total amount received by the claimant will almost always be less with a settlement, you have the level of certainty. It essentially becomes a business decision: Am I going to risk “x” amount of dollars to possibly get “y” dollars, or am I going to take my money now and move on with my life? Considering the thousands of ERISA lawsuits that Greg Dell and his associates have filed, it’s an analysis they go through every day.

“Whatever the outcome is that our clients choose, they’re the boss at the end of the day,” says Greg Dell. “We’re going to give a recommendation as to the merits of the case, why we think we can win or not win. And if we accept the case, almost every time we’re going to be able to get some kind of settlement offer that makes it worthwhile for a claimant to get something rather than nothing.”

A disability insurance attorney at Dell & Schaefer can help anyone in the country who has received a disability insurance claim denial. After the appeals process has been exhausted and it’s time to file an ERISA lawsuit, the attorneys can walk you through the options and represent you through each step. The initial consultation is always free, so just click the Free Consultation button on the Dell & Schaefer website, or call to speak directly with an attorney about your case.