Disability Insurance Under ERISA: Its Not Your Ordinary State Contract Claim

Publication Source: The Nassau Lawyer

Disability insurance is one of those precious protections that is intended to be available at those times when life throws us a curve ball that could jeopardize our ability to provide for ourselves, our family and our loved ones. Many disability insurance companies, however, are becoming increasingly more aggressive in denying claims, forcing insureds to enforce their legal rights in formal litigation. Indeed, there has been an explosion in recent years of reported decisions concerning disability insurance claims. Lawyers that intend to assert and enforce such claims should be aware, however, that enforcing a disability insurance policy may not be as straightforward as it seems. If, for example, the disability insurance arises from an employer-sponsored plan, the insured’s rights are likely to be governed by the Employee Retirement Income Security Act of 1974, commonly known as “ERISA.”¹

If the disability insurance is governed by ERISA, there is a broad body of law -- statutory, regulatory and decisional -- that must be followed, even though the insurance policy itself may not contain a single word about that body of law. This article will review some of the more important issues facing the practitioner seeking to enforce a client’s rights under an employer-sponsored ERISA plan providing for disability insurance.

1. Federal Preemption

Based upon the number of reported decisions, it appears that many practitioners do not know that if their client has received disability insurance coverage through an employer-sponsored plan governed by ERISA, the disability claim is governed strictly by federal law and all state law claims are preempted.²

The term “employee benefits plan” is defined in ERISA as “an employee welfare benefit plan or an employee pension plan,” and an employee benefit plan “includes any plan, fund, or program . . . established or maintained by an employer . . . for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, . . . benefits in the event of sickness [or] disability . . . .”³

Read the full article in the attached PDF.

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Kevin Schlosser is a Shareholder at Meyer, Suozzi, English & Klein, P.C., where he is Chair of the Litigation and Alternative Dispute Resolution Department which has a full roster of available private judges from virtually all disciplines of law. Mr. Schlosser also authors the popular blog, “New York Fraud Claims,” which analyzes the latest developments concerning civil fraud claims under New York law.

Reprinted with permission by The Nassau Lawyer.