I recently settled the claim of a physical therapy assistant who worked for Catholic Health Services after her benefits under her group long term disability (“LTD”) plan were terminated by CIGNA. While most employee benefit plans are subject to ERISA, LTD plans that are sponsored by churches and church-related entities are not, unless they specifically elect to have ERISA coverage.
Because ERISA did not apply, I was able to file suit in State court, seeking State law remedies. As a substantive matter, ERISA usually preempts state law remedies like punitive damages, bad faith, unfair business practices, pain and suffering, and consequential damages. As a procedural matter, because ERISA did not apply, the claimant was entitled to discovery, including deposing CIGNA employees at the courthouse, to introduce new evidence that CIGNA did not consider, and to a jury trial.
Church-related organizations, such as hospitals, schools, and charitable organizations, are not usually governed by ERISA. Freed from ERISA, claimants who have “church plans" have a more level playing field when forced to fight for their disability benefits. Perhaps most importantly, when an insurance company makes a decision for a church related LTD plan, its decision is not entitled to any deference. That is critical because insurers usually argue that their decision does not have to be correct, just a plausible one.