Don’t Believe Everything You Read

Just because your summary plan description (“SPD”) for your group disability plan says that it is governed by “the Employee Retirement Income Security Act of 1974 (“ERISA”) does not mean that ERISA actually applies. There are well known exceptions to ERISA. For example, many governmental or religious entities are exempt from ERISA’s coverage.

It is extremely important to make sure that the insurance company that is acting as a claims administrator realizes that you know your disability claim will not be governed by ERISA. ERISA provides significant advantages for insurers if they have discretionary, such as no jury trial trials, no punitive damages, and their decisions are overturned only for an abuse of discretion. When insurance companies cannot hide behind ERISA’s unlevel playing field they are much more reluctant to reject a claim.

Last year, after the court ruled that my client’s long term disability (“LTD”) claim was exempt from ERISA under the Church Plan exception, CIGNA demanded that the Court order a mediation to try to settle the case. Today, First Reliance approved an application I filed for a claimant who was a teacher.

The teacher’s SPD for the LTD plan stated that ERISA applied. However, I notified Reliance that the teacher’s school district constituted a political subdivision, and therefore, was exempted from ERISA as a governmental entity. Facing immediate state court litigation with unfettered discovery, and the right to a jury trial, the teacher’s application was immediately approved. I doubt that the application would have been approved as rapidly, if approved at all, had I not made clear why Reliance’s decision was not governed by ERISA.