Lawyers handling ERISA claims can tell horrible stories of the injustice that has occurred in the handling of ERISA claims. The State Bar of Texas, Insurance Section published an article that discussed some of the issues harming people.
Although the Act’s purpose was to promote the creation of employee benefit plans and protect those benefits for employees, since ERISA’s enactment most employees with pension or welfare benefit claims do whatever they can to escape the “protections” of the Act, while insurance carriers and employers that fund and administer the benefit plans push to have the claims governed by ERISA. Case law portraying an employee’s struggle to have his or her pension or welfare benefit claim governed by ERISA is almost non-existent. Instead, ERISA benefit case law over the last forty years reveals a common theme: the employee’s Sisyphean struggle to avoid ERISA.
The mountain of cases finding preemption is tall and imposing. The employee stands in the valley with her claim, her rock, using every ounce of physical energy and creative power to push her rock up and over the mountain, to free herself from the Act designed for her benefit. The fiduciary stands calmly upon the side of the mountain, seeking to return the rock to the valley where the protections of the Act lie, pressing the already heavy rock against the employee’s skin, muscle, and bone, forcing it back downhill. Naturally, given the slope of the mountain and the application of pressure by the fiduciary, the rock almost always returns to the valley. The employee watches hopelessly as her heavy burden crashes back down the hill, seeing with despair that all of her toil was for nothing. She is confined to the valley. Many claimants, especially those who are already impaired when they began their quixotic ascent, remain beaten.
The primary reason for the seemingly endless repetition of this Sisyphean struggle is because ERISA decisions have guaranteed the underwriters of ERISA plans and policies deferential review provided their benefit plans contain a simple phrase or sentence that grants discretionary power to the plan fiduciary. The words can be as simple as “the
plan fiduciary shall have full discretion to decide benefit claims.” This simple phrase is held to protect them from the traditional “preponderance of the evidence” burden of proof applied in other breach of contract cases, the burden of proof that would have been applied before the enactment of ERISA, or the burden of proof commonly applied to those who work in the public sector or those who are lucky enough to have individual disability or life insurance policies. Other significant protections for those who fund ERISA benefit plans include the limitation of damages to lost benefits and the prohibition of live testimony, jury trials, and almost all discovery. The underwriters’ medical experts are shielded from cross-examination. This is indeed a comfortable valley for the underwriters of ERISA benefit plans. In health and disability claims the written opinions of their consulting experts are more often than not the backbone of the denial and become the reason the court must sustain the decision when the abuse of discretion standard is applied.
There has been little backlash to the perversity that the Act designed to protect employees and their beneficiaries has ended up marginalizing their contract rights. Insurance carriers and employers, who have the greater power by virtue of their experience with benefit plans and their financial resources, have no incentive to rock the boat. Although there are a few outspoken critics, such as Judge William Acker in Alabama, federal courts remain content with the status quo. The alternative, a slew of pension, health, disability and life insurance benefit contract claims that must be decided in federal court with live testimony, juries, and a preponderance of the evidence standard, might substantially impede their efficiency.
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