Employee Retirement Income Security Act (ERISA) issues can be more onerous than most people can imagine.
Most people who get their insurance from work do not think about it except the the extent of how much it costs, the extent of coverage, and which providers are in the network. Rarely will anybody consider the differences in litigating a denied claim between one type of coverage and another type of coverage. When a plan is not an ERISA plan, the insured stills retains their rights under the Texas Insurance Code. And the insurer suffers penalties if a trier of fact determines the insurer took advantage of the insured or was slow about paying the insured’s claims.
The Texas Insurance Code levels the playing field between the insurer and the insured. As the Texas Supreme Court has stated:
An insurance policy, however, is a unique type of contract because the insurer generally “has exclusive control over the evaluation, processing, and denial of claims,” and it can easily use that control to take advantage of its insureds. Because of this inherent “unequal bargaining power,” the Courts have concluded in that the “special relationship” between an insurer and insured justifies the imposition of a common law duty on insurers to “deal fairly and in good faith with their insureds.” Similar to that common-law duty, the Insurance Code supplements the parties’ contractual rights and obligations by imposing procedural requirements that govern the manner in which insurers review and resolve an insured’s claim for policy benefits.
Texas Insurance Code, §541.060(a) (prohibiting insurers from engaging in a variety of “unfair settlement practices.”). The Code grants insureds a private action against insurers that engage in certain discriminatory, unfair, deceptive, or bad faith practices, and it permits insureds to recover “actual damages…caused by” those practices, court costs, and attorney’s fees, plus treble damages if the insurer “knowingly” committed the prohibited act.
When a person gets his insurance through his employer, the insurance is likely to be governed by ERISA, which preempts the Texas Insurance Code.
The claimant is entitled to a
de novo review of a denied claim and the insurer is required to have a dialogue with the claimant and allow the opportunity to provide evidence that rebut’s the insurer’s denial.
However, the denial is a review of the paperwork in the file and neither the claimant or the claimant’s physicians are allowed to testify at trial. The evidence at trial is limited to the claim file. There is not claim for the remedies in the Texas Insurance Code nor is the claimant entitled to a jury trial. There is no cross-examination. The case will probably be decided on an abuse of discretion standard. And assuming the claimant is successful at trial, the remedy is limited to payment of benefits and the Court may or may not grant attorney’s fees.