Private employers are not required to provide employees with long-term disability insurance plans. However, when they choose to do so, employers must comply with specific rules and regulations laid out in the Employee Retirement Income Security Act (ERISA). When an employer does not provide a long-term disability policy, employees can choose to purchase a policy from an individual insurer or broker. Although the benefits of these policies may be similar, ERISA and individual long-term disability policies have significant differences in cost, in how they define disability, and their appeals processes.
Because employer-provided plans fall under the purview of ERISA, a plan’s administrator must outline specific procedures that claimants can follow in submitting a long-term disability claim. Individual long-term disability contracts, on the other hand, are merely contracts between carriers and policyholders, which means that the transaction is only governed by state insurance law and does not have to comply with ERISA’s procedural requirements.
An employer who provides a long-term disability policy usually also pays the monthly premium for that policy. Those who purchase individual policies, will have to foot the bill for these premiums themselves. Furthermore, these policies are usually more expensive than group policies offered by employers, although the coverage can be tailored to an individual’s needs and so provides a higher quality of coverage.
Employer-sponsored long-term disability policies usually define disability differently than individual policies. For instance, under many group plans an employee is only considered disabled when he or she is unable to perform the duties required of any occupation in the economy. Other employer-sponsored plans define disability as the inability to perform the policyholder’s specific occupation, although the definition will shift to any occupation after two years. Individual policies, on the other hand, can provide coverage based on the “own occupation” standard, the “any occupation” standard, or a combination of the two, which means that the policyholder will usually be able to receive benefits for a longer period of time.
Finally, group coverage provided by an employer is terminated when the employment relationship ends. Individual long-term disability policies are portable, which means that they can travel with the policyholder from job to job.
If a plan administrator denies an employer-sponsored claim, the claimant will need to exhaust the plan’s internal appeals process before filing a lawsuit in federal court. This usually means that the claimant will need to submit an appeal to the insurance company and await its response. Individual long-term disability policyholders, however, do not need to go through the appeals process and can file a claim directly in court as soon as they receive their letter of denial. Furthermore, individual policyholders are entitled to a jury trial in state court when they bring a claim of breach of contract, bad faith, or negligence, while employees must file in federal court and present their case to a judge. Finally, under ERISA, the court can only award plaintiffs the benefits that they were unfairly denied, plus interest. Individual policyholders who go to court may be able to receive compensatory and punitive damages.
If your employer has provided you with a long-term disability policy, but your claim was denied, please contact the legal team at Roberts Bartolic LLP by calling (312) 635-1600 today.
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