Mar 17, 2025 - Disability Insurance, ERISA by Seltzer & Associates
While all insurance policies are complex, those that are designed to provide assistance when you are unable to work due to a disability seem to be among the most complicated. One reason these policies are often so hard to employ is that they are governed by different laws depending on the specific type of disability insurance policy you are trying to enforce.
The federal ERISA laws establish obligations that apply to certain types of disability insurance but not all policies. If you are reviewing your disability insurance coverage, need to file a claim, or want to appeal a denial or discontinuance of benefits, it is helpful to understand whether ERISA protections apply and what they provide. However, it may be reassuring to know that an attorney who focuses on disability insurance can help you enforce your rights under all applicable laws, regardless of whether those laws fall under the ERISA scheme.
Types of Disability Insurance Policies
Disability insurance policies are classified by numerous different features. One primary distinction is the period of coverage. Short-term disability policies often start to provide monetary benefits within a couple of weeks of the time you become unable to work, but these policies only pay benefits for a limited period of time, which could be as short as a few months. Long-term disability policies, by contrast, often will not start to pay benefits until you’ve been unable to work for three months or more, but those benefits will continue for longer. Some long-term disability insurance policies will pay benefits until you reach retirement age if your disability continues to prevent you from working.
Another key distinction involves the insurance provider. Some disability policies are purchased through and provided by insurance companies, while other forms of disability insurance are provided by the federal or state government.
ERISA laws apply to insurance provided through commercial providers—the regulatory scheme for government insurance programs like Social Security Disability Insurance (SSDI) is completely different. However, there is a third key distinction that is critical when assessing whether insurance provided by a commercial company is subject to ERISA. It matters whether a disability policy is a group policy provided by an employer or an individual policy purchased independently by a professional who wanted to ensure that they would be protected in case illness or another condition prevents them from practicing in their field. ERISA laws only apply to group disability policies provided by employers. And that can actually be good news for those who hold private insurance policies for reasons we’ll explore below.
Overview of ERISA
ERISA refers to the Employee Retirement Income Security Act of 1974 and implementing federal regulations. These laws are designed to protect employees who have been promised benefits by their employer, including retirement benefits and health plans. The law requires employers to provide particular information about the features of the plans they provide. In addition, ERISA establishes rules about how the plans must be administered. Among the key protections for employees covered under group disability insurance plans are ERISA rules that set:
- Requirements for how benefit claims must be processed
- Deadlines for reaching coverage decisions
- Rights of plan participants when a claim is denied
ERISA is a federal law, and lawmakers specified that the provisions of ERISA would override state laws governing insurance. In many cases, state laws provide better remedies for holders of private disability insurance policies facing denials or delays in their disability claims. For that reason, a disability insurance attorney can often achieve more effective results for policyholders when dealing with claims under private insurance policies than under group policies. It is often possible to seek compensation for violations of bad faith laws or deceptive practices. However, ERISA does provide some protections that can be enforced.
ERISA Deadlines for Coverage Decisions
ERISA requires insurance companies providing group disability policies through a covered employer to make a decision on a disability claim within a reasonable time, which is generally defined as 45 days. However, that time can be extended if the insurance company tells the policyholder that they need more time.
If they request more information, which is often the case, then the insurance company has 30 days after they receive that information. Then, if the company notifies you that they still need more time, they can receive an additional extension of time and ask for even more information. So, the “reasonable time” can easily be extended to several months.
ERISA Rights if a Claim is Denied
When a disability insurance provider denies a claim covered by ERISA rules, the insurance company must provide a “detailed explanation” of the reason for the denial, making reference to the provisions in the plan that serve as the basis for the denial. The insurance company is also supposed to provide information describing the process for appealing denials under the plan and to inform you about your right to follow up with a claim in court if the claim is denied on appeal.
ERISA gives employees at least 180 days to file an appeal and longer if allowed under plan policies. The federal rules require the appeal to be reviewed by a different person than the one who made the initial decision, and they specify that the person conducting the review is not supposed to rely on the initial decision. As a practical matter, however, it must be remembered that both the person who made the initial decision and the person conducting the review work for the insurance company, which is a for-profit business. Insurers work to keep their profit margins high by denying claims and keeping benefits as low as possible, so the prospect of succeeding on an appeal within the company may not be promising.
While ERISA sets deadlines for reaching a decision on appeal, those deadlines can be extended just as the deadlines for initial decisions can be extended.
Filing a Lawsuit
Insurance companies can require you to go through two rounds of appeal within the company before you are able to take your claim to court. However ERISA does allow you to appeal in court sooner if the plan made a major error following the claim processing rules.
Because insurance companies will often take any opportunity to deny claims, plan participants who have been denied coverage or had their benefits improperly reduced or discontinued often do not have much chance of success until they get to the point where they can appeal the decision in federal court. However, the law limits opportunities even in court. For instance, claimants generally cannot introduce new evidence in court but must rely on facts introduced during the initial claim or administrative appeal. Because of the limitations, it is a good idea to work with an attorney during the appeal process so that the record is fully established if you need to take the claim to court.
An Attorney Who Understands ERISA Procedures Can Work to Help You Receive Disability Benefits
It is grossly unfair that insurance companies who are paid to provide protection for workers deny or delay genuine disability claims when workers are in desperate need of help. To protect yourself, it is helpful to work with an experienced legal advisor from the start of your claims process to ensure that you provide evidence that conclusively proves the extent of your disability. If that evidence fails to succeed in administrative channels, it can be used to make your case in court.
At Seltzer & Associates, we focus our practice on disability insurance claims, so we know how to overcome the challenges and make the most of the opportunities available under federal and state law. If you need help preparing and filing a claim, or your claim is denied or excessively delayed, we invite you to schedule a complimentary consultation to discuss the ways our team may be able to help.