A. What is ERISA?
If an insured person obtained his or her insurance coverage at work, then any claim under that policy may be preempted by the Employee Retirement Income Security Act of 1974 (ERISA). For example, claims for long-term disability benefits, life insurance or health insurance benefits are ERISA claims in most cases, if the insurance was provided through work.
ERISA is a comprehensive Federal statute that applies to many claims related to employee benefits. ERISA is a complicated area of the law that throws up many hurdles that stand between employees and their insurance benefits if the insurance coverage is provided as an employee benefit.
The intent of Congress in enacting ERISA was to protect the “interest of participants in employee benefit plans . . . by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts. .” 29 U.S.C. § 1001(b). The language of the ERISA statute draws heavily from trust law as well as contract law. Congress instructed the courts to develop a common law of ERISA, using both trust and contract principals. The Department of Labor also has authority to issue regulations governing the processing of ERISA claims.
B. ERISA Preemption
ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan … .” ERISA § 514(a), 29 U.S.C. § 1144(a). A saving clause then provides that some state laws are not preempted: “nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.” ERISA § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A).
ERISA preemption means that almost all employee benefits plans that provide such benefits as health insurance, life insurance or disability insurance are preempted by Federal ERISA law; however, plans sponsored by governmental employers and churches are not usually preempted by ERISA.
Once an insurance policy is found to be an ERISA plan, almost all claims under state law are preempted, and the insured can only recover the benefits due to him under the policy, and maybe, attorneys fees. Under the federal ERISA case law, the insured must exhaust his appeals with the insurance company, has no right to a jury trial, gets only very limited discovery, and cannot submit additional evidence to support his or her claim in court. Also, the court will usually give the benefit of the doubt to the insurance company under an arbitrary and capricious standard of review.