SQUARING ERISA LONG SQUARING ERISA LONG TERM DISABILITY TERM DISABILITY

INSURANCE COVERAGE INSURANCE COVERAGE WITH WORKERS’ WITH WORKERS’

COMPENSATION CLAIMSCOMPENSATION CLAIMS

Jonathan M. FeigenbaumJonathan M. Feigenbaum

Jonathan M. FeigenbaumJonathan M. Feigenbaum

Phillips & AngleyPhillips & Angley

One Bowdoin SquareOne Bowdoin Square

Boston, MA 02114Boston, MA 02114

617-367-8787617-367-8787

JonF@phillips-angley.comJonF@phillips-angley.com

www.phillips-angley.comwww.phillips-angley.com

Discovering LTD Discovering LTD CoverageCoverage

You are representing a client in a You are representing a client in a workers’ compensation claim. You learn workers’ compensation claim. You learn that the client was provided long term that the client was provided long term disability benefits insurance through the disability benefits insurance through the employer. employer.

Now you have an opportunity to recover Now you have an opportunity to recover additional income or benefits for your additional income or benefits for your client. You must examine the benefits client. You must examine the benefits and detriments of seeking long term and detriments of seeking long term disability coverage for your client with disability coverage for your client with great care.great care.

Why is LTD Coverage Why is LTD Coverage Important?Important?

More benefits to client.More benefits to client. Could pay to normal social security Could pay to normal social security

retirement age.retirement age. Not work related dependent.Not work related dependent. Sometimes easier proof.Sometimes easier proof. Often integrates with other benefits, Often integrates with other benefits,

health, life etc.health, life etc.

ERISAERISA On September 2, 1974 (Labor Day) On September 2, 1974 (Labor Day)

Congress enacted the Employee Congress enacted the Employee Retirement Income Security Act Retirement Income Security Act (ERISA). Although the statute uses (ERISA). Although the statute uses the word retirement in its title, ERISA the word retirement in its title, ERISA governs both retirement benefits governs both retirement benefits (pensions) and employee welfare (pensions) and employee welfare benefit plan. Those are benefits that benefit plan. Those are benefits that private sector employers provide to private sector employers provide to employees; government employees employees; government employees and those employed by churches are and those employed by churches are not subject to ERISAnot subject to ERISA..

ERISA – How Does It Work?ERISA – How Does It Work?

ERISA long term disability litigation ERISA long term disability litigation is truly a creature of its own. It ‘s a is truly a creature of its own. It ‘s a blend of:blend of:

trust lawtrust law contract lawcontract law disability insurance lawdisability insurance law federal common law of its own federal common law of its own

ERISA Protects ERISA Protects Employees, right?Employees, right?

This must be good for This must be good for employees!employees!

It is hereby declared to be the policy of this It is hereby declared to be the policy of this chapter to protect interstate commerce and chapter to protect interstate commerce and the interests of participants in employee the interests of participants in employee benefit plans and their beneficiaries, by benefit plans and their beneficiaries, by requiring the disclosure and reporting to requiring the disclosure and reporting to participants and beneficiaries of financial participants and beneficiaries of financial and other information with respect thereto, and other information with respect thereto, by establishing standards of conduct, by establishing standards of conduct, responsibility and obligation for fiduciaries responsibility and obligation for fiduciaries of employee benefit plans, and by providing of employee benefit plans, and by providing for appropriate remedies, sanctions, and for appropriate remedies, sanctions, and ready access to the Federal courts. ERISA ready access to the Federal courts. ERISA Sec. 2., 29 U.S.C. Sec. 2., 29 U.S.C. 1001(b) 1001(b)

ADAMADAM

A 16A 16thth Century Interpretation of Century Interpretation of AdamAdam

What Is ERISA?What Is ERISA?

""Everything Ridiculous Imagined Since Everything Ridiculous Imagined Since Adam." This court does not take so dim Adam." This court does not take so dim a view of the Employee Retirement a view of the Employee Retirement Income Security Act of 1974. Instead, Income Security Act of 1974. Instead, this court is willing to believe that this court is willing to believe that ERISA has lurking somewhere in it a ERISA has lurking somewhere in it a redeeming feature. redeeming feature. Florence Florence Nightingale Nursing Service, Inc. v. Nightingale Nursing Service, Inc. v. Blue Cross/Blue Shield of Alabama,Blue Cross/Blue Shield of Alabama, 832 832 F.Supp. 1456, 1457 (N.D.Ala. 1993).F.Supp. 1456, 1457 (N.D.Ala. 1993).

We Hate It, Insurers Love it, Why?We Hate It, Insurers Love it, Why?

Because We Have Polar Because We Have Polar Opposite Goals!Opposite Goals!

We can’t be touched!We can’t be touched!

Told you so!Told you so!

It’s Simply Unfair to the It’s Simply Unfair to the Injured.Injured.

No Jury TrialNo Jury Trial No Damages – All actions are equitableNo Damages – All actions are equitable No Consequential DamagesNo Consequential Damages No Punitive DamagesNo Punitive Damages No Make Whole RemediesNo Make Whole Remedies Federal Court JurisdictionFederal Court Jurisdiction Almost Suspension of Fed. Rules of Civil ProcedureAlmost Suspension of Fed. Rules of Civil Procedure Extremely Difficult Burden to Obtain Discovery Extremely Difficult Burden to Obtain Discovery Rarely Live TestimonyRarely Live Testimony Claims Usually Decided on Cross MotionsClaims Usually Decided on Cross Motions Insurers are treated as fiduciaries and their Insurers are treated as fiduciaries and their

decisions will only be overturned if “arbitrary and decisions will only be overturned if “arbitrary and capricious,” not just unfair or probably wrongcapricious,” not just unfair or probably wrong

Semien v. Life Ins. Co. of Semien v. Life Ins. Co. of AmericaAmerica, 436 F.3d 805, , 436 F.3d 805,

815 (7th Cir. 2006). 815 (7th Cir. 2006). Congress has not provided Article III courts with Congress has not provided Article III courts with the statutory authority, nor the judicial resources, the statutory authority, nor the judicial resources, to engage in a full review of the motivations to engage in a full review of the motivations behind every plan administrator's discretionary behind every plan administrator's discretionary decisions. To engage in such a review would decisions. To engage in such a review would usurp plan administrators' discretionary authority usurp plan administrators' discretionary authority and move toward a costly system in which Article and move toward a costly system in which Article III courts conduct wholesale reevaluations of III courts conduct wholesale reevaluations of ERISA claims. Imposing onerous discovery before ERISA claims. Imposing onerous discovery before an ERISA claim can be resolved would undermine an ERISA claim can be resolved would undermine one of the primary goals of the ERISA program: one of the primary goals of the ERISA program: providing "a method for workers and beneficiaries providing "a method for workers and beneficiaries to resolve disputes over benefits inexpensively to resolve disputes over benefits inexpensively and expeditiously." and expeditiously." Perry v. Simplicity Eng'gPerry v. Simplicity Eng'g, 900 , 900 F.2d 963, 967 (6th Cir. 1990) (internal citation F.2d 963, 967 (6th Cir. 1990) (internal citation omitted). omitted).

ERISA PREEMPTION, IT DOESN’T ERISA PREEMPTION, IT DOESN’T GET MUCH BROADERGET MUCH BROADER

Section 514(a) of ERISA states that Section 514(a) of ERISA states that the statute "shall supersede any and the statute "shall supersede any and all State laws insofar as they may now all State laws insofar as they may now or hereafter relate to any employee or hereafter relate to any employee benefit plan" that is covered by benefit plan" that is covered by ERISA. Section 514(b)(2)(A) ERISA. Section 514(b)(2)(A)

The Savings ClauseThe Savings Clause

29 U.S.C. § 1144(a). The saving 29 U.S.C. § 1144(a). The saving clause states as follows:clause states as follows:

Except as provided in subparagraph Except as provided in subparagraph (B) [the deemer clause], nothing in (B) [the deemer clause], nothing in this subchapter shall be construed to this subchapter shall be construed to exempt or relieve any person from exempt or relieve any person from any law of any State which regulates any law of any State which regulates insurance, banking, or securities.insurance, banking, or securities.

The Deemer ClauseThe Deemer Clause

29 U.S.C. § 1144(b)(2)(A). The deemer 29 U.S.C. § 1144(b)(2)(A). The deemer clause states as follows:clause states as follows:

Neither an employee benefit plan... nor any Neither an employee benefit plan... nor any trust established under such a plan, shall be trust established under such a plan, shall be deemed to be an insurance company or deemed to be an insurance company or other insurer, bank, trust company, or other insurer, bank, trust company, or investment company or to be engaged in the investment company or to be engaged in the business of insurance or banking for business of insurance or banking for purposes of any law of any State purporting purposes of any law of any State purporting to regulate insurance companies, insurance to regulate insurance companies, insurance contracts companies., banks, trust contracts companies., banks, trust companies, or investmentcompanies, or investment

The Genesis of the The Genesis of the TroubleTrouble

'The six carefully integrated civil 'The six carefully integrated civil enforcement provisions found in enforcement provisions found in 502(a) of the statute as finally 502(a) of the statute as finally enacted ... provide strong enacted ... provide strong evidence that Congress did not evidence that Congress did not intend to authorize other intend to authorize other remedies that it simply forgot to remedies that it simply forgot to incorporate expressly.' "incorporate expressly.' "Pilot Pilot Life Ins. Co. v. Dedeaux,Life Ins. Co. v. Dedeaux,, 481 , 481 U.S. 41, 54 (1987).U.S. 41, 54 (1987).

The Hidden Menace.The Hidden Menace.

Would a reasonable employer pay Would a reasonable employer pay premiums to an insurer if that premiums to an insurer if that employer really understood how employer really understood how long term disability benefits are long term disability benefits are calculated and paid? Would an calculated and paid? Would an employee make a partial or full employee make a partial or full payment toward the premium?payment toward the premium?

The Nightmare, offsets and The Nightmare, offsets and other recoveries.other recoveries.

Who wants reimbursement?Who wants reimbursement?

-Health Plan-Health Plan

-Comp Insurer-Comp Insurer

-LTD Insurer-LTD Insurer

-All or some of the above.-All or some of the above.

The Real World IssueThe Real World Issue To figure the amount of monthly To figure the amount of monthly

benefit:benefit: 1. Multiply the Insured's basic monthly 1. Multiply the Insured's basic monthly

earnings by the benefit percentage earnings by the benefit percentage shown in the policy specifications.shown in the policy specifications.

2. Take the lesser of the amount:2. Take the lesser of the amount: a. determined in step (1) above; ora. determined in step (1) above; or b. of the maximum monthly benefit b. of the maximum monthly benefit

shown in the policy specifications; andshown in the policy specifications; and 3. Deduct other income benefits, 3. Deduct other income benefits,

shown below, from this amountshown below, from this amount

Other Income BenefitsOther Income Benefits Other income benefits means those benefits Other income benefits means those benefits

as follows.as follows. 1. The amount for which the insured is 1. The amount for which the insured is

eligible under:eligible under: a. Workers' or Workmen's Compensation a. Workers' or Workmen's Compensation

Law;Law; b. occupational disease law; orb. occupational disease law; or c. any other act or law of like intent.c. any other act or law of like intent. 2. The amount of any disability income 2. The amount of any disability income

benefits for which thebenefits for which the insured is eligible insured is eligible under any compulsory benefit act or lawunder any compulsory benefit act or law

An Illustration of Benefits An Illustration of Benefits and Offsetsand Offsets..

$4000.00 monthly wage.$4000.00 monthly wage. LTD payment 60% or $2400.00 per LTD payment 60% or $2400.00 per

monthmonth Comp payment $2000 per month.Comp payment $2000 per month. SSDI payment $1000.00 per month.SSDI payment $1000.00 per month. A portion of the recovery from the A portion of the recovery from the

third party tortfeasor.third party tortfeasor. After offsets, client receives minimum After offsets, client receives minimum

which is sometimes $50 per month.which is sometimes $50 per month.

Trujillo v. Cyprus Amax Minerals Co. Trujillo v. Cyprus Amax Minerals Co. Retirement Plan CommitteeRetirement Plan Committee, 203 F.3d , 203 F.3d

733 (10th Cir. 2000).733 (10th Cir. 2000).

Victory for the insurer, defeat for Victory for the insurer, defeat for worker.worker.

The Supreme Court The Supreme Court Speaks Again.Speaks Again.

Sereboff v. Mid Atlantic Medical Sereboff v. Mid Atlantic Medical Services, Inc., 126 S.Ct. 1869, Services, Inc., 126 S.Ct. 1869, 1874 (2006)1874 (2006)..

A Partial Win for the A Partial Win for the Injured.Injured.

Popowski v. Parrott, 461 F.3d Popowski v. Parrott, 461 F.3d 1367 (11th Cir. 2006). The 1367 (11th Cir. 2006). The Eleventh Circuit (combined into Eleventh Circuit (combined into one opinion)--interpreted one opinion)--interpreted Sereboff and held that one type Sereboff and held that one type of reimbursement/subrogation of reimbursement/subrogation provision could be enforced provision could be enforced while another could not.while another could not.

What Does One Do?What Does One Do?

Read the documents.Read the documents. Plan Ahead.Plan Ahead. Advise your client well.Advise your client well. Get other counsel involved as necessary.Get other counsel involved as necessary. Negotiate a settlement that that your Negotiate a settlement that that your

client can accept.client can accept. Tell your client about Sereboff.Tell your client about Sereboff. Warn your client that repaying $$ does not Warn your client that repaying $$ does not

equate with continued benefit payments.equate with continued benefit payments.

Fight back!Fight back!

Help your clients achieve Help your clients achieve justice. Sleep well at night!justice. Sleep well at night!