An American Tragedy







Act 1:

A young parent secures a reasonably well-paying job with good benefits. In truth, because the family is young and dependent on her income, the fringe benefits are a significant factor in the decision to take the job. The new job holder feels secure in the knowledge that the job will pay enough to make ends meet and maybe even save a little, will take care of the medical bills when any family member is sick, and will pay benefits if she becomes disabled.

Act 2: 
During the next few years, as the children grow, there are the inevitable illnesses and accidents, and while they may exact a toll, at least the medical bills are covered. But, then, occasionally, the insurance company will deny a claim for medical expense. The denial may be based on lack of medical necessity or a claim that the treatment is experimental. Or maybe a family member needs surgery. The insurance company may want a second opinion – and the second opinion agrees with the first. They are told that everything will be covered, after meeting their deductible and co-pays.

Paying the deductibles and co-pays may create a strain, but the family has stewarded its resources carefully and there are savings that will cover them. The surgery is believed to be a complete success and the patient is on the road to complete recovery.

Then the bills start coming in. The patient then discovers that the anesthesiologist was not “in network”. The insurer will pay only 10% of his bill. The bill is nearly $3,000, and the family must pay 90% of that. A second surgeon was on standby during the surgery and his bill is not covered; the family must pay that.

These extra bills create problems, what with the co-pays and deductibles that they have already had to pay. But, they weather the storm.

The good feeling of knowing that the family will be taken care of if something happens to the bread-winner begins to fade, to be replaced by worry. What if something really serious occurs?

Act 3: 
The patient takes a turn for the worse. It turns out that the surgery wasn’t a complete success, and that the road to recovery may be somewhat longer than was first thought. But, thank heaven the patient works for a company that provides good benefits. If she is off work due to an injury or illness, the company has a salary continuation plan that pays full salary for up to 90 days. Then, if she is still unable to work, she will receive disability insurance benefits.

During the first 90 days the patient finds out that she is not going to be unable to work for much longer than 90 days. A nice lady in the Employer’s HR department gives her the forms to fill out to apply for disability insurance, and maybe even helps her fill them out. She gets them filled out as soon as she can so that there will be no delay the transition between her employer’s salary continuation plan and the disability benefits.

After submitting the application for disability benefits she receives a form letter from the insurance company that tells her that they are investigating her claim. They tell her that her claim is governed by ERISA, and that they will decide her eligibility within 45 days unless they need more time, and then they can take an additional 30 days to decide.

When the salary continuation payments are about to end, our young mother begins to panic. The family’s savings are depleted and she has heard nothing more from the disability insurance company. After navigating through the complicated telephone menu, she gets the voice mail of the person who she believes can give her information about her claim. This may be repeated every day for several days, but finally she speaks to a human. She is told that they are very near a decision and that she will hear from them shortly.

Act 4:
Ninety days go by and still not word. Voice mail messages go unanswered. The salary continuation has ended and either there is no income or the family has to depend on the income of only one parent while its expenses are based on the combined incomes of both parents.

Finally, she gets a letter from the insurance company. But the news is not good. The letter says that the insurer has had her medical records examined by independent physicians. These physicians have concluded that although she does have a verifiable medical condition, it does not prevent her from working. Therefore, the insurance company has decided that she is not entitled to disability benefits.

The letter also tells her that she has appeal rights. She can appeal the decision withing 180 days, and she can include with her appeal any additional information that she wants the insurer to consider. She doesn’t have any idea what additional information she needs to include. So, she sends a letter to the insurance company telling them that she appeals their decision.

The insurer has the records examined by other “independent” doctors and sends her a letter telling her that the new doctors agree with the original decision to deny benefits and that they are affirming their original decision. The letter also tells her that the decision is final and if she still disagrees with it the only thing she can do is to file a law suit in federal court.

Act 5:
Filing a suit in federal court is not something our disability claimant can do by herself. She knows she needs a lawyer. There is a nice lawyer who is a member of her church who recently drafted wills for her and her husband, so she calls and makes an appointment with him.

Now the reality of ERISA becomes apparent. This lawyer explains to her that ERISA is the Employee Income Security Act. That under this law, the claims file generated by the insurance company is the only thing a court will look at if she files a suit. She cannot file a suit and tell her story to a jury. She cannot call witnesses to testify. He tells her that hardly anyone ever wins an ERISA case, and that he doesn’t handle them. If she is lucky, this attorney will refer her to an experienced ERISA attorney. Unfortunately, many lawyers who do not routinely handle ERISA cases will either try to handle one or will not know any lawyers to refer her to and tell her that she doesn’t have any chance to win.

Act 6:
This claimant is one of the lucky ones. She manages to find her way to a lawyer experienced in handling ERISA claims. She meets with the ERISA lawyer who tells her that although ERISA claims are difficult, they are not altogether hopeless. There are ways in some cases to get around the harsh rules imposed by courts in ERISA litigation. There are no guarantees , but this lawyer thinks she has a fighting chance to win and agrees to take her case.


Unfortunately, the above scenario is not a rare occurrence – it happens many times every day. The insurance companies and plan administrators have the upper hand. They know the way in and through the ERISA maze; a journey full of traps for the unwary. But there are lawyers who have discovered ways to help claimants navigate these difficult waters.

What can experienced ERISA counsel do to help?

Fibromyalgia is a Physical Disease and Not Psychosomatic

For years people disabled from fibromyalgia have put up not only with the painful condition but also with the callous treatment by disability insurers who treat them as if they are lying malingerers. Insurance companies get away with it because the public generally is not well educated about the disease and it has not been able to be verified by medical tests. However, a research team led by Dr. Frank Rice, a neuroscientist, has uncovered physical differences between fibromyalgia sufferers and those who don’t have the disease. The National Biotechnology Information Center (NBIC) of the National Institutes of Health (NIH) recently released the team’s findings that there is a causative physical pathology for fibromyalgia. This is a huge breakthrough and will help thousands of fibromyalgia sufferers prove their cases.

Because no one could point to a cause of the disease, and because there was no “objective” test to prove its existence, it was considered by many to be either psychosomatic or wholly made-up by the purported sufferers for “secondary gain”.  Disability insurers, in particular, use this lack of “objective evidence” to deny claims for disability insurance benefits to fibromyalgia sufferers.

 Dr. Rice reported the team’s major discovery that the cause of fibromyalgia is physical, making diagnosis more certain and explaining the multitude of varied symptoms and effects. The research team identified alterations in core body temperature as a culprit, and explained that blood acts as a coolant in our bodies much the same as water does in the radiator of a car. The major organs and active muscles of our bodies require a constant temperature of about 98.6 degrees, and most of us are able to maintain that temperature. But, fibromyalgia sufferers cannot.

 Losing too much heat (hypothermia) or gaining too much heat (hyperthermia), causes our body’s primary thermostat, the hypothalamus, to struggle to maintain balance. It does this by regulating our blood supply to the various organs. Blood carries nutrients and oxygen to our brain and other tissues and takes away waste. When we use our muscles, particularly the hands and feet, blood flows in capillaries (the smallest part of our blood supply system) between the skin and muscles to supply these nutrients and oxygen. The capillaries also act as temperature regulators and either conserve or release heat. They run throughout our entire bodies but are highly concentrated in our hands and feet.

 Capillary function can be diminished by injury and other causes. When that happens, muscle and skin tissue cannot get proper nutrition and oxygen, waste cannot be taken away, and normal temperature cannot be maintained. One result is a build-up of lactic acid in muscles causing pain that can seem to ‘travel’ to and from different areas of the body from one day to the next and can cause fatigue, a symptom commonly reported by fibromyalgia sufferers.

According to this research, fibromyalgia has pathology and is not psychosomatic so those who suffer from this ‘syndrome’ can now rest assured it is not all in their minds. And, perhaps more important, they will be assisted by this research in proving their disability to their disability insurers.


The Eighth Circuit Court of Appeals recently ruled in U.S. v. Ashcraft, No. 12-2449 (8th Cir. 10/9/2013) that disability benefits are “earnings” within the meaning of the Consumer Credit Protection Act, 15 U.S.C. § 1673(a) (“CCPA”), and therefore are protected by that act.

The CCPA protects a portion of earnings from garnishment. Generally, only the lesser of 25% of weekly earnings, or the amount that weekly earnings exceed 30 times the minimum wage, may be garnished. But, that protection only extends to “earnings” and not to other income that a debtor may receive.

In this case, Ms. Ashcraft received disability benefits provided through her employment. While she was drawing these benefits, she pleaded guilty to several federal crimes and was sentenced to a period of incarceration and to make restitution.

Upon her release from prison, Ms. Ashcraft’s disability insurance benefits resumed. The government sought to take all her benefits to enforce her restitution obligation. She resisted, arguing that only 25% of these benefits were subject to garnishment, as they were periodic payments provided to her in the course of her employment. The district court (Northern District of Iowa) overruled her objections and held that all her disability benefits were subject to garnishment.

On appeal, the Eighth Circuit noted that the CCPA’s definition of “earnings”

. . . means compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise, and includes periodic payments pursuant to a pension or retirement program.

However, the Eighth Circuit also noted that the circuit courts are split over whether disability insurance benefits, regardless of whether provided through employment, are “earnings . . . pursuant to a pension or retirement program.” Some courts have ruled that once pension benefits have passed into the hands of the beneficiary, they are no longer “earnings” and lose the protection of the CCPA. Such a holding would seem to make the CCPA protections illusory and instead of protecting earnings they would only force the creditor to enforce its garnishment against the beneficiary or his bank account rather than being allowed to seize all the funds before they get into the hands of the beneficiary. Recognizing this, the 5th Circuit (that has jurisdiction over federal courts in Louisiana, Mississippi, and Texas) ruled in United States v. DeCay, 620 F.3d 534, 543–44 (5th Cir. 2010) that the CCPA unambiguously protects pensions and that payments thereunder do not lose their protection simply by being paid to the beneficiary.

The Eighth Circuit agreed, but found that the Fifth Circuit case was not exactly on point as it dealt with pension payments and not disability payments. But, citing a bankruptcy case from Alabama, In re Conway, No. 03-11200-MAM-7, 2003 Bankr. LEXIS 1988 (Bankr. S.D. Ala. Sept. 9, 2003) that concluded a debtor’s disability insurance payments were “earnings”, the court turned to its own analysis.

The court began its discussion by noting the Supreme Court’s analysis in Rousey v. Jacoway, 544 U.S. 320, 331 (2005) that the common feature of various types of benefit plans, including disability, illness, or unemployment, is that they all provide income that substitutes for wages earned as salary or hourly compensation.

Because Ashcraft received the disability payments through her former employer, they were payments designed to function as wage substitutes; they were not merely “traceable in some way” to her compensation, but were a direct component to her for her personal services. Thus, they were “compensation paid or payable for personal services” by her former employer as disability payments rather than as wages or salary.

The court held:

The government’s argument that Ashcraft receives the payments precisely because she cannot render “personal services” due to her disability incorrectly focuses on the time the payments are received rather than the character of the payments. Simply because the disability payments are delayed—simply because [her employer] received Ashcraft’s personal services before Ashcraft began receiving her disability payments—does not take the payments out of the category of compensation. The disability payments constitute “‘other compensation’ to employees paid to [her] as a part of [her] earnings for personal services performed in the past.” Conway, 2003 Bankr. LEXIS 1988, at *22.

The court concluded that Ms. Ashcraft’s disability benefits were “earnings” within the plain meaning of the CCPA and are therefore subject to the Act’s limitations on garnishment.

When does the Clock Start Ticking For the Deadline to File an ERISA Suit?

My Friend Steve Krafchick, one of the best ERISA lawyers in the country, handled a case for Ms. Julie Heimeshoff against Hartford. The insurance policy said that any suit for benefits against Hartford had to be filed within 3 years of the date proof of loss was first due. As a general rule, proof of loss is first due upon filing the original application for benefits. That provision is not peculiar to ERISA disability policies, similar limitation periods can be found in just about any kind of insurance policy.

ERISA cases are different, though. In most claims for insurance benefits, the beneficiaries are free to file suit at any time. Not so with ERISA cases. ERISA beneficiaries are required to exhaust their administrative appeals to the insurance company before suit can be filed. In other words, if an ERISA claimant is denied benefits he or she must first file an appeal with the insurance company and await the insurance company’s final decision before he or she has the right to file suit. Sometimes that can take years, as in the case of Mrs. Heineshoff.

The suit was filed about a year after Hartford’s decision, and more than 3 years after proof of loss was first due. The New York federal district court threw out the suit, and that ruling was upheld on appeal.

The Supreme Court heard oral arguments on the case Tuesday. The lineup was Hartford on one side and Ms. Heimeshoff and the US Department of Labor on the other.

Ms. Heimeshoff and the DOL argued that since Ms. Heimeshoff did not have the right to sue until the internal appeals were exhausted, her time limits to file suit should not start running until Hartford made its final decision. Hartford argued that she had a whole year after the final appeal decision and that was plenty of time.

It is difficult if not impossible to accurately predict what the Supreme Court might do, but I do wish that the case presented a little bit better set of facts. There have been cases where the beneficiaries did not have the right to sue until after the final decision by the insurer and that decision did not occur until after the time limit had elapsed. This was not one of those cases, and the justices’ questions seemed to indicate a problem with the fact that Ms. Heimeshoff did have a year to file suit.

We will just have to wait and see what they do.  You can read a transcript of the oral argument here.

Book Review: ERISA Benefits Litigation Answer Book 2013

I recently received an inquiry from the Practicing Law Institute asking whether I would be interested in reviewing a new book, ERISA Benefits Litigation Answer Book 2013, by Craig C. Martin and Amanda S. Amert. I googled the authors and discovered that they are partners at Jenner & Block, a firm of approximately 450 lawyers. Now, I must admit my prejudice; as a lawyer whose practice is focused entirely on representing ERISA claimants, I doubt that I would have bought this book because it is written by lawyers whose ERISA practice in almost guaranteed to be representation of employers, insurers, and plan administrators. In other words, the other side.

In my smug myopia I didn’t think that I had much to learn from this book. However, I agreed to review it (probably because I was flattered to be asked to do so); and am glad I did. I was wrong about its value to me (as most of my prejudgments probably are). It is really well written and organized in such a way as to lend itself to easy use. The topics are presented in a sensible question-and-answer format and in logical order. This is not a how-to book, but it is a handy reference for the seasoned practitioner or the attorney who only occasionally finds himself representing either side in ERISA benefits litigation.

The first chapter is an overview of ERISA causes of action. Succeeding chapters more fully flesh these out. There are chapters covering such topics as federal court jurisdiction, fiduciary duties (and another devoted to breach thereof), affirmative defenses, discrimination and interference with benefits litigation, and litigation to recover benefits, to name but a few of the 18 chapters.

For example, chapter 11 is titled, Litigation to Recover Benefits Due Under a Plan. This is the area in which I practice and feel most competent to offer comment. However, all the other chapters are as well written and logically organized.

Section headings in chapter 11 include (among others) topics such as who can bring a claim, who may be sued, damages available, standard of review, conflict of interest, and exhaustion of administrative remedies.

Every answer to every question is presented in an even-handed manner and supported by appropriate authority. In addition to the questions and answers there are “practice notes” that are tips that take the reader beyond the mere answers. For example, after Question 11.7.2 “What is a ‘plan administrator’?” there is the straightforward answer and then the following practice note:

It is common for an ERISA plan – and particularly a welfare benefit plan – to have both an “administrator” for statutory purposes (most typically, the employer and plan sponsor) and a “claims administrator” paid by the plan or the employer to process claims and perform other services. The fact that a claims administrator performs these services is not in and of itself relevant to an analysis of who is the plan administrator for ERISA purposes although a claims administrator could be designated as a plan administrator in a plan document.

I assume that this is information that most seasoned practitioners of ERISA benefits already know. But, it would take a novice an untold amount of time digging that gem out of the jurisprudence. This is just one small example of the little nuggets these “practice notes” contain. The book would be worth the price if it had nothing else.

If there is a valid criticism of this book, it is this: Probably the most litigated issues in ERISA benefits cases center on evidence and discovery. Since it is relatively easy for a plan sponsor to grant discretion to a plan administrator, most cases are reviewed by federal courts using the abuse of discretion standard. Generally, that means that the federal court sits as a court of review and will not reverse an administrator’s decision to deny or terminate benefits if that decision is supported by substantial evidence. But that raises a serious question of what evidence should be before the reviewing court.

With few exceptions courts have held that a reviewing court cannot go beyond the administrative record maintained by the plan administrator. In the usual case, this is what in any other context would be referred to as the insurance company’s claim file. So, if all the evidence is already in the claim file, the only thing necessary is to file that record into evidence. That was surely the case before Metropolitan Life Ins. Co, v. Glenn, 554 U.S. 105, 128 S.Ct. 2343, 2345, 171 L.Ed.2d 299 (2008). The Glenn decision held that when the entity making the claim decision is also the entity that will pay benefits, there is a conflict of interest. The administrator’s conflict of interest is one factor the reviewing court is to consider when making the determination whether a claim decision was an abuse of discretion.

The proof of the extent to which the administrator’s decision is infected with its own self interest cannot usually be found in the claim file maintained by the administrator. Thus, some discovery may be necessary. The scope and extent of that discovery has been the subject of much post Glenn litigation.

That said, I still heartily recommend this book to any lawyer involved in any ERISA benefits litigation.

This review is already too long. But, for those of you still reading, let me sum up by saying that I believe that my every research project will start with this book, and it will be on my desk at all times that it is not with me at a mediation or some other conference.