Collateral Disability Benefits at Work: What the Heck Are They?

Eric Buchanan, Attorney at Law

If a person becomes disabled and unable to continue working, the person is usually eligible to file for Social Security disability benefits. Most attorneys know about Social Security disability, and can either help their client with a claim or can refer the claim to a firm that handles Social Security disability.

But, attorneys should also know that when an employee becomes disabled, the employee may have other benefits at work that he or she can claim. Private employers often offer employee benefits to their employees, such as long-term disability benefits, health insurance, dental insurance, life insurance, accidental death and disability insurance, and others. About 28% of employees are covered by long-term disability insurance at work. Long-term disability (LTD) benefits can provide the disabled person an additional income above Social Security benefits.

There is no law that such benefits have to be offered, but if an employer offers them, the employee has a right to pursue such benefits, and if they are denied, the employee has a claim under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA refers to these types of benefits as â??welfare benefits.â??

When a potential client comes in with a disability matter, the attorney should ask if the person has long-term disability insurance at work and should encourage the person to file a claim for LTD benefits.

As the guy on late-night television says: â??but wait, thereâ??s more!â?? If a person is disabled, there may be other benefits the person is eligible for at work. Not all employers do this, but in some cases employers allow a person receiving LTD benefits to also continue to receive other employee benefits. For example, some employers set up their benefits so that if a person is receiving LTD benefits, the person automatically can continue to be covered under the company health insurance plan.

On the other hand, employers may offer other benefits that provide continued coverage to people who are disabled, but the person has to apply for that coverage separately. One common example of this is a life insurance â??life-waiver of premiumâ?? or (â??LWOPâ??) claim. If an employer offers life insurance with an LWOP provision, then an employee who becomes disabled can file an application with the life insurance company, and, if the employee proves he or she is disabled, then the employee can keep the life insurance coverage in place without paying premiums while the employee is disabled.

So, how do you determine what benefits your client is entitled to? The simple starting place is to ask the plan administrator, who is usually the employer, in writing. Under most ERISA plans, the employer is designated as the Plan Administrator, but some other person may be named. So, the first question an attorney should ask is, â??Dear employer, please provide me with copies of all plan documents or other documents describing what benefits an employee may be entitled to if he or she becomes disabled. If you are not the plan administrator for any such plans, please tell me who the plan administrator is and provide me their address so I can request the documents from them.â?? The second question to ask is, â??because my client is disabled, please tell me what actions my client needs to take to file a claim for any benefits he or she may be entitled to under any of those plans on account of his or her disability.â??

The employer should answer your questions; in fact, if they are the ERISA plan administrator, they have an affirmative fiduciary duty to communicate with a plan participant, and to fully inform a plan participant of the material facts necessary to assist with a claim. Plan Administrators are fiduciaries under ERISA, and courts have held that an ERISA fiduciary is specifically charged with the obligations of a trustee, who â??is under a duty to communicate to the beneficiary material facts affecting the interest of the beneficiary which he knows the beneficiary does not know and which the beneficiary needs to know for his protection.â?? Krohn v. Huron Memorial Hospital, 173 F.3d 542, 548 (6th Cir. 1999) (citing Restatement (Second) of Trusts).

A fiduciary must give complete and accurate information in response to participantâ??s questions. Drennan v. General Motors, 977 F.2d 246, 251 (6th Cir. 1992). â??Misleading communications to plan participants regarding plan administration (for example, eligibility under a plan, the extent of benefits under a plan) will support a claim for breach of fiduciary duty.â?? Id., citing Berlin v. Michigan Bell Telephone Co., 858 F.2d 1154, 1163 (6th Cir. 1988). A fiduciary breaches its duties by materially misleading plan participants, regardless of whether the fiduciaryâ??s statements or omissions were made negligently or intentionally. Berlin, 858 F.2d at 1163-64. The Sixth Circuit has explained:

The duty to inform is a constant thread in the relationship between beneficiary and trustee; it entails not only a negative duty not to misinform, but also an affirmative duty to inform when the trustee knows that silence might be harmful.

Krohn v. Huron Memorial Hospital, 173 F.3d 542, 548 (6th Cir. 1999), citing Bixler v. Central Pa. Teamsters Health and Welfare Fund, 12 F.3d 1292, 1300 (3rd Cir. 1993).

In addition to having an affirmative fiduciary duty to explain to your client about any benefits your client may be entitled to, a Plan Administrator who fails to provide requested documents within 30 days of a written request may be liable to your client for a penalty of up to $110 per day. See, ERISA § 502(c), 29 U.S.C. § 1132(c), which provides:

(1) Any administrator [who fails to provide certain information] . . . (B) who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish to a participant or beneficiary (unless such failure or refusal results from matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address of the requesting participant or beneficiary within 30 days after such request may in the court's discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper. For purposes of this paragraph, each violation described in subparagraph (A) with respect to any single participant, and each violation described in subparagraph (B) with respect to any single participant or beneficiary, shall be treated as a separate violation.

If you request plan documents from a plan administrator, and the administrator fails to provide the documents in 30 days, be aware that the statute of limitations for bringing a claim for penalties under ERISA § 502(c) may be very short. ERISA does not have a statute of limitations built into the statute, so it suggests that courts adopt the analogous state statue of limitations. Because a participant or beneficiary seeking a penalty for failure to provide plan documents, defense attorneys can argue that the analogous statute of limitations is one for punitive damages, which are often very short statutes. In Tennessee, that is probably one year.

What documents should you be able to obtain? Basically, it is generally accepted that the Plan Administrator must provide the controlling plan documents. ERISA § 104(b)(4), 29 U.S.C. § 1024(b)(4) states, â??The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary [] plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.â??

In addition to the specific documents described in the ERISA statute itself, at ERISA § 104(b)(4), 29 U.S.C. § 1024(b)(4), such as the summary plan descriptions and other documents under which the plan is operated, the ERISA statute, at § 109(c), 29 U.S.C. § 1029(c) provides that the Secretary of Labor may also prescribe what other documents should be furnished. The Secretary of Laborâ??s ERISA claim procedures regulations, set out in 29 C.F.R. § 2560.503-1 (h)(2)(iii) describe what documents an administrator must provide. The regulations state that, in order to provide a full and fair review, the Plan must:

Provide that a claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by reference to paragraph (m)(8) of this section.

The Secretary explains at Paragraph (m)(8) what documents are relevant to the claim, and are thus required to be produced under ERISA:

A document, record, or other information shall be considered "relevant" to a claimant's claim if such document, record, or other information.

(i) Was relied upon in making the benefit determination;

(ii) Was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination;

(iii) Demonstrates compliance with the administrative processes and safeguards required pursuant to paragraph (b)(5) of this section in making the benefit determination; or

(iv) In the case of a group health plan or a plan providing disability benefits, constitutes a statement of policy or guidance with respect to the plan concerning the denied treatment option or benefit for the claimant's diagnosis, without regard to whether such advice or statement was relied upon in making the benefit determination.

Beware that in many cases, the employer, who is nominally the â??Plan Administratorâ?? may not have all the â??relevant documents.â?? Many times, the benefit provided is actually provided by an insurance company, and that insurance company acts as a â??claims fiduciary.â??

Therefore, under the ERISA regulations, the insurance company has an obligation to provide all the â??relevant documentsâ?? in its possession. Also, as an ERISA fiduciary, the insurance company has a fiduciary duty to fully answer any questions and to affirmatively give information that your client needs to pursue a claim.

However, In most circuits, including the Sixth Circuit, only the designated Plan Administrator is liable for a penalty under ERISA § 502(c). ERISA § 502(c)(1) provides that â??any administratorâ?? who â??fails or refuses to comply with a request for any information which such administrator is required by this title to furnish to a participant or beneficiaryâ?? shall be, in the courtâ??s discretion, liable to the participant or beneficiary in the amount up to $110 a day from the date of such failure or refusal.

Unfortunately, most circuits have read into ERISA an additional implied term that the language â??any administratorâ?? actually means only the Plan Administrator. For example,

It is well-settled in the Sixth Circuit that only plan administrators can be held liable for statutory penalties under 29 U.S.C. § 1132(c). Caffey v. UNUM Life Ins. Co., 302 F.3d 576, 584 (6th Cir.1989); Hiney Printing Co. v. Brantner, 243 F.3d 956, 960 (6th Cir.2001); VanderKlok v. Provident Life & Accident Ins. Co., 956 F.2d 610, 618 (6th Cir.1992). Furthermore, the Sixth Circuit has expressly held that "an insurance company, which is not a plan administrator cannot be held liable for statutory damages [under § 1132(c) ] for failure to comply with an information request." Caffey, 302 F.3d at 58 (citing VanderKlok, 956 F.2d at 618).

Addison v. Hartford Life and Accident Insurance, 32 Emp. Ben. Cas. 1640, 2003 WL 23413737 (E.D.Tenn. 2003) (unpublished).

In sum, attorneys should get in the habit of writing to the employer (attention â??Plan Administratorâ??) and to the insurance company, asking for any plan documents, including any insurance policies, summary plan descriptions or other documents describing what benefits an employee might be entitled to, and what the employee needs to do to apply for those benefits. If necessary, the attorney should follow up, in writing, to ensure the information is provided.

About the author:

Eric Buchanan represents disabled people and other policyholders across the United States in both ERISA and non-ERISA disputes, focusing primarily in the areas of disability, life and health insurance. He also represents disabled people before the Social Security Administration, having represented approximately 1200 people in Social Security hearings. In 2007 Eric Buchanan was certified as a specialist in Social Security Disability Law by the Tennessee Commission on Continuing Legal Education and Specialization. In 2008 he was selected by the National Board of Legal Specialty Certification to be an examiner for the National Board of Social Security Disability Certification exam.

Eric has represented approximately 1200 people in disability hearings before the Social Security Administration. He has also has represented hundreds of people in federal court law suits involving Social Security and ERISA disputes.

Eric Buchanan regularly chairs conferences and speaks to both national and local audiences on disability insurance, ERISA, insurance law, and Social Security disability. He has been the program chair and speaker for the 2008 AAJ Social Security Section National CLE in Las Vegas, has twice been program chair and speaker at the AAJ (formerly ATLA) Annual Conventionâ??s Disability Law program, has twice been program chair and a speaker for the Tennessee Bar Associationâ??s Disability law conference, has been program chair and speaker for several Tennessee Association for Justice CLEâ??s on Social Security disability and on ERISA litigation. Eric has also spoken eight times at the National Disability Law Conference held by NOSSCR. He has also spoken four times at the national AAJ conference. He has spoken twice at the American Conference Institute Disability Law Conference in Boston. He has also spoken numerous times at local and regional CLEâ??s on Social Security, disability, insurance, and subrogation.

Eric is the immediate past-chair (2007-2008 chair) of the AAJ Social Security Disability Section, past chair (2006-2007 chair) of the AAJ Health Care Finance and Disability Litigation Group, is a past President of the Chattanooga Trial Lawyers, and is past-chair (2005-2006 chair) of the Tennessee Bar Association Disability Law Section. He is a life-time member of the Tennessee Association for Justice (formerly TTLA), where he currently serves as a member of the executive committee member of the Board of Governors.

Eric graduated from the Washington and Lee University School of Law Magna Cum Laude in the top 10% of his class. While in Law school he was also inducted into the Order of the Coif and the Omicron Delta Kappa honorary leadership fraternity. Eric is also a graduate of the Virginia Military Institute, and served as an officer in the U.S. Navy from 1989 to 1994 where he served as a naval aviator (pilot), plane commander, and mission commander of P-3C Orion aircraft.