After an employee has exhausted all appeals to the plan administrator or insurance company, the only remaining course of action is to file a lawsuit. Unfortunately, many courts return (remand) the case to the administrator or insurance company for further investigation, thereby precipitating additional delay. The 3rd US Circuit Court of Appeals recently pointed out the unfairness of this practice in the remedy phase of selected disability cases.

The federal case involved an airline pilot collecting disability payments under a long-term disability plan (policy) that provided coverage in the event the individual could not work in his/her “own occupation,” as distinguished from “any occupation.” The individual suffered a psychotic episode while on duty, was hospitalized, and started receivingbenefits. After six years, the airline said it intended to cut off further monthly benefits despite statements from the treating physician that the patient was still under treatment and, although asymptomatic for psychosis, was unable to handle the stress of flying because of an anxiety disorder.

As is common, the employer retained  outside doctors to review the patient’s records. These individuals are rarely impartial because of the money they make from selling their services.  Their report concluded the employee was “not really disabled” because he was not undergoing psychotherapy and was no longer taking medication. However, the court reasoned that termination made no sense since the employee’s condition had remained unchanged for years, during which time the company received identical information from the treating doctor and concluded that it supported a finding of disability.

The federal court held that the remedy for an” arbitrary and capricious” termination of benefits is a court-ordered reinstatement of benefits, retroactive to the day they were cut off, so as ”restore the status quo,” rather than a remand to the ERISA plan administrator for further processing causing additional delay.

This is a small victory for employees, but an important one.

While you do not need an attorney to file an administrative appeal, we recommend against proceeding on your own. There is a great deal more to filing an ERISA appeal than simply writing a letter stating that you are appealing the denial of benefits.

Under ERISA, your rights are controlled by plan documents provided by your own employer, which are not always consistent with information provided by the insurance company involved. In fact, insurers often provide misinformation in their correspondence with claimant’s in hopes that they will not contact attorneys familiar with this specialized area of law.

Ordinarily, employees must file an appeal with an insurance company or other claim administrator within 60 to 180 days after receiving a denial letter. Failure to do so bars an employee from later filing a court action.

Importantly, workers must prove their claim during the “administrative process” by providing documentation such as doctors opinions, medical literature, witness statements, expert reports and occupational information.

A lawyer can help individuals effectively complete the administrative process that is critical to success. This is truly a situation where “an ounce of prevention is worth a pound of cure.”

Richard M. Waugh, Ltd. launched the new website the first week of February 2011.  Check it out!  http://waughlaw.com/