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How Are ERISA-Covered Plans Different Than Standard Plans?

Fri Jun 29th, 2018 on     Disability Insurance,    

In 1974, the Employee Retirement Income Security Act (ERISA) was enacted, thus creating new standards governing private employee benefit plans — such as employer-sponsored disability, health, and welfare insurance, among other plans.  In Florida and elsewhere, ERISA does not require that employers purchase private insurance coverage for their employees, but it does impose a stricter set of rules on such plans so that employee-policyholders are protected from the potential abuses of plan administrators and others.

If you are a private employee in Florida, and you are a participant in an employee-sponsored benefits plan, then in all likelihood your plan is ERISA-covered.  This not only ensures that your plan will be governed by federal law (i.e., ERISA regulation), as opposed to Florida law, but also subjects you to various advantages and disadvantages when it comes to litigating claims against the insurer.

Consider the following.

Fiduciary Duties Give Rise to Legal Action

ERISA establishes a range of fiduciary duties and obligations, which gives policyholders new opportunities to sue and recover damages for fiduciary violations.  For example, suppose that you are a policyholder in an employer-sponsored welfare plan.  You later discover that the funds were mishandled by the fiduciaries (i.e., the plan administrator and their agents), and this will have a substantial impact on your later benefits.  You would be entitled under ERISA to sue the fiduciaries and secure damages as compensation for your various losses.

Florida Bad Faith Law is Preempted

Under state law, section 624.155 of the Florida Statutes establishes bad faith claims in the insurance context.  For example, if your insurer unreasonably delays the processing of your legitimate claim for benefits, then you may be entitled to bring a bad faith action against the insurer and recover significant damages.

Importantly, however, Florida state law (here, bad faith law) is preempted by federal ERISA regulation when it comes to ERISA-covered plans.  ERISA-covered plans do not grant policyholders broad opportunities to litigate bad faith claims.  Generally speaking, ERISA policyholders may not bring bad faith actions against their insurer for wrongful denial of a legitimate benefits claim.

De Novo Review of Decisions by the Plan Administrator

In federal circuit courts throughout the country, “de novo” review has become rather standard with regard to how courts evaluate denial of benefits decisions made by plan administrators in ERISA-covered plans.  Simply put, even if the ERISA-covered plan included language that gave discretionary authority to the plan administrator (when deciding whether to award benefits to the policyholder), the court must not defer to the decision of the plan administrator — they must consider the facts on a “de novo” basis (i.e., a blank slate).  This means that policyholders can more effectively challenge the decision of a plan administrator to deny benefits.  The courts will not automatically favor the decision of the plan administrator.

Schedule a Consultation With an Experienced Miami Insurance Coverage Lawyer for Assistance

If your insurance plan is employer-sponsored, then chances are that it is governed by federal ERISA regulation, as opposed to Florida state regulation.  Though there are some shared elements between the two types of insurance policies, there are still many significant differences in how ERISA mandates that covered plans be administered.

Ver Ploeg & Lumpkin, P.A. is a Miami-based insurance litigation firm with extensive experience representing policyholders in disputes concerning ERISA-covered plans.  Unlike many other insurance litigation firms, we understand that ERISA-covered plans demand unique consideration and a custom-tailored strategy.

Call (305) 577-3996 or submit an online form to speak with a skilled Miami insurance coverage lawyer today.

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