Unum Taking Advantage of a Federal Law

http://www.kantorlaw.net/News/Unum-Taking-Advantage-of-A-Federal-Law.aspx

At issue are cases such as that of Laurie Hindiyeh, who was forced to quite her job as controller of a real estate company because of an inner-ear ailment. For two years, the long-term disability coverage she had from Unum helped to offset her lost income. But then the checks stopped. Unum declared her fit for work, based in part on surveillance videotapes. It cut off her benefits about a year ago, she said…

Because she obtained coverage through her employer, her ability to contest Unum’s decision is sharply limited by the Employee Retirement Income Security Act. The 1974 federal law, according to subsequent Supreme Court rulings, exempts employee benefits, such as disability insurance, from state regulation. As a result, Hindiyeh and thousands of similarly insured Americans are not covered by state consumer protection laws and are not entitled to take most claim disputes before a jury…

In fact, the insurance companies often are the only arbitrators of such disputes. Only after the insurer has denied an appeal are policyholders permitted to go to court, where they may receive a hearing before a judge. At that point, policyholders who fall under ERISA are still not entitled to compensatory or punitive damages, even if they prove the insurer knowingly cheated them out of benefits. All they may recover is the amount of the benefits in dispute, and the burden of proof is high. For a policyholder to win, a judge must conclude not only that the insurance company made the wrong decision but that is also acted in an arbitrary and capricious way.

“As a practical matter, you have lost all of your rights, ” said Ray Bourhis, a San Francisco lawyer who represents Hindlyeh. “You can’t even call the California Insurance department and ask them to investigate because they have no jurisdiction. You have nothing, and, as a result, you have no leverage.”

Bourhis and other insurance lawyers say they believe Unum has exploited the ERISA shield in its handling of employer-provided long-term disability coverage. Bourhis cited the insurer’s own internal memos, which he obtained in previous lawsuits, describing the company’s plans to use the federal rules to reduce its payouts to policyholders…

Few lawyers accept ERISA-related disability matters because even if they win, the awards usually are so small that they do not cover the cost of preparing the case…