The United States Supreme Court issued another ruling on Thursday, June 19, 2008. In this ruling, the Court ruled in favor of consumers. Wow! A ruling for employees AND a ruling for consumers over insurance companies by a Court which has shown a conservative and big business slant in the past.
What was this ruling about? According to the Birmingham News, an Ohio woman sued MetLife, Inc. for denying her disability claim. The Court ruled in favor of the woman 6 to 3 holding that “federal law imposes a special standard of care on insurers requiring full and fair review of claim denials.” They ordered her benefits reinstated.
Many people do not understand that almost all employee benefits obtained through an employer are governed by the Employee Retirement Income and Security Act (ERISA). Once your claims fall under that umbrella, you are limited in what you can claim. For example, ERISA preempts many state law claims such as fraud and negligence. Furthermore, you can not have a jury hear your case in an ERISA claim, and you cannot recover damages for pain and suffering or punitive damages. Consequently, insurers under these policies have an incentive to deny claims because all they can lose are what they would have owed the insured had they approved the claim and possibly the insured’s attorney fees.
What is a company’s incentive to do the right thing when they have nothing to lose by denying the claim? There is none. They should have called it the Employer’s Retirement Income and Security Act or the Insurer’s Retirement Income and Security Act because it sure doesn’t benefit the employees.