Most employee group long-term disability insurance plans are governed under the Employee Retirement Income Security Act of 1974, or ERISA, a set of federal laws that protect the rights of policyholders. Among other things, ERISA gives policyholders the right to appeal an insurance company’s decision to deny a claim for LTD benefits.
The law offices of Houston disability attorney M. Stanley Whitehead, have helped clients all over the U.S. who have had their ERISA LTD claims unfairly denied or delayed by an insurance company. One question we get a lot is about attorney fees. In particular, if they proceed with their appeal, are they responsible for paying attorney fees, or will the court award them attorney fees?
ERISA Allows the Court to Award Attorney’s Fees in Certain Circumstances
ERISA does not automatically provide for the award of attorney fees or any legal fees. However, there are certain conditions under which you may petition the court to have the insurance company pay for your legal costs.
ERISA §502(g)(1), 29 U.S.C. §1132(g)(1) states that “the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party.” The U.S. Supreme Court upheld this in the 2010 case of Hardt v. Reliance Standard Life Ins. Co., ruling that a court does indeed have the discretion to award attorney’s fee under ERISA as long as the party seeking fees has achieved “some degree of success on the merits” of their claim.
The Five-Factor Test
Under ERISA, the decision to award attorney fees and court costs to the claimant is left to the judge’s discretion.
The judge must agree that there is “some degree of success on the merits” of your case. How do they make this decision? The courts generally apply what is called a five-factor test in determining whether or not to award attorney’s fees. The five factors a district court is required to look at when considering awarding attorney fees are:
- To what degree did the insurance company act in bad faith? For instance, did the insurance company blatantly ignore the rules or did they just bend them a bit?
- Can they afford to pay? This is not usually an issue when the claimant wins. If the claimant is unsuccessful, this rule may help them if the judge decides to award attorney’s fees to the insurance company.
- Will the award act as a deterrent? The judge will consider if the award will deter the insurance company from engaging in further acts of bad faith.
- Are you willing to share your award with another plan? This only applies when filing a joint lawsuit.
- The merits of each party’s position. For instance, was the insurance company really justified in denying your claim?
Under ERISA, the decision to award attorney fees and court costs to the claimant is left to the judge’s discretion. The judge must agree that there is “some degree of success on the merits” of your case. The amount of attorney’s fees an insurance company must pay is also solely decided by the judge. In some instances, this results in the insurance company paying a lot less than what might normally be considered a “reasonable” amount for attorney fees.
Don’t Let the Worry of Big Legal Bills Prevent You From Exercising Your Rights in ERISA LTD Claims
Houston long term disability attorney M. Stanley Whitehead understands all too well the financial burdens a disability can impose. Don’t let the fear of expensive attorney fees prevent you from exercising your rights to appeal an insurance company’s decision to deny your claim for LTD benefits. We are able to handle many LTD benefits appeals on a contingency basis. This means there are no upfront fees for our representation; we are paid a percentage of the recovery only when and if we reach a successful outcome in a settlement or a judgment in court.