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ERISA Benefits Litigation: How the Special Chess Pieces Move

ERISA litigation is a universe with a body of quite unique rules. In most litigation, the plaintiff who files suit is allowed to send engage in “discovery” to gather the information needed to pursue their case. The plaintiff may send to the defendant written questions and requests for documents which the defendant must comply with or object to (but objections are narrow and discovery is broad). Ultimately the plaintiff who has obtained sufficient evidence will be allowed to present their case to a jury for decision.

ERISA litigation is different. ERISA is a federal law that preempts all state laws that would otherwise apply to employer benefit plans. It does not provide for any jury trials. The cases are heard only in Federal court. The plan “administrator” serves as a fiduciary with respect to the plan participants and must exercise the highest duty of good faith.

In the context of disability insurance plans offered as an employee benefit, typically the plan is an insurance policy that is administered by the insurance carrier. Consequently, although they are a fiduciary with the highest duty of good faith owed to plan participants, if they approve a claim the money comes from the insurance company’s own pockets. This amounts to a conflict of interest. Lawsuits are treated as an “appeal” from the insurance company’s decision based on the “administrative record” – information the Company had before it when it made the decision.

Historically courts have been reluctant to allow much written discovery by plaintiffs because those requests amount to an attempt to use information from outside of the administrative record. But where there is reason to believe that the conflict of interest has played a role in the decision process, courts sometime allow the plaintiff to conduct limited discovery into that conflict. But it is up to the plaintiff’s attorney to posture the case correctly to convince the Court to allow the discovery. And the treat of this discovery often leads insurance companies to get reasonable and come to the table for settlement discussions.

A good example of this process was a case decided in Oregon recently against Hartford Life. In Black v. Hartford Life Insurance Co., 2018 WL 3872113 (D. Oregon 2018), the plaintiff had been receiving Social Security Disability benefits and also on claim with the Hartford for years when it decided to review the claim again. Hartford reached out to a company called MES to obtain a review of plaintiff’s medical condition. Based on the results of that review, Hartford denied plaintiff’s disability claim going forward.

The plaintiff sued and sought production of the performance reviews of the employees involved in the underlying decision and financial information regarding Hartford’s relationship with MES, from whom it had obtain a review of the plaintiff’s medical records. Harford objected to this discovery. The Court ordered that Hartford produce this requested information. In doing so, the Court emphasized that Hartford’s had a history of unfair ERISA claims practices. It also noted Hartford’s business relationship with MES was long-standing and on-going, and may influence MES’s outcomes.

Likewise, the Court held that plaintiff was entitled to obtain information on the employees of Hartford, to ensure that they did not have any financial stake in the outcome.

ERISA litigation is a very unusual domain with unusual rules. Plaintiffs are well-advised to hire counsel who understand how the special chess pieces in this unusual game are allowed to move.