US SUPREME COURT DECISION ON ATTORNEY FEES UNDER ERISA A WIN FOR CLAIMANTS
Tuesday, June 1st, 2010
If you have a long term disability insurance policy governed by ERISA, the United States Supreme Court has just handed down a decision in Hardt v. Reliance Standard that is very encouraging to policy owners and the attorneys who represent them.
The Supreme Court’s decision is a major victory for ERISA disability insurance claimants and a warning to insurance companies that it may actually cost them money – more than just the cost of the policy benefits – if they wrongly deny or delay claims and a policyholder chooses to fight back.
There are a lot of moving parts in this decision. The key issues are:
A) whether or not ERISA provides a district court with the discretion to award reasonable attorney’s fees only to the party who wins the decision and,
B) whether a party in a lawsuit governed by ERISA is entitled to attorneys fees if that party
1- persuades a district court that a violation of ERISA has taken place,
2 – wins a court-ordered decision that requires a benefit decision to be reviewed, and
3 – wins the benefits sought following the review.
The decision in Hardt v. Reliance Standard holds that a party that seeks to recover attorney’s fees is not required to be victorious in all parts of a lawsuit for a court to decide to award attorney fees.
Ms. Hardt had to stop working as a result of medical problems and filed a claim for disability insurance benefits under her employer’s long-term disability plan. When she exhausted the administrative remedies, Mrs. Hardt brought a lawsuit against Reliance, alleging that it had wrongfully denied her claim. The District Court found that the carrier had acted on incomplete medical information and that the denial was not based on substantial evidence. The Court also concluded that Reliance would get the chance to address the medical review, giving Reliance 30 days to consider the evidence and make a decision. Reliance reviewed the file and awarded Hardt benefits.
Hardt filed a motion to recover attorney’s fees. The District Court agreed with Hardt, and Reliance filed an appeal. The Fourth Circuit Federal Court disagreed, vacating the award, arguing that Hardt had failed to establish that she was a “prevailing party,” which is defined in a landmark case that a fee claimant is a “prevailing party” only if they have won an enforceable judgment or a court -ordered consent decree.
Common sense would dictate that someone who wins back their benefits from an insurance company has won the case, and that should be enough to be considered the “prevailing party,” but the letter of the law is very specific. The Federal Court decision was appealed to the United States Supreme Court, the highest court in the nation.
The US Supreme Court agreed that a person seeking attorney’s fees need not be a “prevailing party” in cases governed by ERISA. The term itself does not appear in one section of the legal statute that created ERISA, nor does anything else in the section indicate that only the “prevailing party” should be awarded legal fees. To the contrary, the statute expressly gives district courts the discretion to award either party attorneys fees. In direct contrast, another portion of the statute is very clear about awarding attorney fees in cases where there is an issue of employer contributions to multi-employer plans.
If you have any questions about Hardt v. Reliance Standard and what this decision may mean for your situation, call our office today. This is one battle you do not have to take on alone.