The United States Supreme Court has issued a ruling in CIGNA v. Amara on May 16, 2011 (Case No. 09-804, 2011 U.S. LEXIS 3540) that reverses nearly two decades of law which limited employees rights to take their employers to court under ERISA. The implications for long term disability claims when policies are an employee benefit are staggering.
Presently, an employee whose claim is denied is forced to go through a severely restrictive administrative process, where the insurance companies serve as judge and jury. The employee cannot bring a case in court until all administrative remedies have been exhausted – at which point many give up the battle, while others go on to fight their case in Federal Court.
It is an overly burdensome process, heavily weighted against the employee. However, the decision in Amara opens the door to allowing federal courts to hear disputes against a fiduciary (the employer or the insurance company) about the terms of an ERISA benefit – in this case, long term disability insurance policies.
In its simplest form, CIGNA wrote up summaries of changes to its employee pension plan that characterized the plans as being far more generous than they actually were. Employees brought a class action lawsuit demanding that CIGNA had a fiduciary responsibility to them to provide the better benefits as described in the summaries. At the district court level, the district court found that this was not a case of poor editing but a deliberate act to provide misleading information. Both the district court and U.S. Court of Appeals for the Second Circuit gave that relief to the employees. CIGNA appealed to the U.S. Supreme Court, and lost.
The case encompassed many complex issues but at its essence, the core issue revolves around the right of employees to bring a lawsuit against a fiduciary and obtain monetary compensation for damages.
In providing guidance to the District Court on remand, the Supreme Court in Amara significantly expands the power and substance of the remedies available under ERISA. The language of the decision affirms that where there is a violation of the terms of an ERISA plan or the requirements of the Act itself for which no remedy exists elsewhere in the Act, as in Amara, that equity will provide a remedy. This has enormous implications for the rights of employees whose long term disability insurance benefits have in the past been held to the very strict guidelines of ERISA.
We believe that Amara will have a significant impact on the rights of employee policyholders, but how lower courts follow this ruling will only become clear over the course of time. If you are not able to obtain disability insurance benefits and your claim is being denied or delayed, call our office to find out how this decision may impact your claim, and how we may help.
To read the actual decision, click here.