ERISA And Life Insurance

Haltom City life insurance attorneys who handle ERISA claims should already know this, but here goes anyway.
Insurance companies can make erroneous arguments with near impunity when it comes to life and accidental death policies provided by companies with ERISA plans. That is because of loopholes in the ERISA laws intended to protect worker benefits.
Under ERISA – the Employee Retirement Income Security Act, insurers can even win when they lose because they can keep and invest claims money while cases are pending.
In order to achieve ERISA’s goals, federal courts have ruled that employees must surrender their rights to jury trials and compensatory and punitive damages if they sue an insurance company for wrongfully denying coverage. Judges have reasoned that companies and insurance companies should have these protections to encourage them to continue to provide benefits.
ERISA puts these issues under federal jurisdiction, so state regulators usually can’t help consumers.
Too often, when a life insurance company denies benefits the survivors don’t have the stamina and knowledge to file a lawsuit. Often, survivors are dissuaded by insurance companies from taking grievances to state regulators or to court. The company tells the customer, “Oh, no, that’s not an unusual practice, so you don’t really have a complaint.”
The counter argument by the insurance company is that it is their obligation to policyholders and shareholders to challenge death claims they consider fraudulent. They say it is their job to protect the insurance pool by blocking undeserved payouts.
But, that doesn’t give them the right to wrongly deny claims. Insurance companies have a profound structural conflict of interest. The company benefits if it rejects a claim. The insurance companies like to take in premiums but they don’t like to pay out claims.
Spokesmen for large life insurers such as MetLife and Prudential will say that contested claims represent a small fraction of the overall number of claims paid. They will state that their claims professionals are trained to conduct an appropriate review and follow applicable laws, regulations and the terms of the policy.
Employer provided life insurance is a big business. Employers can offer either accidental death policies – which cover fatalities an insurer deems to be an accident – or term life insurance, or both. Group policies have a face value of $7.7 trillion, or 40 percent of all life insurance in the nation according to the American Council of Life Insurers data.
ERISA contracts bring the industry about $25 billion in annual revenue. MetLife says it has 20 percent of the ERISA market.