ERISA Vs Individual Disability Policies
When your health takes an unexpected turn, and you need disability benefits, the type of policy you have matters more than you might think. ERISA plans and individual disability policies operate under completely different rules, and knowing which one you have can determine your rights, your appeal options, and even whether you can sue in court.
Our friends at The Law Office of Bennett M. Cohen work with clients facing both types of claims on a regular basis. If you’re dealing with a denied claim under an employer-sponsored plan, speaking with an ERISA disability lawyer can help you understand what comes next.
What An ERISA Disability Policy Is
ERISA stands for the Employee Retirement Income Security Act, a federal law passed in 1974. If you get disability insurance through your employer, chances are high that ERISA governs your policy. These plans are typically offered as part of a benefits package and are often fully or partially paid by the employer. ERISA was designed to protect employees by setting minimum standards for retirement and health plans. But when it comes to disability insurance, the law actually limits your options if your claim gets denied.
What An Individual Disability Policy Is
An individual disability insurance policy is one you purchase on your own, outside of any employment relationship. You pay the premiums directly to the insurance company, and the terms are outlined in a contract between you and the insurer. Because these policies are governed by state law rather than federal law, you have different rights and remedies if the insurance company denies your claim or acts in bad faith.
Key Differences Between ERISA and Individual Policies
Legal Framework
ERISA plans fall under federal jurisdiction, which means federal courts handle disputes. Individual policies are subject to state insurance laws, and you can typically file lawsuits in state court.
Appeal Process
With ERISA plans, you must exhaust an internal administrative appeal process before you can take any legal action. This process is mandatory and can take months. Individual policies also require appeals, but the timelines and procedures are set by state regulations.
Right to Jury Trial
One of the biggest differences is your right to a trial. ERISA cases are decided by judges, not juries. You cannot demand a jury trial under ERISA, no matter how unfair the denial seems. Individual policy disputes can go before a jury in most states, which often works in favor of the policyholder.
Damages Available
If you win an ERISA case, you can typically only recover the benefits you were owed. You cannot get punitive damages, compensatory damages for emotional distress, or attorney fees in most situations.
With individual policies governed by state law, you may be able to recover:
- The full value of your benefits
- Damages for emotional distress
- Punitive damages if the insurer acted in bad faith
- Attorney fees and court costs
Evidence Standards
ERISA courts generally review claims based only on the administrative record created during your appeal. You cannot introduce new evidence or testimony during litigation. Individual policy lawsuits allow for discovery, depositions, and the presentation of new evidence in court.
What Type of Policy You Have
Look at where your policy came from. If you signed up through your employer’s benefits enrollment and premiums are deducted from your paycheck, you likely have an ERISA plan. If you purchased the policy directly from an insurance agent or broker and pay premiums from your personal account, it’s probably an individual policy. Check your policy documents. ERISA plans must include specific language about your rights under federal law, including information about filing appeals and accessing plan documents.
What This Means for Your Claim
The type of policy you have changes everything about how you should approach a denied claim. ERISA claims require careful attention to strict deadlines and procedures during the administrative appeal. Missing a deadline or failing to submit the right documentation can eliminate your chances of overturning a denial. Individual policy claims give you more flexibility and stronger legal remedies, but you still need to follow the appeal process outlined in your contract. Understanding which type of disability policy you have is the first step in protecting your rights. If your claim has been denied or you’re not sure how to proceed, getting legal guidance can make all the difference in securing the benefits you deserve.
