One of the most unfortunate areas of the disability claims process to write about is the victimization of ERISA Plan participants by both the insurance industry and attorneys who refuse to represent them. The belief that every American is entitled to legal representation is a fallacy for working middle class Americans who are forced to rely upon employer-provided disability benefits. These are the people in our country who are firemen, teachers, nurses, secretaries, computer techs, and middle administrators caught in the cross fire of insurer abuse and payment of benefits so low attorneys walk away and leave them with out legal defenses to fight back.
This isn’t a new problem. During the Unum multi-state settlement nearly a decade ago documents were found illustrating Unum management’s recommendation to deny more ERISA claims because there were millions to be had. Insurers are aware that with the lack of legal representation, an ERISA denial is a sure thing with no future liability. While I fully recognize that there are good ERISA attorneys out there who DO take non-wealthy ERISA cases, by far most attorneys are still looking to put their children through Harvard with the value of a single ERISA claim.
From what I’m hearing today, attorneys are not likely to accept ERISA cases for claims paying under $4,000-$5,000 a month in benefits. If most ERISA policies pay 60% of pre-disability earnings then a $5,000 monthly benefit is payable to those earning in excess of $80,000 per year. This isn’t likely to be our secretaries, nurses, and firemen, but company executives receiving the maximum benefit sometimes as much as $10,000 per month. Most attorneys would fall over each other scrambling for ERISA cases with benefits in excess of $5,000 per month. Not so much, however, for the case of a single mom with Plan benefits of $800 per month.
I am well aware of the amount of work it takes to litigate ERISA cases. I’ve been an expert on many, and I’ve read requests for summary motions (from both sides); I get it, ERISA cases are a lot of work. But, if you do the math of prior and future fee arrangements, attorneys are paid quite handsomely for not much work. For example, let’s assume an example of a 40-year-old ERISA claimant with a monthly benefit of $1,200 per month. A typical fee structure might be 30% of all past recovered benefits and 40% of future benefits to age 65. This claimant could recover $57,000 owed in back benefits if the case is won. This doesn’t include, of course, court awarded attorney fees that counsel doesn’t have to give back to the claimant.
If the case is won and benefits are reinstated, the attorney would receive $17,100 from prior benefits. With 25 years left to age 65 the attorney would also receive a total of $144,000 from future benefits. In the future, the claimant will receive a reduced benefit of $720 because the attorney would receive $480 per month to age 65. In total, the attorney would be receiving $145,700 to manage the claim. Assuming the case was won and the claimant began to receive benefits again, most attorneys wouldn’t have to do anything on the claim except supervise future medical updates. Future benefit fee structures have the effect of reducing net benefits to claimants of between 35-45 per cent of pre-disability earnings.
So, why do attorneys walk away from ERISA cases again? Perhaps, it is because they don’t win. Let’s face it, Republican judge appointees are more likely to render decisions in favor of insurance companies, not claimants. The system is flawed with the end result of leaving a large segment of the population without financial support and legal defenses. This is why there are so many attorneys advertising and creating settlement mills. After all, insurance settlements can be as lucrative as litigation except there is much less work for a 6 figure settlement fee.
(Note: Prior and future benefit fee arrangements do not end if the attorney of record dies. Your fee agreement becomes the property of the attorney’s estate and your future benefits will be inherited by his family, partners or others as beneficiaries. Other than the partners if there are any, this means your claim probably won’t be managed, but you are still paying the fee.)
I know attorneys read this blog and garnish information from it. And, again I apologize in advance if you are one of the few who represent the ERISA folks fairly and reasonably. In fact, I’d like to know where you are so I can make referrals to you when appropriate. What I really do NOT like is to refer cases to attorneys when the first words out of their mouths are, “How much is your monthly benefit?’
Perhaps most attorneys are not aware of how egregious the ERISA disability process has become. Without ERISA case precedent and current citations slapping insurers hands for wrongdoing insurers have an open door to unfair claims practices and non-payment of legitimate claims. Insurers aren’t stupid – they know the chances of a poor ERISA claimant getting legal representation is next to impossible.
This is why I’ve often said on this blog that attorneys are part of the problem, not the solution to good faith and fair dealing. Put yourself in my position as a consultant for just a moment. I hear the crying secretary who tells me she spoke to four attorneys who told her they couldn’t afford to take her case.; I hear from people who tell me most attorneys advise them to “come back when the claim is denied” because there’s no money in it for them to be proactive and help manage the claim; and of course, there are the attorneys who sit on the claim for 180 days and do nothing so the claim can be litigated where the real money is.
From what I’m seeing, attorneys are still jumping all over themselves for the wealthy Individual Disability Income cases with benefits greater than $10,000 per month while RN’s and HIV claimants lose benefits ($1,000/mo) with nowhere to go legally. This is really a travesty resulting from ERISA. When one considers the reduction of benefits by SSDI and other offsets, and future possibility of termination of benefits, the working middle class has no one to see, and nowhere to go.
If you are an attorney and accept cases with benefits less than $4,000, I’d like to hear from you so that I refer cases to you. What I’m not going to do is refer DCS cases to attorneys looking for the “biggest bang for the buck.” ERISA claimants need to send a strong message to group insurers that they expect fair and equitable claim review. They can only do this through their attorneys.
In my opinion, attorneys in this country need to buck up and defend the one segment of society that can’t defend itself. The ERISA folks aren’t going to be wealthy, and no, you won’t get rich representing them, but you will have the satisfaction in knowing that you helped one family at a time beat the worst scam artists in the United States.
If you are an attorney and would like to receive referrals from DCS, please give me a call. I’d love to hear from you.