ERISA Implications For A Personal Accident Claim In The US

Managing a disability benefits dispute in the United States can be a challenging endeavor for claimants, employers, plan administrators and insurance providers alike. One area that all involved must consider is whether a claim for disability benefits will be controlled by the Employee Retirement Income Security Act of 1974 (ERISA).

What is ERISA and does it apply?

ERISA is a federal law which sets minimum standards for pension and health plans in the private sector and which provide benefits (including in some instances disability insurance) to individuals protected under those plans. ERISA regulates the benefits you receive through your private employer, such as disability insurance but does not apply to privately purchased, individual insurance policies or benefits. The main purpose of ERISA is to protect the interests of employees (and their beneficiaries) who are enrolled in "employee benefit plans," and to ensure that employees receive those benefits that have been promised to them by their employers. Therefore, as a general guide, group PA schemes purchased by employers for the benefit of their employees are likely to be covered by ERISA.

A threshold issue that often comes up in ERISA disputes is whether ERISA is implicated in the first place. These disputes concern what is commonly referred to as "ERISA preemption." If ERISA is implicated in a given case, state law claims will be "preempted", which in the insurance context will mean that the ERISA rules will govern the dispute between individuals and their insurers rather than general state law.

To ascertain whether ERISA applies, reference first should be made to 29 U.S. Code §1002, which defines an "employee welfare benefit plan" and a "welfare plan" as: "...any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer ... for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, ... benefits in the event of sickness, accident, disability, death or unemployment." There are also certain limitations set out in that section.

Care should be taken to consider whether a policy will be governed by ERISA because this law will impact how a dispute will be resolved. Whether a plan satisfies the criteria is an objective test and is not dependent upon certain labels or formalities, although the existence of these is obviously a good guide.

It should be noted that the provisions of ERISA...