If you are
entitled to disability, health, life insurance, pension, severance, or almost any other type of benefit because of your employment
or union membership, your rights to those benefits are governed by a federal statute entitled the Employee Retirement Income
Security Act of 1974 -- ERISA.
Many employers set up employee benefits plans that provide benefits to employees
in the form of disability insurance, life insurance, medical insurance, severance benefits and pensions. These employee
benefits are funded either through the purchase of insurance policies or through the establishment of trusts, paid for by
the employer or both the employer and the employee. If a trust is established and too much money is paid out in employee
benefits, the employer has to replace the missing money. Successful claims by employees diminish the trust's
money and, if there is an insurance company involved, cause a loss of profit to the insurance company.
This is where ERISA comes in. ERISA is perhaps the biggest con job affecting the American worker since the Great
Depression. ERISA, in the guise of protecting the worker's rights to benefits, replaced all state laws that effectively
did the job before 1974. Under the laws of most states, a wrongful denial of benefits can result in a jury verdict awarding
an employee the denied benefits, damages for emotional distress, and punitive damages. Under ERISA, there is no right
to a jury trial, and the most that an employee who has been wrongly denied benefits can receive are the benefits
that were denied. What has an insurance company or employee benefit trust got to lose from denying a claim? If
they are sued, the most they can lose is what they would have had to pay in the first place. Prior to ERISA, an
insurance company had to think long and hard before denying benefits because of the possibility of emotional distress
and punitive damages. Now, because of ERISA, a denial is a no brainer. There is nothing to lose!
As
if to further encourage the practice of denying employee benefit claims, ERISA says that, in most cases, the insurance company's
or employee benefit trust's decision to deny benefits will not be overturned, even if wrong, unless it can be shown to
be arbitrary and capricious.
