ERISA Disability Causes of Action

There is an elaborate scheme set out in § 1132 of the ERISA statute for enforcing rights under the statute through civil actions. With respect to participants and beneficiaries seeking civil enforcement of ERISA disability benefits, the most important remedy is set out at section 1132 (a)(1)(B), which empowers a participant or beneficiary to bring a civil action “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” In most civil actions brought by ERISA disability benefit claimants, what the claimant wants is to recover benefits due under the plan. The participant has become disabled and has applied for disability benefits. The administrator has denied the claim and has denied as well any and all appeals allowed under the plan. The participant has no other recourse but to accept the decision or to bring a civil action in federal court under § 1132 asking a judge to overturn the administrator’s denial and award benefits.

The other typical cause of action relied upon by a participant is set out at § 1132(a)(3)(B). That part of the statute provides that a civil action may be brought –

(3) by a participant, beneficiary, or fiduciary

(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or

(B) to obtain other appropriate equitable relief

(i) to redress such violations or

(ii) to enforce any provisions of this subchapter or the terms of the plan[.]

The Supreme Court has interpreted § 1132(a)(3)(B) to allow civil actions of the kind that were permissible in courts of equity, which have been defunct for almost a century. The equitable remedies the Court apparently has in mind are, for example, actions to reform the terms of the plan to comply with other plan documents relied upon by participants to their detriment. Other examples might be actions seeking an injunction, which is an old equitable remedy, or seeking restitution, also an equitable form of relief in equity.

The decisions by the Court to interpret § 1132(a)(3)(B) as reading into ERISA the entire body of law from the old and defunct courts of equity is not, shall we say, a tidy solution for anyone. But for a lay person, the most important point is that “appropriate equitable relief” decidedly does NOT mean that a court has the power to enforce a decision that it sees as fair, where the plan documents clearly dictate a different outcome, however unfair it may appear to the court.

A participant or beneficiary may also bring an action for an administrator’s refusal to provide requested information or its failure to provide an annual report in complete form. Those actions are set out at § 1132(c)(1)(B), and provide that any administrator “who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish to a participant or beneficiary” within 30 days after such request may be liable in the amount of up to $100 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper.

Each violation under this section is treated as a separate violation, so for example the failure to provide a copy of the summary plan description and the failure to provide a copy of the claim file pursuant to the ERISA regulations would be considered two separate violations. If a claimant brings a civil action for violations of this section, it almost invariably accompanies an action under § 1132(a)(1)(B). It is also worth keeping in mind that courts tend to sharply reduce the fine for disclosure violations to some amount designed to keep in place the disincentive for the administrator to stonewall while not providing a windfall for a claimant. This is especially true in cases in which the claimant loses the § 1132(c)(1)(B) claim.

The provision that a court may impose “other relief” that it deems appropriate is an invitation for claimants to be creative in leveraging disclosure failures to strengthen their claims under § 1132(c)(1)(B). In addition to making the administrator appear obstinate and unreasonable, it would be a good strategy to have a theory for what advantage the administrator sought by keeping information from the claimant, and ask the court to read into or out of the record the information at issue in a way favorable to the claimant with respect to the § 1132(c)(1)(B) claim.

Finally, ERISA § 1132(g)(1) empowers courts in their discretion to award “a reasonable attorney’s fee and costs of action to either party.” The typical “American rule” regarding attorney fees is that each party pays its own legal costs, which makes § 1132(g)(1) a departure from the customary approach to attorney fees in litigation. Moreover, where the law does provide for attorney fee shifting, the party requesting an award of an attorney’s fee typically must be a “prevailing party.” However, the Supreme Court has ruled that for an award of an attorney fee under § 1132(g)(1), a party need only show “some degree of success on the merits.” See Hardt v. Standard Life Ins. Co., 130 S.Ct. 2149 (2010). As one would expect, this allowance of an award of an attorney’s fee can greatly impact the value of a civil action to recover long term disability benefits under an ERISA disability plan, especially so since attorneys need only show some degree of success on the merits to recover their fees. In a statutory scheme that otherwise tilts the playing field decidedly in favor of plan sponsors and administrators, § 1132(g)(1) and its interpretation is one section that favors plan participants.