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Chances are if you have a long-term disability (LTD) insurance policy it falls under the Employee Retirement Income Security Act (ERISA) guidelines. If that is the case then know now that if you ever become disabled and file a LTD claim there is a chance you will be denied your benefits after a year or so and there is nothing you can do about it. The ERISA facts governing LTD claims is truly stranger than fiction

According to Ray Bourhis’ Insult to Injury in 1945 congress enacted the McCarran-Ferguson Act, which prevents the federal government from enacting any insurance consumer protection. Period! Out of the millions of pages of regulations and laws there is not one single word that regulates insurance practices.

Most states have enacted their own laws against unfair insurance practices that makes it illegal to:

  • engage in unreasonable delay
  • underpay, terminate, or deny valid claims
  • put their financial interests above those of their policyholders
  • conceal benefits from claimants
  • interpret policy ambiguities against insured
  • use their superior size or wealth to intimidate or undersetlle claims
  • force policyhoders to sue them in order to obtain benefits due

Insult to Injury goes on to explain that not a single state has an insurance department that has the authority to sue an insurance company on behalf of a cheated claiment. What most state’s department of insurance (DOI) do is investigate whether insurers are violating unfair practice laws and fine them. It is rare that a state fines an insurance company.

In 1974 congress enacted ERISA and orginally was designed to protect retirement benefits against mergers, acquisitions, and other corporate activities that might endanger a retirement plan. ERISA, when originally enacted, had nothing to do with state regulations.

In 1987 Justice Sandra Day O’Connor wrote an opinion regarding the case Pilot Life v. Dedeaux. As a result the legal rights to protect policy holders from fraudelent and bad-faith insurance practices by the states was all but eliminated. It is an ironic twist that the McCarran-Ferguson Act that prevented federal regulation of insurance companies was extended by a Supreme Court ruling.

Currently ERISA eliminates all state insurance protections on all policies purchased at work. Because ERISA provides no remedies for misrepresentation the consumers who acquire their LTD policy through work have no anti-fraud or bad-faith protections under federal or state laws. None!

On April 7, 2003, the Supreme Court of the United States handed down a decision on State Farm Mutual Automobile Insurance Company v. Campbell, which restricted the amount of punitive damages that a state court could award. Punitive damages, said the Court, had to have a “single digit” relationship with actual (compensatory) damages awarded. That is, if damages range from $200,000 to $300,000 the punitive damages would be limited to $2 million or so.

On February 18, 2005, President Bush signed into legislation a law that he had personally proposed. The law effectively banned all state court class actions and forced them to be filed in federal court. He said that it would protect Americans from “frivolous litigation.”

Learn more about LTD claims made under both ERISA and non-ERISA. Read Ray Bourhis’ Insult to Injury.

Comments on this entry are closed.

  • Kafie January 17, 2010, 11:36 am


  • Edwin R. September 11, 2011, 1:59 pm

    I purchased a group LTD plan from my employer HCA/Grand Strand Regional Medical Center with Prudential which I was led to believe that after a 5 month waiting period I would be paid half my salary. Truth is that waiting period doesnt begin until Prudential deems me disabled which by their guidelines is in 24 months. So, instead of 5 months from injury, it is 2.5 years from injury. I would still have to be making my monthly premium payments until I start receiving benefits even though I probably would not have a job and that half salary is reduced by other benefits like social security which if I didnt apply for I will be denied. Same thing UNUM was foung guilty of. What a scam!!!