The Journal of The DuPage County Bar Association

Back Issues > Vol. 18 (2005-06)

Social Security Disability and ERISA Disability Claims
By James R. Comerford


Illinois practitioners encounter clients seeking disability benefits under two separate programs-Social Security and employer provided group disability plan governed by the Employee Retirement Income Security Act of 1974 ("ERISA").1 (Editor’s Note: This isn’t quite accurate. Many individual policies have a rider that pays enhanced benefits if social security is not awarded.) For those inexperienced with ERISA law, unforeseen hurdles may prevent counsel from effectively representing their client. The following discussion attempts to explain the procedures involved in ERISA claims and highlight common issues that will arise during the course of representation.

I. ERISA Plans and Their Effect on Recovery

ERISA covers all group disability benefits established by an employer for the benefit of its employees2. This includes both short-term and long term disability plans. Individual disability policies, government plans3 and church plans4 however, are not covered by ERISA and thus are entitled to state law remedies.

Unfortunately for claimants, ERISA’s specific remedies preempt state law claims, limiting participants to the specific remedies codified in the statute5. For example, participants bringing claims pursuant to ERISA plans are unable to recover punitive and extra contractual damages6. The ERISA statute allows participant’s to recover benefits7 or equitable relief.8 Obviously, these provisions favor the employer, limiting their outstanding liability.

However, prevailing claimants may be entitled to attorney fees9. The Seventh Circuit has adopted a five factor test for the propriety of a fee award. Noting that there is a modest presumption in favor of attorney fees,10 the Seventh Circuit has implemented a five factor test to determine whether fees are proper:

§ the degree of the offending parties’ culpability or bad faith

§ the degree of the offending parties’ ability to satisfy personally an award of attorneys fees

§ whether an award of attorney fees against offending parties would deter others acting under similar circumstances

§ the amount of benefit conferred on members of the pension plan as a whole

§ the relative merits of both parties positions.11

Although awards of attorney fees are generally available to both parties, the courts have held that Defendants are only entitled to fees where the Plaintiff’s claims were frivolous or brought in bad faith.12

II. Developing the Claimant’s Case Prior to Litigation.

Establishing a favorable administrative record is crucial to prevailing upon litigation. The Department of Labor established a detailed set of regulations regarding the internal, administrative claim process.13 The administrative appeal process begins following the issuance of a denial letter. The denial letter is required to provide specific reasons for the denial, including the medical evidence and plan language relied upon when reaching the decision.14 Additionally, a claimant is entitled to receive all of the information relied upon by the Plan Administrator and must be provided the identity of all physicians who reviewed/offered an opinion regarding the claimant’s disability upon request.15

Once a disability claim is denied, a claimant is afforded 180 days within which to appeal.16 Failure to appeal in a timely manner or failure to exhaust the appeals process may result in the claimant being precluded from bringing an action in Federal Court.17 Most importantly, claimants are generally not permitted to present new evidence after the appeals process has concluded. (See Section III, A.). Thus, presenting medical evidence and opinions during this stage in the process is absolutely essential.

III. Essential Issues in Litigation.

A. The Applicable Standard of Review

and Its Effect on Litigation.

After the appeals process has been exhausted, determining the applicable standard of review is critical in deciding whether to bring an action in Federal Court. In actions brought in the Seventh Circuit, the court applies either the de novo review or review under the arbitrary and capricious standard. The Supreme Court has determined that the de novo standard of review is the default standard applied to ERISA benefit claims litigation "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." 18 The Seventh Circuit has offered guidance in said area, offering "safe harbor" language that would confer discretion19. In the absence of the safe harbor language, the court has determined that if a plan administrator "is going to reserve a broad, unchanneled discretion to deny claims, the employees should be told about this, and told clearly."20 Language indicating that an applicant must submit proof "satisfactory to us" or "satisfactory to the insurer" is insufficient to confer discretion.21

When the de novo standard of review applies to a claim, the court will weigh the evidence and decide for itself whether the claimant is disabled. However, if the arbitrary and capricious standard applies, the court does not re-weigh the evidence but rather determines whether or not the decision was substantially justified. In Firestone Tire & Rubber Co. v. Bruch, issued in 1989, the Supreme Court found that the deferential standard of review should be modified where there is a conflict of interest infecting the plan administrator’s decision-making.22 The Court never explained what constitutes a conflict, however; nor did the Court explain how a conflict is factored into judicial review of a benefit denial. Although some Circuits consider an insurer’s dual role of benefits payor and claim administrator to be a conflict that affects how a court reviews the claim denial, 23 the Seventh Circuit has rejected that approach.24

Additionally, the insurance commissioner of Illinois has prohibited the use of discretionary clauses in ERISA claims.25 However, challenges to the Commissioner’s regulation and whether it survives the ERISA preemption clause have not been brought before the Seventh Circuit. Thus the status of discretionary language in policies issued in Illinois remains unclear.

The applicable standard of review also determines the scope of the court’s review. When a claim is decided under the arbitrary and capricious standard, the judicial review is limited to the evidence that was before the Plan Administrator.26 However, when reviewing a claim de novo, the court, in its discretion, may allow additional discovery.27 Factors for the court to consider when deciding to permit additional evidence include:

§ claims that require consideration of complex medical questions or issues regarding the credibility of medical experts;

§ the availability of very limited administrative review procedures with little or no evidentiary record;

§ the necessity of evidence regarding interpretation of the plan’s terms rather than specific historical facts;

§ instances where the payor and the administrator are the same entity and the court is concerned about impartiality;

§ claims which would have been insurance contracts prior to ERISA; and

§ circumstances in which there is additional evidence that the claimant could not have presented in the administrative process.28

The limited discovery permitted in ERISA cases has been met with much criticism amongst claimant’s attorneys and ERISA scholars.29 In any event, the limited discovery reinforces that a claimant’s representative take full advantage of the administrative appeals process to fully document the claimant’s disability.

B. Statute of Limitations

Unlike the Social Security regulations30, the ERISA statute does not set forth a time period in which claims under 502(a)(1)(B) must be brought in Federal Court. Lacking statutory guidance, the Seventh Circuit has applied the 10 year statute of limitations applicable to Illinois’ contract claims31. However, the Plan may contractually establish a shorter limitation period in the Plan document.32

C. Right to a Trial by Jury.

Although the Supreme Court has not addressed the issue, Circuit courts have generally prohibited jury trials in ERISA welfare benefit cases.33. Following the Supreme Court’s decision in Great-West Life & Annuity Ins. Co. v. Knudson34, several district courts and legal commentators have opined that benefit claims brought under ERISA should be afforded the right to a jury trial.35 Thus, whether a participant should be afforded the protections provided under the Seventh Amendment of the Constitution could be an issue raised in court.

III. Other Considerations

A. Impact of a favorable Social Security Determination

The impact a favorable Social Security decision has on the outcome of litigation varies. Some courts have found that it was unreasonable for an insurer to deny benefits once a claimant has received a favorable social security decision;36 others have determined that SSA determinations do necessarily need to be considered by the Plan.37 Nonetheless, the Seventh Circuit has recognized that Social Security concepts are "instructive" when deciding a claim for benefits38 and drawing corollaries between procedures utilized by Social Security to protect claimants and deficiencies in those employed by the Plan are often beneficial.

B. Standard for Disability.

Although insurance policies vary, many disability plans contain a two-tiered test for determining disability. Under such plan, during the first two years of alleged disability, a claimant is entitled to benefits if unable to perform the "material duties of his or her own occupation.39" After two years of disability, an individual is deemed disabled if they are unable to perform the material duties of any occupation. Said definition resembles the definition employed by the Social Security Administration, defining disability as an "inability to perform any substantial gainful activity…"40

It should be noted that disability under the "own occupation" standard of review has been interpreted differently depending on the circuit. Some courts have found an individual disabled even if the insured is unable to perform a single material job duty41 while other courts have ruled in the opposite manner - the insured is unable to collect benefits so long as he or she is capable of performing any single material job duty42.

C. Considerations When Presented With Conflicting Medical Opinions.

In Social Security evaluations, treating doctor opinions are given deference under the doctrine known as the "treating physician rule."43 The Supreme Court in Black & Decker v. Nord44 explicitly declined to extend the treating physician rule to ERISA disability cases. However, the Supreme Court was careful to note that it would be improper to disregard a treating doctor’s opinion altogether. Despite the rejection of the treating physician rule, the Seventh Circuit has recognized that treating physicians often possesses superior knowledge of a claimant’s condition.45 Moreover, the fact that insurer conducted a medical review of the claimant’s claim does not necessarily ensure its decision will be upheld even under an arbitrary and capricious standard of review. For example, courts have refused to credit the opinions of reviewing physicians where the reviewer did not have the requisite expertise in the claimant’s condition46, failed to consider all of the claimant’s impairments47 or was repeatedly retained by an insurer to render a benefit denial.48 Thus, undermining the propriety of a physician retained by the Plan is of almost equal import to bolstering the opinion provided by the claimant’s physician.

D. Claims Based on "Subjective Complaints"

A considerable point of contention in ERISA claims are claims based on "subjective" symptoms such as pain and fatigue. For example, claimants alleging disability due to Fibromyalgia and Chronic Fatigue Syndrome are unable to substantiate their claims of disabling pain and fatigue through MRI, EKG and EMG tests. However, the Seventh Circuit has recognized that subjective complaints such as pain cannot be measured through objective testing49. In such cases, establishing the claimant’s disability often focuses on whether the treating physician followed standard clinical procedures for diagnosing the claimant’s impairment50. Absent a fundamental disagreement regarding diagnosis or plan language requiring objective evidence, it may be unreasonable for a plan administrator to deny such a claim based solely on a lack of objective support.

E. Offsets to Disability Benefits.

Determining the net benefit payable to a claimant should be considered when deciding to accept an ERISA client. Many disability plans reduce the disability benefit payable when a claimant derives income from "other sources." "Other sources" of income can include Social Security benefits (payable to the claimant and/or the claimant’s dependents), workman’s compensation and pension benefits. What specifically may be deducted from the benefit amount should be documented in the Plan. However, the Plan may also be able to offset disability payments when the claimant signs a reimbursement agreement.51


If your client is a former employee of a company that provides employees with Short and Long Term Disability and has a claim for Social Security disability benefits, the road to a successful outcome in both areas requires a sophisticated knowledge of the time bombs and road blocks. Hopefully, this short article highlights some of the problems you might encounter.

1 29 U.S.C §1001 et. seq.

2 29 U.S.C. §1002(1)

3 29 U.S.C.§1003(32)

4 29 U.S.C. 1003(32)

5 29 U.S.C. §§ 1144(a) and 1132.

6 See e.g. Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985); Mertens v. Hewitt Assocs., 508 U.S. 248 (1993).

7 29 U.S.C. §1 132(a)(1)(B)("502(a)(1)(B)")

8 29 U.S.C. § 1132(a)(3). For a discussion of what constitutes "equitable relief" see Great-West Life & Annuity Ins. Co. v. Knudson

9 29 U.S.C. §1132(g) Hackett v. Xerox, 315 F.3d 771, 775 (7th Cir. 2003) (holding a failure to articulate reasons for rejecting the Plaintiff’s disability precluded a "full and fair" necessitating overturning the insurer’s decision.)

10 Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574 (7th Cir. 2000)

11 Bittner v. Sadoff & Rudoy Industries, 728 F.2d 820, 828 (7th Cir. 1984).

12 Marquardt v. North American Car Corp., 652 F.2d 715, 719 (7th Cir. 1981); Little v. Cox’s Supermarkets, 71 F.3d 637 (7th Cir. 1995).

13 29 C.F.R. §2560.503-1

14 29 C.F.R. §2560.503-1(g)

15 29 C.F.R. §2560.503-1(i)(3) and (h)(3)(iii)-(iv).

16 29 C.F.R. 2560.503-1(h)(3)(i)

17 See Smith v. Blue Cross & Blue Sheild United of Wis.¸959 F.2d 655, 658-59 (7th Cir. 1992); Gallegos v. Mt. Sinai Medical Center, 210 F.3d 803 (7th Cir. 2003)

18 Firestone Tire & Rubber v. Bruch, 489 U.S. 101, 115, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989)

19 Herzberger v. Standard Ins. Co., 205 F.3d 327, 331 (7th Cir. 2000) ("Benefits under this plan will be paid only if the plan administrator decides in his discretion that the plan applicant is entitled to them.").

20 Id.

21 Diaz v. Prudential Ins. Co. of Amer., 424 F.3d 635, 640 (7th Cir. 2005)

22 Firestone, 489 U.S. at 115 ("Of course, if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a "factor in determining whether there is an abuse of discretion.’" (quoting Restatement (Second) of Trusts 187, cmt. d (1959))).

23 See e.g. Wright v. R.R. Donnelly & Sons Co. Group Benefits Plan, 402 F.3d 67 (1st Cir. 2005); Pinto v. Reliance Standard Life Insur. Co., 214 F.3d 377, 388 (3rd Cir. 2000); United McGill Corp. v. Stinnerr, 154 F.3d 168 (4th Cir. 1998); Vega v. Nat’l Life Ins. Servs., 188 F.3d 287, 295 (5th Cir. 1999); Woo v. Deluxe Corp., 144 F.3d 1157, 1161 (8th Cir. 1998) Gatti v. Reliance Standard Life ins. Co., 415 F.3d 978 (9th Cir. 2005); Lee v. Blue Cross/Blue Sheild of Alabama, 10 F.3d 1547 (11th Cir. 1994);

24 See Mers v. Marriott Int’l Group Acc. Death & Dismemberment Plan, 144 F.3d 1014, 1020 (7th Cir. 1998).

25 29 Ill. Reg. 10172

26 Perlman v. Swiss Bank Corp., 195 F.3d 975 (7th Cir. 1999)

27 Casey v. Uddeholm Corp., 32 F.3d 1094, 1099 (7th Cir. 1994)

28 Quisenberry v. Life Ins. Co. of N. Am., 987 F.2d 1017 (4th Cir. 1993)

29 Mark D. DeBofsky, The Paradox of Misuse of Administrative Law 37 J. Marshall L. Rev. 727 (2004)

30 20 C.F.R. §404.982 (requiring that any action brought in Federal Court must be brought within sixty days of the Appeals Counsel’s decision affirming the administration’s adverse determination.)

31 See Daill v. Sheet Metal Workers’ Local 73 Pension Fund, 100 F.3d 62, 65 (7th Cir. 1996) (applying the 10 year statute of limitations found in 735 ILCS 5/13-206).

32 Doe v. Blue Cross & Blue Shield United of Wis., 112 F.3d 869, 875 (7th Cir. 1997)(finding that Plan provisions requiring a civil action be brought within 39 months was consistent with contract law and not unreasonable).

33 See Wardle v. Central States, Southeast & Southwest Areas Pension Fund, 627 F.2d 820 (7th Cir. 1980) (finding that claims brought under ERISA are equitable in nature); See accord Pane v. RCA Corp., 868 F.2d 631 (3rd Cir. 1989).

34 534 U.S. 204 (2004)(distinguishing between equitable and legal claims brought under ERISA).

35 See Bona v. Barasch, 2003 U.S. Dist. LEXIS 4186 (S.D.N.Y March 20, 2003)(holding that jury trials were permitted where participant’s claims sought money damages); accord Kirse v. McCullough, 2005 U.S. Dist. LEXIS 17023 (W.D. Mo. May 12, 2005);. See also Donald T. Bogan, ERISA: Re-thinking Firestone in light of Great-West-Implications for Standard of Review and the Right to a Jury Trial in Welfare Benefit Claims, 37 J. Marshall L. Rev. 629 (2004)

36 Ruder v. Commonwealth Edison Dis. Plan, 2000 U.S. Dist LEXIS 17161 *24-26 (N.D. Ill. 2000)(no rational basis for a disability insurer to deny benefits where claimant was found disabled by both the employer’s life insurance company and the Social Security Administration); LaBarge v. Life Ins. Co. of North America, 2001 U.S. Dist LEXIS 1033 at *8 (N.D.Ill. 2001)(holding that a favorable Social Security determination was "compelling evidence" of disability); Wise v. Hartford Life & Acc. Ins. Co., 360 F.Supp. 2d 1310 (N.D. Ga. 2005) (Insurer’s motion for summary judgment was denied as a favorable Social Security determination created a question fact as to the claimant’s disability.); Oliver v. Coca-Cola Co., 397 F.Supp. 2d 1318 (N.D. Ala. 2005)(holding that although dispositive, a favorable Social Security determination bolstered the claimant’s treating physician’s finding of disability.); See accord Pierce v. American Waterworks Co., Inc., 693 F.Supp. 996 (W.D. Pa. 1988).

37 See Madden v. ITT Long Term Disability Plan, 914 F.2d 1279 (9th Cir. 1990); Taft v. Equitable Life Assur. Soc., 9 F.3d 1469 (9th Cir. 1993); Donato v. Metropolitan Life Ins. Co., 19 F.3d 375 (7th Cir. 1994)(holding that a favorable Social Security decision is not in and of itself sufficient to overturn a denial of benefits.) ; Minix v. Liberty Life Ins. Co., 2005 U.S. Dist. LEXIS 15309 (N.D. Ind. July 22, 2005)(finding that a favorable Social Security decision is not binding and does not have to be considered by the plan administrator.)

38 Halpin v. W.W. Grainger, Inc., 962 F.2d 685 (7th Cir. 1992)

39 Seitz v. Metropolitan Life Ins. Co,—F.3d —, 2006 U.S. App. LEXIS 486 (8th Cir. Jan. 10, 2006)

40 42 U.S.C. §423 (d)(1)(A) (definition of disability under the Social Security Act)

41 See Seitz, supra fn. 9 at *10 (being able to perform some job duties or all material aspects of a job for a limited period of time is insufficient to deny benefits.); See also McFarland v. Gen. Am. Life Ins. Co., 149 F.3d 583, 588 (7th Cir. 1998) (holding that a participant is totally disabled where "an injury or sickness would not physically prevent an employee from performing any given task, but the injury instead renders the person unable to perform enough of the tasks or to perform for a long enough period to continue working at his regular occupation.").

42 Gallagher v. Reliance Standard Life Ins. Co., 305 F.3d 264 (4th Cir. 2002).

43 20 C.F.R. §404.1527(d)

44 538 U.S. 822 (2003)

45 Hawkins v. First Union, 326 F.3d 914, 917 (7th Cir. 2003)

46 Crespo v. Unum Life Ins. Co. of Amer., 294 F.Supp. 980 (N.D. Ill. 2003)

47 White v. Airline Pilots Ass’n, 364 F.Supp. 2d 747 (N.D. Ill. 2005)

48 See Nord, 538 U.S. at 833 (recognizing that consultants repeatedly hired by insurance companies may have an incentive to deny claims); Hangarter v. Provident Life and Accident Ins. Co., 373 F.3d 998 (9th Cir. 2004)(refusing to accept the opinion of a reviewing doctor who denied all previous claims referred.)

49 Hawkins, supra, fn 43.

50 Hawkins, supra fn 43. See also Gawrysh v. CNA Ins. Co., 8 F.Supp.2d 791 (N.D.Ill.1998); Vartanian v. Metropolitan Life Ins. Co., 2002 U.S. Dist. LEXIS 5495, *27, (N.D. Ill. 2002); Hyatt v. Sullivan, 899 F.2dd 329, 337 (4th Cir. 1990).

51 Anweiler v. Amer. Elec. Power Serv. Corp. 3 F.3d 986 (7th Cir. 1993

James R. Comerford is an attorney with Daley DeBofsky & Bryant.

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