70 The Alabama Lawyer 131 (2009). The Agency Argument - What ERISA Plaintiffs and Defendants Need to Know.

• Author: BY THOMAS O. SINCLAIR and JENIFER CHAMP WALLIS

The Alabama Lawyer

2009.

70 The Alabama Lawyer 131 (2009).

The Agency Argument - What ERISA Plaintiffs and Defendants Need to Know

The Agency Argument - What ERISA Plaintiffs and Defendants Need to KnowBY THOMAS O. SINCLAIR and JENIFER CHAMP WALLISThe Employee Retirement Income Security Act of 1974, commonly known as ERISA, governs most employer-provided employee welfare benefits. If an employer provides its employees with benefits such as group disability insurance, ERISA may govern legal disputes that arise concerning those benefits. In practical effect, ERISA (a federal statute) may preempt any state law claims an employee would otherwise have and subject those claims to the increasingly specialized area of ERISA litigation. This article is written for ERISA practitioners on both sides of the bar and for corporate counsel who are faced with ERISA questions arising in the administration of employee benefits.

Mrs. Smith worked more than 15 years for an employer she respected in a job she enjoyed. When Mrs. Smith was diagnosed with a potentially debilitating medical condition, she planned to obtain treatment and continue working. More than five surgeries later, Mrs. Smith and her attending physicians concluded she was simply no longer physically capable of working. Luckily for Mrs. Smith, one of the employee benefits provided by her employer was a group disability insurance plan, one which paid 60 percent of her pre-disability salary in monthly Long-Term Disability ("LTD") benefits upon a finding of total disability under the policy.

Mrs. Smith submitted a claim for disability benefits with ABC Insurance, the LTD insurance carrier, was approved for benefits and began receiving a monthly check for disability benefits. Mrs. Smith readjusted her life plan and set a new goal - meeting her daily needs on only 60 percent of her former salary. Within a few months, ABC Insurance offered to arrange for Mrs. Smith to be represented in a claim for Social Security Disability ("SSDI") benefits. ABC Insurance made clear that Mrs. Smith would not be responsible for obtaining representation in the SSDI claims process but rather that ABC Insurance itself would "help her" obtain representation. Mrs. Smith accepted the insurer's offer.

Mrs. Smith was then contacted by Government Benefit Advocates, an entity that represents individuals in claims for Social Security Disability benefits. One of the initial forms Government Benefit Advocates requested Mrs. Smith sign was one allowing Government Benefit Advocates to release information on the status of her SSDI claim to the LTD carrier, ABC Insurance. Mrs. Smith executed the form and provided Government Benefit Advocates with the contact information for all her attending physicians - contact information she had also provided ABC Insurance. Government Benefit Advocates contacted Mrs. Smith's attending physicians and obtained her medical records. Government Benefit Advocates also had consultants review Mrs. Smith's medical records and these consultants opined that Mrs. Smith was unable to perform the job duty requirements for any occupation in the national economy.

Government Benefit Advocates then submitted the medical records and reports outlining Mrs. Smith's inability to perform any occupation in the national economy to the Social Security Administration in support of Mrs. Smith's claim for Social Security Disability benefits. Government Benefit Advocates then represented to the Social Security Administration and to the administrative law judge at the hearing on Mrs. Smith's claim for Social Security Disability benefits that Mrs. Smith was unable to work in any occupation. Mrs. Smith was found to be "disabled" by the Social Security Administration and awarded Social Security disability benefits. Mrs. Smith then received a check for $50,000 in retroactive Social Security disability benefits, covering the same period of time she was receiving LTD benefits and also received notice that she would receive monthly Social Security Disability benefits in the future. Her future monthly benefit from Social Security was less than the monthly LTD benefits she was presently receiving from ABC Insurance.

Throughout her claim for Social Security Disability benefits, Government Benefit Advocates kept ABC Insurance updated on the progress of Mrs. Smith's Social Security Disability claim through emails and phone conversations. Government Benefit Advocates communicated regularly with Mrs. Smith's insurer, notifying ABC Insurance when medical records were requested and keeping ABC Insurance apprised of the status of Mrs. Smith's claim for Social Security Disability benefits. Upon the award of Mrs. Smith's Social Security Disability benefits, Government Benefit Advocates notified ABC Insurance of the award and provided ABC Insurance with a copy of the award letter from the Social Security Administration. Government Benefit Advocates then notified Mrs. Smith that she would be responsible for reimbursing ABC Insurance for the resulting "overpayment" of benefits(fn1) and that Government Benefit Advocates would coordinate repaying ABC Insurance.(fn2) Government Benefit Advocates later notified Mrs. Smith that the amount of "overpayment" was $50,000, the total amount of her retroactive Social Security Disability benefit payment, and that she was required to pay this amount to ABC Insurance.(fn3)

Mrs. Smith submitted the $50,000 check to Government Benefit Advocates who immediately turned over the funds to ABC Insurance. ABC Insurance paid Government Benefit Advocates for its services in representing Mrs. Smith in her claim for Social Security Disability benefits and recovering the "overpayment." Shortly thereafter, Mrs. Smith...