Vol. 5, No. 5, Pg. 22. Recognizing an ERISA Claim.

• Author: By D. Michael Kelly and Daniel Mueller

South Carolina Lawyer

1994.

Vol. 5, No. 5, Pg. 22.

Recognizing an ERISA Claim

22Recognizing an ERISA ClaimBy D. Michael Kelly and Daniel MuellerThe Employee Retirement Income Security Act of 1974 (ERISA) , 29 U.S.C. §§ 1001 to 1461 (1988), is a comprehensive federal statute governing most employee pension and benefit plans, from the small office health plan to the retirement systems of multinational corporations. ERISA preempts virtually all state laws and has a broad reach that allows for few exemptions. By enacting such an expansive statute, Congress hoped to protect the retirement income and benefits of American workers from the sudden forfeiture that was all too common in the past.

Nonetheless, lawyers too often fail to consider whether a given plan is covered by ERISA. They file suit against an insurer for bad faith failure to pay an insurance claim, breach of contract or some other state law, only to find that their claim is preempted. At best, failure to recognize an ERISA claim will cause unnecessary delay for the client and embarrassment for the lawyer, and, in some instances, a lawyer may waive a claim or defense. See, e.g., Weiner v. Blue Cross & Blue Shield ofMaryland, 925 F.2d 81 (4th Cir. 1991).

The lawyer's ability to recognize an ERISA claim is crucial because the procedures and remedies under ERISA differ significantly from those available under state law. Only contract benefits, attorneys' fees and costs are recoverable in a suit for benefits under an ERISA plan. ERISA § 502(g)(1), 29 U.S.C. § 1131(g)(1). Most courts have rejected extracontractual damages of any kind in an ERISA action. See Massachusetts Mutual Life Ins. Co. v. Russel 473 U.S. 134 (1985) (Dicta imply that punitive damages would violate Congressional intent.). Contrast the recovery available under ERISA with the recovery available under common law bad faith. See, e.g., Weiner, 925 F. 2d 81.

ERISA requires that a participant or beneficiary of a covered plan exhaust all administrative remedies under the plan before filing suit. ERISA § 503(2), 29 U.S.C. § 1131. A lawyer who is unaware that ERISA applies may waste time and energy bringing a premature suit that will be thrown out pending completion of the administrative process.

Six Factors to Consider

Not every employee benefit plan constitutes an ERISA plan. ERISA governs benefit plans...