Teachers and Municipal Employees Disability Insurance Claims: It’s Not ERISA!

The experience of teachers and other municipal employees in Connecticut with long-term disability and short-term disability insurance policies is similar to employees from private employers: the plans are often identical to plans of private employers, and the claims are administered similarly, with a denial letter and opportunity to appeal.  Most insurers of municipal disability insurance plans follow the claims processing regulations that ERISA imposes on group disability policies offered by private employers.

While the process is similar, the reality is fundamentally different.  Employee benefits provided by governments for their employees, such as pensions, long-term disability and health insurance, are excluded from ERISA.  The most fundamental consequence of this is that any lawsuit to get long-term disability benefits from a municipal plan in Connecticut is brought in state court, not federal court, and is governed by contract and insurance law of the state.  There have not been many cases in Connecticut addressing claims of municipal employees for long-term disability benefits, so we can’t be sure whether state courts will apply ERISA concepts to non-ERISA plans.  But, there is certainly the strong possibility that many of the special rules that make ERISA cases difficult won’t apply to municipal employees’ claims for long-term disability benefits. 

• Non-ERISA claimants can get a jury trial, while juries are not available in ERISA cases.
• The deferential standard of review that is commonly applied in ERISA, upholding the plan decision if it is rational even if the court believes it is wrong, may not apply.
• The damages the claimant can recover may not be limited only to the benefit, and can possibly include emotional distress damages and consequential damages, and punitive damages under a bad faith denial  claim.
• At trial, the claimant may be able to present new evidence that was not presented during the administrative appeal process. 

Not having ERISA apply can put teachers and municipal employees in a better situation than claimants on ERISA group disability policies, depending on the facts of an individual case.  One thing to remember, though, is that you should choose an attorney to represent you, either in an internal appeal with the insurer or in court, who is experienced in state-court litigation.  The Connecticut state courts are quite different from federal court, or the Social Security Disability Income system, and you need an attorney who knows the written and unwritten rules of successfully litigating a case in state court.