People Denied Long-Term Disability Benefits Need Make-Whole Remedies

The Employee Retirement Income Security Act of 1974 (ERISA) currently provides a person who has been improperly denied long-term disability benefits, remedies that include reinstatement to the LTD plan, payment of past due benefits, interest, and attorney fees.  ERISA remedies do not currently allow the disabled person to recover the additional damages suffered as a consequence of the benefit denial.  Such damages may include damage to credit rating, loss of a home, tax liability, loan interest, and other harms that result directly from the improper denial of disability benefits. 

Justice Ruth Bader Ginsburg has recently joined, “the rising judicial chorus urging that Congress and [this] Court revisit what is an unjust and increasingly tangled ERISA regime.”  Because the Court has had a cramped construction of the “equitable relief” allowable under ERISA, a “regulatory vacuum” exists.  A series of the Court’s decisions has yielded a host of situations in which persons adversely affected by ERISA-proscribed wrongdoing cannot gain make-whole relief.  There is a stark absence, in ERISA itself and in its legislative history, of any reference to an intention to authorize the recovery of extracontractual damages for consequential injuries.  Most recently, the Court ruled that, as ” ERISA, by its terms, only allows for equitable relief,” the provision excludes “the imposition of personal liability … for a contractual obligation to pay money.” 

As the array of lower court cases and opinions documents, fresh consideration of the availability of consequential damages under ERISA is plainly in order.   The “gaping wound” caused by the breadth of preemption and limited remedies under ERISA will not be healed until the Court “start[s] over” or Congress “wipe[s] the slate clean”)  The vital thing is that either Congress or the Court act quickly, because the current situation is plainly untenable.  “Congress … intended ERISA to replicate the core principles of trust remedy law, including the make-whole standard of relief.”   In the words of Justice Ginsburg, “I anticipate that Congress, or this Court, will one day so confirm.”

Alan Olson writes this web-log to provide helpful information regarding long-term disability cases. He practices long-term disability law throughout the United States from his offices in New Berlin, Wisconsin. Attorney Olson may be contacted at [email protected] with questions about the information posted here or for advice on specific disability benefit claims.

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