What Types of Damages Can a LTDI Lawsuit Possibly Win in Court?

If you have exhausted the administrative remedies under your group long-term disability insurance plan, your next step is to file a lawsuit in court. Most people who find themselves in this position want to know what damages they can recover if they win their case. In fact, this one of our clients’ most common questions.

The answer to this question depends on whether your claim is governed by state law or the federal law under Employee Retirement Income Security Act (ERISA). Generally, you can recover more damages if you claim is governed by state law than you can if your claim is governed by ERISA because ERISA limits the amount of damages recoverable in court. For that reason, it is important to know which set of laws governs your claim.

How to Tell If Your Claim Is Governed by State or Federal Law

Generally, ERISA governs your claim if you have an employer-issued policy. However, there are exceptions. State law will govern an employer-issued claim if you are a government employee (including a school district employee) or if you are covered by a “Church plan” (which is defined by 29 U.S.C. § 1002(33)(A)). State law will also govern your claim if you purchased your own individual long-term disability insurance policy.

Damages for an ERISA LTDI Claim

Because ERISA preempts state law, it overrides any conflicting state law that allows plaintiffs to recover compensatory or punitive damages. Instead, plaintiffs filing a claim for LTDI benefits under an ERISA policy are limited to recovering only the following types of damages:

  1. Past Due Benefits

ERISA allows plaintiffs to recover benefits that should have been paid to them under the terms of the plan (see 29 U.S.C. § 1132(a)(1)(B)). ERISA does not allow a plaintiff to recover prospective or future benefits. Instead, the court will send the claim back to the plan administrator to determine whether the plaintiff is eligible for such future LTDI benefits (this is known as “remanding” the case).

Example: Sandy files a claim for LTDI benefits after becoming disabled in 2017. Cigna denies her claim. After exhausting her administrative appeal process, Sandy proceeds to file a lawsuit in federal court. By the time the judge makes a ruling on her case, it’s already 2020. If the judge rules that Cigna wrongfully denied Sandy’s benefits, the judge will order Cigna to pay Sandy’s past due benefits through 2020. The judge cannot order Cigna to pay Sandy’s claim beyond 2020 and into the future. Instead, the judge and will order Cigna to re-review Sandy’s claim to determine if she is eligible for LTDI benefits beyond 2020.

Note: While the court can’t order a defendant to pay future LTDI benefits, the value of a plaintiff’s future LTDI benefits can be factored into settlement discussions. LTDI settlements typically entail the plaintiff’s agreement to waive their claim to past due and future LTDI benefits in exchange for the defendant’s agreement to pay plaintiff a lump sum amount.

  1. Prejudgment Interest

After winning their case in court, a plaintiff can ask the judge to award prejudgment interest. Prejudgment interest is additional money to account for the interest that the plaintiff’s benefits could have earned from the time they were entitled to receive those benefits. The court may, at its discretion, grant order a defendant to pay prejudgment interest but ERISA does not require it to do so. Regardless, many courts find awarding interest to the plaintiff is important to prevent the defendant from profiting off its wrongful denial of the plaintiff’s LTDI benefits.

  1. Attorney’s Fees and Costs

Under ERISA, the court has the discretion to award attorney’s fees and costs to the plaintiff (see 29 U.S.C. § 1132(g)(1)). This means, the defendant (the insurance company) must not only pay the plaintiff (the worker) their disability benefits, but also the attorney expenses.

To recover attorney’s fees and costs, a plaintiff must have received “some degree of success on the merits.” This includes instances in which a plaintiff is awarded past due benefits, and may also include instances in which the plaintiff is not awarded past due benefits, but their claim is remanded to the plan administrator. (Importantly, a court can also award attorney’s fees and costs to the defendant. However, this is very rare and typically only occurs if the plaintiff’s lawsuit was frivolous.)

Unfortunately, ERISA prohibits plaintiffs from recovering any other form of damages, including punitive damages and compensatory damages (such as damages for pain and suffering). If your LTDI plan is governed by ERISA, these types of damages are not available to you.

Damages for a State Law (“Non-ERISA”) LTDI Claim

Plaintiffs can recover a wider variety of damages if their LTDI claim is governed by state law. In addition to recovering past due benefits, prejudgment interest (which is calculated at the rate of 7.5% in Wisconsin (see Wis. Stat. § 628.46)), and attorney’s fees and costs, plaintiffs can also typically recover:

  1. Compensatory Damages

As its name suggests, compensatory damages are intended to compensate a plaintiff for any loss suffered as a result of the defendant’s unlawful conduct. These are damages above and beyond a plaintiff’s past due benefits, and may include both economic loss as well as non-economic damages such as pain and suffering and emotional distress.

  1. Punitive Damages

In addition to a plaintiff’s actual damages, the court may also award punitive damages. Unlike compensatory damages which are intended to repay a plaintiff for the losses they have suffered as a result of a defendant’s wrongdoing, punitive damages serve a different purpose. Punitive damages are intended to punish a defendant’s especially harmful behavior and deter such behavior in the future.

Wis. Stat. § 895.043 governs punitive damages in Wisconsin. In order to be awarded punitive damages in Wisconsin, a plaintiff must show that the defendant intentionally disregarded their rights or acted maliciously toward them. This is a high burden. Additionally, Wis. Stat. § 895.043(6) limits the amount of punitive damages a plaintiff may receive in LTDI cases to the greater of $200,000 or double the compensatory damages.

Consult an Attorney for More Specific Details

An attorney can not only help you determine whether your LTDI claim is a federal or state claim, but they can also provide a sense of what the specific possible outcomes of your case may be once they learn the context of your injury or illness. Because LTDI attorneys have brought many long term disability cases to court, they can draw on their extensive experience to evaluate a case, predict how it will fare and strengthen the case if needed through research, physician consultation, etc.

If you believe your LTDI benefits have been wrongfully denied, or if you would like to discuss your LTDI claim in general, please contact our office to speak with one of our experienced LTDI attorneys.

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Jessa Victor