You may have heard some grumbling about the recent case of Amschwand v. Spherion Corp., 2007 U.S. App. LEXIS 24435 (5th Cir. 2007).  The facts of the case are as follows:

Thomas Amschwand was a participant in his employer’s ERISA benefits plan, which included life insurance benefits.  The employer switched insurers after Thomas Amschwand was diagnosed with cancer. The new policy would not cover an employee unless and until that employee had worked one full day (post plan swap).  According to the Amschwand’s attorney, they were never advised of the requirement.  Unfortunately, Mr. Amschwand died without ever having worked a day after the employer had changed insurers.

When Mrs. Amschwand filed for life insurance benefits, her claim was denied.  She appealed, under ERISA, to the Federal District Court.  That court, applying precedent that says plans can only be pursued for refunds of premiums - not payment of denied benefits - dismissed Mrs. Amschwand’s suit.  She appealed to the Fifth Circuit Court of Appeals, which upheld the lower court’s decision.  When Mrs. Amschwand appealed to the United States Supreme Court, the high court refused to hear the case.

ERISA is meant to protect both plan sponsors and plan participants.  In general, both are protected from the kinds of outrageous damages we read about in other lawsuits.  The issue many are having with stories like the one described above, however, is what they consider to be a double standard when it comes to the pursuit of relief in equity, in accordance with ERISA.

ERISA allows plan sponsors and administrators to enforce the terms of the Plan Document, (when pursuing reimbursement of claims paid, for instance, when the insured recovers funds from a responsible third party), even if it means taking every cent recovered by the insured.  While the Plan has a right to recover everything they pay - sometimes substantial amounts of money - Plan members are entitled only to their contributions, not the benefits they believe they are entitled to.

In a nutshell, the media, attorneys, politicians and the insureds see Plans recovering all of the money they are entitled to according to the Plan Document, but the Plan Participants cannot recover all of the money they would be entitled to if they were to receive benefits in accordance with the Plan Document.  

Because the interpretation of ERISA, and case precedent regarding that interpretation are clear, short of legislating from the bench, the Courts cannot change the application of ERISA in these cases.  As such, the only way to change the way these cases are handled would be through Congressional efforts.

Cites:

Brian S. King

http://www.erisa-claims.com/blog/

San Francisco Chronicle

Mark Sherman, Associated Press

Sunday, July 13, 2008

“U.S. law used as shield to limit benefits: Employers only have to give workers’ survivors a pittance”

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/07/13/MNEO11JJKK.DTL

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