The Supreme Court usually ends its term in June with the real blockbuster decisions (though the decision holding that corporations have free speech rights, issued in February, may prove to be the most significant).
Yesterday a unanimous court ruled that the Fourth Circuit was wrong in denying a disability claimant the right to recover attorney’s fees and costs.
I commented on this pending case here, Hardt v. Reliance Standard Life Ins. Co.
The Fourth Circuit denied attorney’s fees to the long-term disability claimant, on the theory that she did not show that she was a “prevailing party.” Her long-term disability carrier had denied benefits, she appealed internally, was denied repeatedly, and finally filed suit. The court found fault with the insurance company’s reasoning, which had ignored much of the available evidence, and ordered it to reconsider. If it failed to reconsider all of the evidence, the court warned that it would enter judgment in favor of the claimant. On reconsideration, the insurance company finally changed its decision and paid the plaintiff her disability benefits. Therefore the only further court proceedings involved the claimant’s attorney fee request, which the trial court granted, and the Fourth Circuit vacated.
The Supreme Court rejected the idea that the claimant had to qualify as a “prevailing party.” That usually means that a judgment is entered in favor of the person. The words of the statute did not require prevailing party status (although many others do). Instead, the Court borrowed from an early case interpreting the Environmental Protection Act (Ruckelshaus v. Sierra Club, 463 U. S. 680, 694 (1983)), and held that “a fees claimant must show ‘some degree of success on the merits’ before a court may award attorney’s fees under §1132(g)(1).” Justice Stevens disagreed with using a different law to guide the interpretation of ERISA, but agreed with the result.
This decision is important to employees who are so often rejected on their first claims for benefits under disability policies. Navigating the requirements for benefit claims can be a major undertaking. The decisionmakers, often the insurance companies that ultimately will pay the benefits, require medical records, interviews, questionnaires, medical tests, and often have short timelines for these requirements. Appeals at the administrative level must be handled with a lot of attention to detail, so that if necessary a federal court can be persuaded that the claimant has the bulk of the evidence on her side. Then, if the claimant is successful, the only damages that ERISA allows are the benefits themselves! The hardship of living without income, the burden of complying with all of the demands of the insurance company, the emotional toll – none of these can be elements of damage in court. But the attorney’s fees and litigation costs are available, IF the claimant “shows some degree of success” on the merits. The Supreme Court cut off an easy escape hatch for the insurance company. It was certain to lose in court if it persisted, and by relenting on the benefits it hoped to deny the claimant attorney’s fees. Her persistence paid off, at least by not costing her additional money for pursuing benefits for which her employer had paid premiums.