LTD and ERISA Lawyers: Riverside, Orange & San Bernardino Counties
Settlement and Mediation
ERISA long-term disability (LTD) cases settle about 95% of the time. In general, the place to "win" an ERISA LTD case is to settle it in mediation, and not in court at a bench trial. That's because a judge's decision is a zero-sum decision, where there is one winner and one loser. You and your client might win, but you might lose. The same, of course, is true for the other side.
A settlement results in two winners (albeit, after compromise), but no losers. Everyone goes home with something.
A settlement also means that there will be no appeal taken, and once a settlement has been reached, the parties are done and can go on with their lives.
Mediation facilitates settlement. Settlements are often reached during mediation, which is usually mandated by the court. The mediator facilitates settlement discussions by objectively pointing out the advantages and disadvantages of the respective positions of both parties.. He/she has no authority to force either the claimant or the insurance carrier to settle. A settlement is voluntary and requires cooperation from both the claimant and the insurer. The proceedings are not recorded or transcribed, and the parties engage in a back-and-forth negotiation as to the worth of the case. Mediation and settlements are confidential.
A mediation should not be adversarial. It is best conducted in a firm but friendly manner, with both sides laying out their cases and trying to negotiate a reasonable compromise that's acceptable to both sides.
A mediation brief is usually submitted in advance to the mediator by each side. Some attorneys like to share the mediation brief with the other side, and some don't. There are pros and cons and no right or wrong way of doing that.
Lump Sum Buyout
There are no punitive or compensatory damages in ERISA cases, and what a mediator attempts to do is to arrive at an acceptable buyout (lump sum payment) of the LTD insurance policy that the claimant and the insurer can live with. That lump sum buyout will typically be reduced by any applicable offsets, such as social security disability benefits, in accordance with the terms of the disability policy. And, the lump sum will usually be reduced to "present value."
It is useful to keep in mind that a disability insurer will usually not agree to pay the full value of a case. There is no financial incentive for it to do that because the money an insurer has reserved on your claim can be invested. Therefore, you, as a claimant, must give the insurer a reasonable financial incentive to buy back your policy in order to settle the claim.
Attorney fees are generally not provided as part of a settlement. However, at the court's discretion, attorney fees may be provided at trial.
In Wright v. Hanna Steel Corp., 270 F.3d 1336, 1344-45 (11th Cir. 2001), the court set forth factors that a trial court should consider when awarding attorney fees in an ERISA case. They include:
The degree of the opposing parties' culpability or bad faith.
The ability of the opposing parties to satisfy an award of attorney's fees.
Whether an award of attorney's fees against the opposing parties would deter other persons acting under similar circumstances.
Whether the parties requesting attorney's fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself.
The relative merits of the parties' positions.
In Oliver v. Coca-Cola Company and Broadspire Services, Inc., 506 F.3d 1316 (11th Cir. 2007), the court held that while the district court did not make a finding that the administrator acted in bad faith, it based its award of attorney fees under 29 U.S.C. § 1332(g)(1), in part, on the need "to deter fiduciary decision-making of the sort found in this case," a clear reference to the arbitrary and capricious decision-making in its claim denial.
In accordance with the above priniciples, a trial court has broad discretion to award attorney fees. The usual rule in the Ninth Circuit is that attorney fees are typically awarded to successful plaintiffs (claimants), but not to successful defendants (insurers).