When an Employee Sues Over a Health Plan, ERISA Sets the Rules.
ERISA lets participants sue over denied health benefits and fiduciary breaches. This guide covers who can sue, the appeal step, court review, remedies, fees and what employers can do.
Who Can Sue, And For What.
ERISA section 502(a), 29 U.S.C. 1132(a), lists who may bring a civil action and for what. For a health plan, three provisions do most of the work.
Section 502(a)(1)(B) lets a participant or beneficiary sue to recover benefits due under the terms of the plan, to enforce rights under those terms, or to clarify rights to future benefits. A denied claim for a medical service is the classic example. The question is what the plan says, not what would seem fair. ERISA defines a participant to include an employee or former employee of an employer, and a beneficiary as a person designated by a participant or by the plan’s terms (29 U.S.C. 1002(7) and (8)).
Section 502(a)(2) allows the Secretary of Labor, a participant, a beneficiary or a fiduciary to seek appropriate relief under ERISA section 409, 29 U.S.C. 1109. That section makes a fiduciary who breaches plan duties answerable to the plan for resulting losses. Section 502(a)(3) allows a participant, beneficiary or fiduciary to enjoin violations of ERISA or the plan’s terms and to seek other appropriate equitable relief. Individual claims of fiduciary misconduct often land here, as the Amara case below shows.
Federal district courts have exclusive jurisdiction over most ERISA civil actions, but a benefits claim under 502(a)(1)(B) can also be filed in a state court of competent jurisdiction (29 U.S.C. 1132(e)(1)).
Appeals Come First.
Every plan must give written notice, with the specific reasons, when it denies a claim, and must give the participant a reasonable opportunity for a full and fair review by the responsible fiduciary (29 U.S.C. 1133). The Department of Labor claims regulation adds detail. A group health plan must allow a claimant at least 180 days after a denial notice to file an appeal (29 CFR 2560.503-1(h)(3)(i)). Our ERISA claims procedure guide walks through the notices and timelines.
The same regulation says that if a plan fails to establish or follow compliant claims procedures, the claimant is deemed to have exhausted the plan’s administrative remedies (29 CFR 2560.503-1(l)(1)). In plain terms, a careless denial letter can shorten the road to court. We have not confirmed how every court applies exhaustion in other situations, so ask your attorney before relying on it.
Why Discretion Language Matters.
In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), the Supreme Court held that a denial of benefits challenged under section 502(a)(1)(B) is reviewed de novo unless the plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the plan’s terms. Where the plan does grant that authority, review is more deferential.
That makes the plan document a litigation document. If the documents are silent on who decides, a judge may decide the question fresh. If the plan clearly grants discretion to a named fiduciary and that fiduciary actually used it, the court’s role is narrower. An insurer’s certificate may carry its own language, so check which document governs and who the named fiduciary is. We cannot predict how a particular court will rule.
What A Court Can Order.
In CIGNA Corp. v. Amara, 563 U.S. 421 (2011), the Court held that section 502(a)(1)(B) enforces plan terms and did not authorize the district court to reform the plan, and it rejected the argument that summary plan descriptions are themselves plan terms. It also held that section 502(a)(3), which authorizes appropriate equitable relief, can reach remedies resembling reformation, estoppel and surcharge. Estoppel requires detrimental reliance, and surcharge requires actual harm and causation. Whether a given claim fits is a question for counsel.
A plan can also set its own deadline to sue. In Heimeshoff v. Hartford Life & Accident Insurance Co., 571 U.S. 99 (2013), the Court enforced a three-year plan provision that ran from the date proof of loss was due, even though that date came before internal review ended, unless the period is unreasonably short or a controlling statute says otherwise. Courts may still apply waiver, estoppel or equitable tolling in some cases. This page does not state a deadline, because the right period depends on the plan’s wording and the applicable law.
On fees, section 502(g)(1), 29 U.S.C. 1132(g)(1), says the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party. The award is discretionary and can run in either direction.
Why State Claims Often Fall Away.
ERISA supersedes state laws insofar as they relate to an employee benefit plan (29 U.S.C. 1144(a)). A savings clause preserves state laws that regulate insurance, and a deemer clause keeps a plan from being treated as an insurer under such laws (29 U.S.C. 1144(b)(2)(A) and (B)). How those clauses play out differs for insured and self-funded plans, which our ERISA preemption guide explains. We do not say here which state-law claims are displaced in a given case. That depends on the facts and the claim.
What Employers Can Do Now.
Name the decision maker. Say in the plan document who the named fiduciary is and whether that person has discretion to decide eligibility and interpret the plan. See ERISA fiduciary duties for health plans.
Keep the SPD and plan document consistent. Because Amara treats the summary plan description as separate from the plan terms, a mismatch between the two is a problem you can avoid. Start with the summary plan description guide and note that a handbook is not an SPD.
Run one claims procedure and follow it. Written notices, stated reasons and appeal windows should match the regulation every time.
Write down each decision. Record who decided, what they reviewed and why. This checklist shows what to keep.
Read the limitations clause. Know the plan and carrier deadlines before a dispute begins.
Route employee complaints to the right person. Plan fiduciary duties and employee complaints covers who should hear them.
We work alongside your attorney on documents and process. We are licensed insurance brokers, not a law firm. General information, not legal advice.
Related Guides On Plan Lawsuits.
ERISA Claims Procedure and Appeals
The notices, reasons and appeal windows a plan must provide before any lawsuit.
ERISA Preemption for Insured and Self-Funded Plans
How federal law displaces state law, and where insured plans differ.
The Summary Plan Description
What an SPD must do for participants and why it is not the plan itself.
ERISA Fiduciary Duties for Health Plans
Who the fiduciaries are and what the law asks of them.
Employee Benefits Lawsuits and Rulings
A roundup of recent cases that employers are watching.
Health Plan Fiduciary Lawsuits: What To Document
The records that help when a fiduciary decision is challenged.
ERISA Standing in Health Plan Lawsuits
Who has standing to bring a health plan claim and how defendants respond.
Plan Fiduciary Duties and Employee Complaints
Handling an employee complaint as a fiduciary matter.
Laws And Sources
29 U.S.C. 1132 (ERISA 502): Civil enforcement: who may sue, jurisdiction and attorney’s fees.
29 U.S.C. 1109 (ERISA 409): Liability for breach of fiduciary duty.
29 U.S.C. 1133 (ERISA 503): Claims procedure: written notice and full and fair review.
29 U.S.C. 1144 (ERISA 514): Preemption, savings and deemer clauses.
29 U.S.C. 1002 (ERISA 3): Definitions of participant and beneficiary.
29 CFR 2560.503-1: Department of Labor claims procedure regulation.
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989): Standard of review for benefit denials.
CIGNA Corp. v. Amara, 563 U.S. 421 (2011): Remedies under sections 502(a)(1)(B) and 502(a)(3).
Heimeshoff v. Hartford Life & Accident Insurance Co., 571 U.S. 99 (2013): Plan-based limitations periods.
General information, not legal advice.
Quick Answers.
Brief answers to what employers ask about ERISA benefit lawsuits, each linked to a fuller page.
Can an employee sue the plan over a denied claim?
Yes. Section 502(a)(1)(B) of ERISA lets a participant or beneficiary sue to recover benefits due under the plan’s terms, and the claim can be filed in federal or state court.
Does an employee have to appeal before filing suit?
The law requires plans to offer a full and fair review of a denial. If a plan does not follow the claims regulation, the claimant is deemed to have exhausted the plan’s remedies. Ask your attorney how your court treats exhaustion.
Why does the plan document need discretion language?
Under Firestone, a benefit denial is reviewed de novo unless the plan gives the fiduciary discretionary authority. Clear language and a named fiduciary shape how a court reviews the decision.
Can a plan shorten the time to sue?
Sometimes. In Heimeshoff the Supreme Court enforced a plan’s three-year limit running from proof of loss, unless the period is unreasonably short or a controlling statute says otherwise.
Do state-law claims survive ERISA?
Often not. ERISA supersedes state laws that relate to an employee benefit plan, with a savings clause for laws regulating insurance. The answer differs for insured and self-funded plans.
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