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Aetna Denied Attorney Fees From Plan Participant in ERISA Case

Hand out asking for money with dollar sign in the air over the hand

Will the Insurance Company Make You Pay Them if They Beat You In Court?

Attorney Fees Available, but Rarely Awarded to Disability Insurers

Our clients often ask us if they will have to pay the disability insurance company’s attorney fees and costs if they file a lawsuit under their employer’s group disability plan, but the  insurance company wins.  Although ERISA, the federal law that governs employer group benefit plans, allows a group disability insurance company to make a claim for attorney fees and costs, it is extremely rare that an insurance company will win on a claim for attorney fees.  Nearly all of the reported court decisions end with the judge denying the insurance company’s motion for attorney fees.  Disability insurers do recover some of their costs, but that is seldom a very large amount of money.  A recent case out of Illinois illustrates what happens when Long Term Disability plan administrators, like Aetna Life Insurance Company, hold their hands out to try to get fees from individuals who lose ERISA disability lawsuits.

Aetna Seeks Fees in Illinois ERISA LTD Case

In Geiger v. Aetna Life Ins. Co., a federal judge in Illinois considered a case where Aetna Life Insurance Company tried to recovery over $40,000 in attorney fees from a person that filed a disability benefits lawsuit.  Unfortunately for Donna Geiger, the disabled claimant, the court did not find her disabled under the disability plan’s terms.  Though Aetna had paid Ms. Geiger for some time, it terminated her benefits as the insurer of Ms. Geiger’s employer group Long Term Disability plan.  She had a very significant back and neck condition, but Aetna obtained surveillance video of her doing various activities which caused it to question her disability.  Aetna sent the file out to two of its hired physicians, both whom stated that Ms. Geiger no longer had disabling limitations.  Ms. Geiger appealed, but Aetna denied the appeal.  Ultimately, the judge ruled in Aetna’s favor.  Ms. Geiger has appealed the ruling on her claim to the U.S. Court of Appeals for the Seventh Circuit, but the law required Aetna to file its attorney fee motion.  Instead of deferring a ruling on attorney fees, the court issued a decision.

General Rule – Fees Available When There is Some Degree of Success

The general rule in ERISA cases is that “as long as the fee claimant has achieved some degree of success on the merits,” a court’s discretion to award that claimant fees is “considerable.”  In the federal jurisdiction that oversees the federal courts in Illinois, there are 2 more specific tests for a court to determine if fees should be awarded.

Seventh Circuit Test #1 – Was the Other Party Substantially Justified?

In the U.S. Court of Appeals for the Seventh Circuit, there are two tests for whether a party should win attorney fees in an ERISA case.  Under the first test, the court must decide whether the position of the party against whom the fees are sought was “substantially justified.”  That means Ms. Geiger had to show that her position was “something more than non-frivolous, but something less than meritorious—and taken in good faith.”  Looking at the case through with this in mind, the judge held:

Given the deferential standard of review in ERISA denial-of-benefit cases in which the plan administrator has discretionary authority, [citation omitted], Geiger faced an uphill battle to prevail in her claim for benefits. She did not, however, enter this battle without ammunition. Multiple doctors diagnosed Geiger with conditions affecting her back and ankles, and those diagnoses were severe enough to require some surgery as well as pain medication. Even Dr. Gutierrez, who opined that Geiger could work, conceded that Geiger had “fairly significant necrosis and osteochondral pathology that would become very painful with prolonged standing and/or walking.” [citation omitted] Based on the existence of the medical evidence supporting Geiger’s claim, the Court cannot say that her position lacked a “solid basis.”

Geiger, 2016 WL 5391206 at *5. The court also noted that Geiger’s challenge to Aetna’s surveillance was reasonable.  The judge also recognized that Aetna had actually paid Geiger previously, then cut her off, but had reinstated her before finally terminating benefits.

In short, although the Court concluded in its thirty-seven-page opinion that Geiger’s arguments did not ultimately justify overturning Aetna’s discretionary denial-of-benefits determination, her litigation position was not so lacking in merit as to justify awarding fees to Aetna. As Aetna points, the Court rejected Geiger’s arguments in its summary judgment opinion. [citation omitted]  That the Court disagreed with Geiger’s contentions—which were occasionally accompanied by the sort of puffery typical of litigants both unsuccessful and triumphant—however, does not mean that her position lacked substantial justification when viewing the litigation as a whole.

Geiger, 2016 WL 5391206 at *6.

Seventh Circuit Test #2 – 5 Factors – More Detailed

The second test involves more factors,  and the court must asses:

  1. the degree of the offending parties’ culpability or bad faith;
  2. the degree of the ability of the offending parties to satisfy personally an award of attorney’s fees;
  3. whether or not an award of attorney’s fees against the offending parties would deter other persons acting under similar circumstances;
  4. the amount of benefit conferred on members of the plan as a whole; and
  5. the relative merits of the parties’ positions.

This second test is widely used by court in ERISA cases all over the country.

In this case, the judge found that only the 5th factor weighed in Aetna’s favor, and that was only because it ultimately won the case.  The judge had found that Geiger’s position was substantially justified, and stated, “Furthermore, the fact that Geiger is an individual plaintiff suing a large insurance company for disability benefits lessens her level of “culpability.”

As for factors 2, 3, and 3, the judge found them at best “neutral” for Aetna.  In fact, the judge almost ignored the 4th factor, since the result in Geiger’s case had little impact on the plan as a whole.  On balance, the judge clearly found the 5 factors did not support awarding attorney fees to Aetna either.

Aetna Only Won $17.50 in Court Costs

In the end, the court awarded Aetna a total of $17.50 to reimburse it for some court costs.  It did this under a Federal Rule of Civil Procedure that gives a District Judge discretion to award case related costs.

Takeaway:  LTD Insurance Companies That Seek Fees Likely to Lose Unless Than Can Show Claimant Was Frivolous or Trying to Harass the LTD Insurer

An ERISA disability plan claimant that has a reasonable claim will likely not have to pay attorney fees if they sue the plan’s LTD insurer.  This can never be a guarantee, but unless the disabled employee brings a frivolous case, the law does not favor imposing a large attorney fee award against them.

THE CASE:  Geiger v. Aetna Life Insurance Company, No. 15-CV-3791, 2016 WL 5391206 (N.D. Ill. Sept. 27, 2016).


Are you fighting Aetna or another insurer on a group Long Term Disabilty claim?  Call us to talk with one of our experienced ERISA Disability Attorneys from anywhere in the U.S.A. at (866) 282-5260.

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