Why is it often far more costly to hire a “low-charge” law firm for your ERISA appeal?

There is an old adage in the legal industry: “There is nothing more expensive than hiring a bad lawyer.” Truer words were never spoken, especially in an area of law as specialized and complex as ERISA long-term disability claims.

It has come to our attention that some high-volume advertising law firms offer “low charge” ERISA appeals. We have seen the results of these endeavors, and they are generally not good. As demonstrated below, a poorly prepared appeal can easily cost you as much as 80% of the value of your claim, if not cause you to lose outright. Choosing a law firm to handle your ERISA appeal is the most important decision you will make in the life of your claim. And it is a situation where you get what you pay for. 

When an insurance company denies your ERISA disability claim, you have the obligation to file an administrative appeal. If you fail to make a timely appeal, your claim is dead forever. So, this process is not optional.

The ERISA administrative appeal is the most important phase of every claim. It is not the time to go bargain shopping. The most important determinant of the success of your claim is the quality and thoroughness of the appeal. 

It is important to understand, too, that the appeal is your last opportunity to produce evidence in support of your claim. In ERISA lawsuits (which usually follow denied appeal), the court is generally limited to reviewing whatever evidence exists in the insurance company claim file. In other words, you (and your lawyer) generally may not add any new evidence during the lawsuit. So, whatever evidence you present in your appeal will be what the judge sees—no more and no less.

For that reason, it is important to take a “kitchen sink” approach to your appeal. Any potentially helpful evidence must be included. A thorough ERISA appeal should include:

• all relevant medical records – all available medical testing (often including specialized testing which you have not yet undergone) to objectively verify and measure your condition and its impact on your physical and/or cognitive functioning.

• detailed testimony from all available treating physicians
• detailed written testimony from the claimant (you)
• written testimony from other corroborating witnesses who have witnessed your medical decline
• citations to relevant medical research 
• (possibly) retention of high-level experts, and 
• any other evidence that can be customized to your case
• A detailed appeal letter tying the evidence to the specific terms of your Plan, with citations to relevant cases and statutes. Our appeal letters almost always run twenty-plus pages, single spaced.

Hopefully, you can begin to appreciate that the preparation of an appeal is a labor intensive and specialized process. It is far more demanding than most laypeople realize without ever having gone through it. It requires specialized knowledge of medicine and the unique procedural rules that govern ERISA appeals. Insurers routinely violate their procedural obligations when handling appeals. An ERISA expert should know how to handle these violations to your advantage.

The bottom line is that it is  impossible to prepare an appeal thoroughly and cheaply. Unfortunately, we have seen the appeal work product of some “lower cost” law firms, and it is frequently lacking in the detail necessary to adequately prove the validity of a claim. In short, otherwise winnable claims are lost.

The good news is that a thoroughly and carefully constructed appeal vastly increases the chances that the insurance company will overturn its denial and voluntarily pay benefits. 

There are four important ways a poorly constructed appeal can (and probably will) damage the value of your claim: 

• First, it makes it much easier for the insurance company to deny the appeal, forcing you into litigation; 
• Second, the absence of crucial evidence will weaken your side of the case, because you cannot add evidence during litigation.
• Third, defense lawyers and insurance companies like to fight these weaker cases, and this impairs settlement values;
• Lastly, even “low cost appeal” law firms charge much higher contingency fees for litigating in federal court.

A poor evidentiary record on your side will greatly decrease your chances of success in litigation. The insurance defense attorneys will look at the weak evidentiary record and think, “we are likely to win this one.” For that reason, a poor appeal will also likely impair the insurer’s valuation of your case for settlement. 

Then there is another hidden cost of being forced into litigation by a poor appeal: most law firms, including those offering low cost appeals, charge 40% contingency fees for handling ERISA lawsuits in federal court. (That is a much higher percentage than even boutique specialty firms like Robinson Warncke charge for handling an appeal.) So what started out as “low cost,” ends up being very expensive in ways that are less than transparent to the uninitiated.

So here is an illustration of the potential dollar cost of a poor, “low cost” appeal:

Let’s imagine a disability claim where the total benefits in dispute are $100,000. Assume you retain a firm like Robinson Warncke to prepare an extremely thorough appeal for a 25% fee. 

Because the appeal is thorough, the insurer is far more likely to pay the claim, and your net recovery will be 75% of the total claim value, or $75,000.00. Our track record, having done this work for more than twenty-five years, speaks for itself.  We have a 95% success rate in successfully getting disputed claims paid on appeal.  

Now let’s assume you hire a “low cost” law firm that prepares a substandard appeal. The insurer stands by its denial, and you are forced into litigation. The vast majority of ERISA disability lawsuits end in lump sum settlements, and as previously mentioned, a weak appeal will affect how much an insurer is willing to pay to settle. They become far more likely to roll the dice on winning outright in court. In such a case, they might only be willing to offer 25% of the total claim value, instead of the much more generous offer you would have gotten if your appeal had been well-documented.

What are you left with, then, with a poor appeal that forces you into litigation? It leaves you paying a 40% contingency fee on a 25% settlement. Your net proceeds from this example will equate to $15,000.00 on a $100,000 claim. That is 15% of the total claim value, as opposed to the 75% net proceeds typically achieved by a thorough and successful appeal. 

This really does happen. And worse, a poorly documented appeal can also result in the insurance company winning the lawsuit outright, meaning you recover nothing.

The other factor to consider here is time. A successful appeal means you will receive your full benefit much sooner, usually in a matter of months. A poorly constructed appeal, forcing your claim into federal court, will take much longer to resolve. Oftentimes, the time frame to settlement can be one to two years (or even longer) from the time you receive your original claim denial. 

So, the bottom line is that the decision you make about which firm you hire to handle your appeal will likely have a massive impact on whether you recover benefits, but also how quickly and at what cost in terms of compromised case value and litigation attorney’s fees.

At Robinson Warncke, we want all our appeals to be successful. Unfortunately, no one, including us, can guarantee you that outcome. After all, insurance companies will do what insurance companies do. What we can guarantee is that we will leave no stone unturned to ensure that your side of your claim is proven with every possible piece of helpful evidence. And, again, we have a 95% success rate.

We urge you to take extreme care in choosing the law firm that handles your appeal. Cheaper fees can become costly in the long run.