People generally come about their insurance coverage in one of two ways. Either they purchase the insurance themselves (known as first-party insurance), through an insurance broker or agent, or they have insurance through their employer. If the insurance is provided by an employer, then the insurance itself is covered by the Employee Retirement Income Security Act (ERISA). This is an important distinction, because claims covered by ERISA that are denied must first be appealed with the insurance company before a lawsuit is filed. Failure to appeal the denial can result in the lawsuit being thrown out of court.
Furthermore, that appeal must be filed within 180 days of the denial. Failure to appeal in a timely manner means that neither the appeal or the lawsuit can be filed. If the appeal is denied by the insurance company, then a lawsuit can be filed.
But even if a lawsuit is filed, the courts view ERISA-covered insurance differently than first-party insurance. For one thing, even in a lawsuit regarding ERISA-covered insurance, the judge will only examine the submitted paperwork and the patient’s file. There is no opportunity for the patient to testify. This means that all paperwork must be in order and clearly lay out the patient’s case. Second, even if the insured prevails, he or she will only be eligible to recover money that should have been paid out by the insurance claim, plus attorney’s fees. ERISA-covered insurance lawsuits are not eligible for punitive damages or pain and suffering claims.
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Or, in the case of the CalPERS lawsuit, a lawsuit can be filed when plaintiffs learn about alleged mismanagement or misleading marketing regarding an insurance plan. In the case of the CalPERS lawsuit, plaintiffs Elma Sanchez and Holly Wedding alleged policyholders were not warned that premiums were grossly underpriced or that in 2009, CalPERS had stopped enrolling people in its program.