If your disability insurance claim has been denied or your benefits have been cut off, one of the most important questions is what kind of policy you have. In California, disability claims generally fall into two categories: claims under an employee-sponsored group disability plan, which are usually governed by a federal law called ERISA, and claims under an individual disability insurance policy, which are governed by California state law. The difference between these two types of claims can dramatically affect your rights, your chances of success, and the power an insurance company has over your case.
Certain states, like California, have laws that provide important protections, which can level the playing field—especially in certain ERISA cases—but these protections only apply if your claim is handled correctly from the start.
Group Disability Plans Governed by ERISA
Most disability benefits provided through private employers are part of a group disability plan governed by the Employee Retirement Income Security Act of 1974, commonly known as ERISA. ERISA establishes strict rules for how claims must be handled and how disputes are resolved. Although ERISA was intended to protect employees, it often makes it more difficult to win disability claims.
Under ERISA, disability disputes are decided by a federal district court judge instead of a jury. The court’s review is typically limited to what is called the “administrative record.” The administrative record is the complete paper file that the insurance company created while deciding the claim, including all the evidence the claimant submitted and the documents the insurer generated and relied on to deny or terminate benefits. In an ERISA disability case, the administrative record is the only evidence the court typically sees, which is why it’s so important to submit all supporting evidence during the claim and appeal process.
This means that if important medical records, doctor’s opinions, or vocational evidence are not provided at the appropriate time, they may never be considered later. ERISA also restricts what a claimant can recover. Even if the insurance company acts unreasonably, ERISA generally only allows recovery of unpaid benefits and possibly attorney’s fees, not compensation for emotional distress or bad-faith conduct.
How California Law Levels the Playing Field in ERISA Disability Claims
For many years, ERISA claims were even more difficult because disability policies often gave insurance companies “discretionary authority” to decide whether someone qualified for benefits. When this language was included in a policy, courts were required to give deference to the insurer’s decision, making it far easier for insurance companies to deny claims.
California changed that with the enactment of Insurance Code § 10110.6, effective January 1, 2012. This section of the code makes discretionary authority clauses illegal in disability and life insurance policies issued or renewed in California. When this law applies, courts must review the claim de novo, meaning the court examines the evidence independently without giving deference to the insurance company’s decision.
This protection can be a game-changer for employees in California, or any other state that has a ban on discretionary authority. Without discretionary authority, insurers must justify their decisions based on the evidence rather than relying on judicial deference. Federal courts in California have repeatedly enforced this law in ERISA cases involving California-issued policies. See, e.g., Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan, 856 F.3d 686 (9th Cir. 2017).
However, not every ERISA claim automatically benefits from §10110.6. Whether the law applies depends on where the policy was issued or renewed and how the plan is structured. Identifying and asserting this protection early can make a decisive difference.
Individual Disability Insurance Policies Under California State Law
Individual disability insurance policies are governed entirely by state law and provide even stronger protections for policyholders. These policies are purchased directly by the insured and are not subject to ERISA’s restrictions.
In California, courts interpret insurance policies under well-established rules that require ambiguous terms to be interpreted in favor of coverage. Courts generally interpret the coverage clauses of insurance policies broadly, protecting the objectively reasonable expectations of the insured (See AIU Ins. Co. v. Superior Court, 51 Cal. 3d 807) Policyholders typically have the right to a jury trial and full discovery, allowing them to uncover how the insurance company actually handled the claim.
Most importantly, California law recognizes that insurers owe their policyholders a duty of good faith and fair dealing. When an insurance company unreasonably delays, denies, or terminates disability benefits, it may be held liable for insurance bad faith. This can include recovery of emotional distress damages and, in appropriate cases, punitive damages. (See Gruenberg v. Aetna Ins. Co., 9 Cal. 3d 566 (1973).
Why This Distinction Matters for California Claimants
Whether your claim is governed by ERISA or state law affects nearly every aspect of your case, including how evidence must be submitted, how the court reviews the insurer’s decision, whether you have a jury, and what damages may be available. Even within ERISA, states like California have enacted bans on discretionary authority under Insurance Code §10110.6, which can significantly improve the insured’s chances—if it is properly applied.
Insurance companies understand these rules and design their claims processes to protect themselves. Claimants who do not understand which laws apply often lose rights without realizing it.
A Strong Advocate for California Disability Claimants
At the Law Offices of Kevin M. Zietz, PC, we focus on representing disabled individuals in complex disability insurance claims, including ERISA-governed group plans and individual disability policies governed by California law. We understand how insurance companies operate, how ERISA limits claimants’ rights, and how California laws—such as Insurance Code §10110.6—can be used to level the playing field.
If your disability claim has been denied, delayed, or terminated, do not assume the insurance company got it right. The steps you take now can determine whether you ever receive the benefits you paid for.
Contact the Law Offices of Kevin M. Zietz, PC today for a consultation. We can review your policy, explain which laws apply to your claim, and help you take informed action to protect your rights and pursue the disability benefits you deserve.
