Employees in Chicago with an employer-sponsored disability plan who had a claim denied often fear two things: what will they do if they do not get their benefits, what will they do for money until the insurer does pay? Disability cases can drag on, in some cases only being resolved several years after the insurer initially denied a claim. But even assuming your case goes to litigation in court, and you win your case, is merely paying you today what you should have received three years ago really adequate? Often the answer is: no. Courts may, in their discretion, award a prevailing plaintiff in an ERISA case prejudgment interest. A court in California recently did just that. Letvinuck v. Aetna Life Ins. Co., No. 06-2831 (C.D. Cal. Dec. 2, 2011). After Letvinuck successfully appealed her case to the Ninth Circuit, and obtained a reversal in her favor, she moved for prejudgment interest, and the District Court awarded it.
In the judicial circuit in which Illinois sits, the Seventh Circuit, a court presumes prejudgment interest is applicable. Fritcher v. Health Care Serv. Corp., 301 F.3d 811, 820 (7th Cir. 2002). But how much interest do you get? Generally, the court can award prejudgment interest for your losses. But that does not necessarily convert to the amount of interest you had to pay if you borrowed money to make ends meet. It is even more problematic when the plaintiff cannot document the amount of interest he or she actually paid. Sometimes courts will apply the post-judgment interest rate to prejudgment interest. The court can vary from that figure with a showing that the lost investment opportunity (i.e., the rate you could have earned had you invested the benefits) was higher than the statutory post-judgment interest rate. This, of course, raises the complexity of getting compensated for the time you were not paid. But when the compounded sum of past due benefits is a significant number, the mental gymnastics, number crunching, and math-letics may be worthwhile.