Can I recover attorney fees if my long-term disability claim is governed by ERISA?

We regularly receive this question from disability claimants. The answer is YES, attorney fees are recoverable in ERISA long-term disability claims, but they are not guaranteed and the award is discretionary with the judge. The statute that gives courts the discretion to award attorney fees is 29 USC 1132 (g)(1) and it states in pertinent part, “In any action under this subchapter (other than an action described in paragraph (2)) by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party.” Disability carriers will always challenge an award of attorney fees.

The United States Supreme Court in the case of Hardt v. Reliance Standard has stated the following circumstances under which a court may award attorney’s fees:

a claimant must show some degree of success on the merits before a court may award attorney’s fees under § 1132(g)(1). A claimant does not satisfy that requirement by achieving trivial success on the merits or a purely procedural victory, but does satisfy it if the court can fairly call the outcome of the litigation some success on the merits without conducting a lengthy inquiry into the question whether a particular party’s success was ‘substantial’ or occurred on a central issue.

In addition to the above criteria a district court may also consider the following five factors in deciding whether to award attorney fees:

1. the degree of opposing parties’ culpability or bad faith;
2. the ability of opposing parties to satisfy an award of attorney’s fees;
3. whether an award of attorneys’ fees against the opposing parties would deter other persons acting under similar circumstances;
4. whether the parties requesting attorney’s fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself;
5. the relative merits of the parties’ positions.

The following legal cases around the country discuss the established five factor test, Quesinberry v. Life Ins. Co. of N. America, 987 F.2d 1017, 1028-29 (4th Cir. 1993) (en banc), and other courts of appeals have used this test to determine whether to award fees. See Eddy v. Colonial Life Ins. Co. of America, 59 F.3d 201, 206-07 (D.C. Cir. 1995); Gray v. New Eng. Tel. & Tel. Co., 792 F.2d 251, 257-258 (1st Cir. 1986) (citing cases from Second, Third, Fifth, Eighth, Ninth, Tenth, and Eleventh Circuits adopting test); Sec. of Dept. of Labor v. King, 775 F.2d 666, 669 (6th Cir. 1985). The Seventh Circuit has used two tests, including the five-factor test, to determine whether fee awards in ERISA actions are justified. Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574, 592-93 (7th Cir. 2000) (describing five-factor test and “substantially justified” test). The Seventh Circuit does not consider the two tests to be meaningfully different. See id.