For individuals unable to work due to a serious illness or injury, a long-term disability (LTD) insurance policy is more than a convenience—it’s a financial lifeline. When that policy is provided by a private sector employer, it is governed by a complex federal law known as the Employee Retirement Income Security Act of 1974, or ERISA. Unfortunately, obtaining these vital benefits can be an arduous process. Insurance companies often deny valid claims, forcing disabled individuals into a legal battle they are ill-equipped to fight alone. The threat of having to pay your attorneys’ fees is often the economic risk an insurer has when it comes to a denied ERISA LTD claim.
While winning a court judgment that awards you the long-term disability benefits you are owed is a monumental victory, many claimants are surprised to learn that the fight isn’t over. A critical, and often contentious, second phase of the litigation begins: the recovery of attorneys’ fees, costs, and interest. A recent federal court decision, Macalou v. First Unum Life Insurance Company, provides a compelling look into this process and underscores why experienced legal representation is indispensable not only for winning your case but for ensuring you are made financially whole.
The Initial Victory: Securing Your Long-Term Disability Benefits
The central issue in any ERISA LTD case is proving that you meet your policy’s specific definition of “disability.” In the Macalou case, the claimant, Anticia Macalou, suffered from several debilitating conditions. Her insurer, First Unum, denied her claim. After a lengthy administrative appeal process, she was forced to file a federal lawsuit.
Following a bench trial, the court ruled in Ms. Macalou’s favor, finding that she had successfully proven she was disabled under the terms of her policy. The court ordered First Unum to pay her over $928,000 in past-due benefits. However, this judgment for back benefits did not account for the substantial legal fees she incurred to win her case or the interest she lost on the money that was wrongfully withheld from her.
The Second Battle: The Fight for ERISA Attorneys’ Fees
This is where the second battle began. ERISA contains a “fee-shifting” provision, which gives federal courts the discretion to award “a reasonable attorney’s fee and costs of action to either party.” The purpose of this provision is to provide access to the courts for individuals like Ms. Macalou. Without it, the staggering cost of litigating against a multi-billion dollar insurance company would prevent most people from ever challenging a wrongful denial.
In Macalou, the court had already determined that an award of fees was appropriate, but the parties disagreed on the amount. Ms. Macalou’s legal team requested over $250,000 in attorneys’ fees. First Unum, as is typical for insurance carriers, objected and argued for a much lower amount. This triggered a detailed, line-by-line analysis by the court to determine what constitutes a “reasonable” fee.
What Makes Attorneys’ Fee “Reasonable”?
Courts do not simply rubber-stamp a fee request. They conduct a thorough investigation to ensure the fees are justified, a process that highlights the importance of partnering with a law firm that operates with efficiency and integrity. The analysis generally breaks down into two key components:
1. The Reasonable Hourly Rate
A court first determines if the hourly rates charged by the attorneys and paralegals are reasonable. This is not based on what the law firm alone says it is worth, but on the prevailing market rates in the community for attorneys of comparable skill, experience, and reputation. In Macalou, the plaintiff’s attorneys submitted declarations from other prominent ERISA lawyers in New York City to support their requested rates.
The court largely agreed with the rates for most of the legal team. However, it decided to reduce the lead partner’s rate from a requested $895 per hour to $810 per hour. While acknowledging the attorney’s extensive experience and reputation, the court adjusted the rate to align it more closely with what had been awarded in other recent, similar ERISA cases in the district.
2. The Reasonable Hours Expended
Next, the court scrutinizes the amount of time the legal team spent on the case. Every task is reviewed to ensure the time spent was not excessive, redundant, or unnecessary. In Macalou, the court found some inefficiencies. It noted that an excessive number of hours were spent drafting a reply brief, especially given the attorneys’ expertise and prior work on the case.
More significantly, the court pointed out that the firm failed to properly delegate tasks. Highly experienced—and expensive—senior attorneys were performing work like legal research and initial drafting that, in the court’s view, should have been handled by more junior, and less expensive, associates. Because of these issues, the court imposed a 15% across-the-board reduction on the total number of hours claimed. This decision underscores a critical point: an effective legal team is not just skilled, but also structured efficiently to maximize value and withstand judicial scrutiny.
Making You Whole: The Importance of Prejudgment Interest
Beyond attorneys’ fees, there is the crucial issue of prejudgment interest. This is the compensation a claimant is owed for the time they were deprived of their benefits. Essentially, the insurance company had use of the claimant’s money for years, and the claimant should be compensated for that loss.
In Macalou, the debate over the interest rate was significant. The plaintiff argued for a rate of 21.8%, tying it to First Unum’s own “Adjusted Operating Return on Equity” during the period her benefits were withheld. Her argument was a powerful one: an insurer should not be able to wrongfully deny a claim and then profit by investing that money for its own gain. She also detailed the severe financial hardship she endured, including taking on high-interest credit card debt and making early withdrawals from her retirement account.
The court, however, opted for a more traditional approach, applying New York’s statutory interest rate of 9% in simple interest. It reasoned that this rate was sufficient to compensate Ms. Macalou fairly without being improperly punitive to the insurer. While lower than her request, the 9% rate still resulted in an additional award of nearly $140,000—money that was essential to making her financially whole.
How The Garner Firm’s Experience Maximizes Your Attorneys’ Fee Recovery
The Macalou case provides a clear road map of the complexities of ERISA litigation. It demonstrates that winning your long-term disability benefits is just the first step. Successfully navigating the second battle over attorneys’ fees and interest requires a legal team with not only deep subject-matter expertise but also a commitment to efficient and ethical case management.
At The Garner Firm, our attorneys have decades of experience focused specifically on ERISA and LTD claims. We have a proven track record of not only securing our clients’ benefits but also successfully fighting for and recovering the maximum possible award for fees, costs, and interest. Our staffing model is designed to be both effective and efficient, ensuring that the right tasks are handled by the right professionals at the right cost. We build our cases and document our work with the full expectation that it will be scrutinized by a federal judge, and our meticulous approach ensures our fee petitions are strong, defensible, and successful.
If you are facing a denial of your ERISA long-term disability benefits, you do not have to fight the insurance company alone. Contact The Garner Firm today for a confidential consultation to learn how we can put our experience to work for you.