As explained below, this is a trap for the unwary. This clearly gives the insurer or plan administrator a tremendous advantage over the claimant in any dispute over benefits. The court may refuse to consider any evidence that was not before the insurer or administrator at the time the final decision was made to uphold the denial of the claim. Although a claimant is usually required to exhaust all internal administrative appeals before he can file a lawsuit, the attorney fees incurred by the claimant for any legal services rendered at the administrative review phase are not recoverable, even if the claimant wins the litigation. This is true no matter how frivolous or wrongful the insurance company's claim denial was in the first place.
Few claimants can afford to pay an attorney's hourly rate.
Thus, most of these claims must be pursued on a contingency fee basis. Thus, attorney fees are frequently rather low. Although the claimant will no doubt fare better with an attorney than without one, the sad fact is that the claimant gets screwed either way. There was no sinister conspiracy. Historical developments, augmented by various court decisions, over a 20 year period, have brought us to where we are today.