DISABILITY BLUES….Peter Gosselin, who has written an excellent series of stories about increasing income volatility and the fraying of the safety net that used to protect the poor from its worst effects, is back today with a story about a part of that fraying safety net that affects the middle class as well:

When middle-class Americans talk about safety nets, they usually mean such things as food stamps or housing subsidies ? public assistance on which generally only the poor depend….But…a key component of working Americans’ protective shield fails with unnerving regularity.

Disability insurance ? now carried by more than 50 million Americans ? generally promises to replace at least half of a person’s wages in case of illness or injury. However, in a substantial number of cases, especially those involving workers with long-term or permanent disabilities, it doesn’t deliver.

The chief reason ? and one that affects not only disability but the whole universe of employer-provided benefits ? is a series of court decisions dealing with the federal benefits law known as ERISA. The decisions have prevented states from extending almost any form of consumer protection to these benefits, and have severely limited individuals’ ability to successfully sue their insurers.

“People who file disability claims today are worse off than they were two or three decades ago,” said Judge William M. Acker Jr., who was appointed to the U.S. District Court in Alabama by President Reagan.

Basically, insurance companies are doing their best to move as many policies as possible under ERISA, which makes them virtually invulnerable to lawsuits for unfairly denying benefits. Even if you sue and win, you’ll typically get only back payments, not punitive or compensatory damages ? or even legal fees. This means that insurance companies have plenty of incentive to aggressively deny benefits and virtually no incentive not to.

As they say, read the whole thing.