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Does a Co-Morbid Psychiatric Impairment Allow a Disability Insurer to Invoke a Policy Limitation Limiting the Duration of Benefit Payments for Psychiatric Conditions?

The lesson taught by Okuno v. Reliance Standard Life Ins. Co., 2016 WL 4655741 (6th Cir. September 7, 2016), is that the answer to the question posed by the title of this blog is a resounding NO. 

The case involved a former art director for a clothing company who became disabled on account of Crohn's disease, narcolepsy, and Sjogren's syndrome.  The case turned, however, on the insurance policy's "Mental or Nervous Disorders" Limitation, which includes "depressive disorders," and "anxiety disorders," and states:

Monthly Benefits for Total Disability caused by or contributed to by mental or nervous disorders will not be payable beyond an aggregate lifetime maximum duration of twelve (12) months unless the Insured is in a Hospital or Institution at the end of the twelve (12) month period. The Monthly Benefit will be payable while so confined, but not beyond the Maximum Duration of Benefits.

 (emphasis added).

Because Okuno suffered from co-morbid psychiatric conditions in addition to her physical impairments, Reliance maintained that benefits were limited to 12 months of payments under the policy's mental and nervous disorder limitation.   The court of appeals reversed that finding.

The court looked at other cases that had considered the meaning of the phrase "caused by or contributed to by," in the Mental or Nervous Disorders Limitation, and found that the limitation applies only where the behavioral health condition is a "but-for" cause of total disability (citing Eastin v. Reliance Standard Life Ins. Co., No. 13-6247, 2014 WL 3397141 (6th Cir. July 10, 2014) and George v. Reliance Standard Life Ins. Co., 776 F.3d 349, 355-56 & n.9 (5th Cir. 2015)).

The court of appeals explained the insurance company's error: "The primary rationale for the denial of long-term benefits to Okuno was not an independent assessment of her physical symptoms separate from any alleged mental health challenges. Rather, as explained by Reliance in response to Okuno's last appeal, the denial was based on a finding that 'Ms. Okuno's records continue to support the continued presence of a psychiatric component.'" Since the burden of proof was on Reliance to show the applicability of the limitation, according to the court, that rationale failed to meet the burden. 

Hence, the court held: 

We follow the analyses of our sister circuits and apply the but-for inquiry to the Mental and Nervous Disorders Limitation as did the Fifth Circuit in George, 776 F.3d at 355-56, as well as the Ninth and Third Circuits. See Maurer v. Reliance Standard Life Ins. Co., 500 F. App'x 626, 628 (9th Cir. 2012); Gunn, 399 F. App'x at 153; Michaels v. The Equitable Life Assurance Soc'y of U.S. Emps., Managers, and Agents Long-Term Disability Plan, 305 F. App'x 896, 898, 907-08 (3d Cir. 2009). Thus, an application is not appropriately denied on the basis that a mental or nervous disorder "contributes to" a disabling condition; rather, the effect of an applicant's physical ailments must be considered separately to satisfy the requirement that review be reasoned and deliberate. 

Because Reliance failed to make that separate inquiry, the court ruled that the claim decision was not "rational in light of the Plain's provisions." (citation omitted). 

The court next found that Reliance did not rationally determine that the physical impairments themselves were not disabling.  First, the court cited its past precedents to rule that the file reviews alone were inadequate to assess disability.  The lack of a physical examination, according to the court, "raises questions about the thoroughness and accuracy of the benefits determination." (citing Shaw v. AT & T Umbrella Ben. Plan No. 1, 795 F.3d 538, 550 (6th Cir. 2015)).  The court added: "File reviews are particularly 'questionable as a basis' for an administrator's determination to deny benefits where the claim, as here, involves a mental illness component." (citing Javery v. Lucent Techs., Inc. Long Term Disability Plan for Mgmt. or LBA Emps., 741 F.3d 686, 702 (6th Cir. 2014)).

The court was also critical of Reliance's failure to consult with medical professionals possessing expertise in the applicable field of medicine as required by the ERISA regulations - See 29 C.F.R. § 2560.503-1(h)(3)(iii) (requiring plan administrators, "in deciding an appeal of any adverse benefit determination that is based in whole or in part on a medical judgment" to "consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment."). Reliance utilized an orthopedist and pulmonologist to assess a claim based on auto-immune disorders.  Nor did Reliance engage a psychiatrist even though it based its decision on the mental and nervous impairment limitation.  The court was also critical of Reliance's failure to make any effort to consult with the treating physicians.  In addition, the court made it clear that "it would be inappropriate for a medical professional to interpret the contractual language of the Plan and tailor his or her opinion accordingly because it would invade the province of the plan administrator and court to make legal determinations with the aid of medical evidence."  Thus, a doctor's opinion as to whether the claimant is "disabled" would be inappropriate. 

The court summarized its conclusions as follows: "The lack of a diligent and reasoned resolution--evidenced by failure to examine Okuno, file review by health care professionals without the relevant skill set, failure to consult with Okuno's treating physicians, and shifting explanations--indicates that Reliance's determination was arbitrary and capricious." 

Discussion:   The court's ruling nicely summed up a number of key points, but one critical citation was omitted in the discussion relating to the application of the mental and nervous disorder limitation.  In Krolnik v. Prudential Ins. Co. of Am., 570 F.3d 841, 843-44 (7th Cir. 2009), the Seventh Circuit pronounced: 

Nor did the judge explain why summary judgment is apt. The court needs to know whether depression ever disabled Krolnik. If the answer is no--either because his mental condition never was disabling, or because his physical impairments disabled him independent of his mental state--then the Plan's two-year bar does not apply. If the answer is yes, and Krolnik's mental condition played a causal role in his past inability to work, it remains essential to know whether it remains important.

 

A reasonable trier of fact might conclude that, even if depression was a contributing cause of Krolnik's past inability to work, any current inability to work has a physical rather than a mental cause. The policy does not say that, if two years of benefits have been provided on account of a mental condition, then no future benefits may be paid for a physical impairment: it says only that two years is the maximum period of benefits that may be justified, in whole or in part, by a mental condition. If Krolnik's limitations today are entirely physical (or if physical problems disable him no matter what his mental state), then benefits are available under this policy.

 

Hence, it is well-established that the mental and nervous limitations that are found in most group long-term disability insurance plans are inapplicable if the insured is disabled due to physical impairments alone irrespective of co-morbid psychiatric conditions.  It would have been helpful, though, if the Sixth Circuit had not dismissed the plaintiff's causation argument and issued a ruling here comparable to the finding in Patterson v. Hughes Aircraft Co., 11 F.3d 948, 951 (9th Cir. 1993), which explained: 

If Patterson's disability was caused solely by his depression, and his headaches are neither a cause nor a symptom of the depression, then his condition is subject to the two-year limitation by any possible meaning of the Plan's term "mental disorder." However, if Patterson's headaches contributed to his total disability, or they are either a cause or symptom of his depression, then Patterson's disability does not fall within the "mental disorder" limitation interpreted in his favor. 

The court also noted, but did not fully flesh out a key issue - whether a physician can opine on a claimant's "disability."  In Heinrich v. Prime Computer Long Term Disability Plan, No. 94 C 6914, 1996 WL 495566, at *5 (N.D. Ill. Aug. 28, 1996), the court did a more thorough job of articulating the concerns about that issue: 

First, we find that it is improper for the Plan administrator to delegate its responsibility to determine a claimant's employment qualifications to a physician. The physician, of course, is qualified to determine a claimant's physical condition, which the administrator may properly rely upon in reaching its own determination as to whether the claimant is disabled under the terms of the plan. But we know of no reason, nor do the defendants offer one, why a physician has any expertise in determining employment qualifications, which is a wholly separate question from physical condition.

 

But all in all, this case is chock full of useful nuggets that will prove precedential in future cases.

 

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