As the recent case of White v. Prudential Ins.Co., 2012 U.S.Dist.LEXIS 160773 (E.D.Pa. Nov. 9, 2012) illustrates, whether a disabling condition is psychiatric or physical is not easily determined. The plaintiff in this case, James White, worked as the chief operating officer, chief financial officer and director of risk management at Holt Oversight & Logistical Technologies. In 2007, White was seriously injured in a rollover car accident that occurred when his vehicle was struck by another car. Although White’s disability claim was ultimately approved, Prudential tried to limit the duration of benefits to 24 months by invoking a policy limitation that limits benefits when a disability is caused “in whole or part” by a psychiatric condition. The court rejected Prudential’s maneuver and found the mental impairment limitation inapplicable.

White’s initial treatment records from the accident did not reflect a traumatic brain injury and Prudential relied on that fact in denying benefits when the claim was first submitted despite later records that attributed White’s cognitive dysfunction to the car accident. The insurer also found White’s orthopedic impairments insufficient to justify the payment of disability benefits.

However, after White appealed, Prudential approved his claim based on cognitive impairments. Nonetheless, Prudential questioned the etiology of the impairments and asserted the 24-month mental illness limitation applied even though the insurer acknowledged White’s ongoing disability.

The court relied heavily on Morgan v. Prudential Ins. Co. of Am., 755 F. Supp. 2d 639 (E.D. Pa. 2010), another case where Prudential sought to impose the mental illness limitation despite the plaintiff’s claim that his disability was due to fibromyalgia and that depression and anxiety were secondary effects of that condition. There, the court held:

“Even if the mental illness contributes to the impairment causing the disability, it is the physical condition, not the mental condition, that is the cause of the disability. Otherwise, whenever a claimant’s physical disease or condition causes anxiety and depression, the mental illness limitation would always apply. Thus, we conclude that in a claim such as Morgan’s, where a mental condition is a sequelae or component of a physical disease or condition, a mental illness limitation will not apply.”

Applying that holding, the court determined: “[I]t matters not whether the plaintiff suffers from depression and anxiety as a result of the accident – the pertinent question is whether his depression and anxiety are sequelae or components of a physical disease or condition caused by the accident. If the depression and anxiety stem from a physical disease or condition, the 24-month limitation will not apply.”

With that framework in mind, the court examined the evidence. The court noted that while all of the doctors who treated White found the presence of a traumatic brain injury as the triggering cause of his neuropsychological symptoms, the Prudential doctors, who disagreed, never examined White and their reports were rife with inaccuracies.

Also, while the court acknowledged Prudential had no obligation to defer to the opinions of the treating doctors, the court also pointed out that insurers’ reliance on their consultants could be overruled since the evidence from the treating doctors was more persuasive.

The court also noted that in addition to the treating doctors, two independent physicians retained by Travelers Insurance Co. concurred with the treating doctors’ findings. In contrast, Prudential’s consultants failed to consider the objective evidence of cognitive deficits caused by the brain trauma. The insurer’s consultants also mixed up the claimant with a different James White or with his son and those errors were relied on by Prudential in reaching its determination. Prudential maintained the errors were insignificant. However, the court found the errors raised questions about the quality of the review process.

The court was also disturbed by one consultant’s report which questioned whether White was even cognitively impaired, and remarked: “The question of whether the plaintiff suffers from cognitive deficiencies already had been decided by Prudential. Absent evidence establishing that the plaintiff’s cognitive deficiencies had improved to the point where he could fulfill the role of chief operating officer of a corporation – and there is none – Prudential had no reason to revisit the issue.” Hence, the court found Prudential’s determination was incorrect and ruled the policy limitation was inapplicable.

In addition to this case, theMorgan ruling has also been followed by Lavino v. Metro.Life Ins.Co., 779 F.Supp.2d 1095 (C.D.Cal. 2011), which also rejected an insurer’s efforts to impose a mental illness limitation in a case involving fibromyalgia. This is not a decided issue, though. While the majority of rulings apply a causation approach to whether a mental illness limitation is applicable (e.g., Billings v. Unum Life Insur. Co. of America. 459 F.3d 1088 (11th Cir. 2006)), that is not always the case. In Roubal v. Prudential Ins.Co. of America, 2009 U.S.Dist.LEXIS 33081 (W.D.Ky. April 16, 2009), the court utilized a deferential standard of review, and while the insurer’s rejection of the claim altogether was found arbitrary and capricious, the court upheld Prudential’s determination finding that even though the plaintiff’s disability arose from a car accident, because he was disabled due to a cognitive impairment, it was subject to the mental illness limitation.

Another significant case offering a critical analysis of this issue is Bosetti v. U.S. Life Ins. Co. in the City of New York. 175 Cal. App. 4th 1208, 96 Cal. Rptr. 3d 744 (Cal.App. 2d Dist. 2009). There, the court held that in a disability claim involving both a physical and a mental condition, the insurer could not invoke a psychiatric illness limitation as to a physical condition that resulted in psychiatric symptoms or as to a psychiatric condition that caused physical symptoms.

Nonetheless, the courts remain divided as to whether the applicability of a psychiatric limitation in an insurance policy is analyzed from a causation approach or from a symptom-based approached.

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