Both federal and state laws mandate parity in health insurance policies between physical and behavioral health conditions. However, mental health parity is not required in disability insurance policies by any state other than Vermont.

Consequently, most disability insurance policies provide inferior coverage for psychiatric impairments, although a recent federal court ruling from Michigan, Berg v. Unum Life Insurance Company of America, 2023 WL 2619015 (E.D. Mich., March 23), rejected Unum’s attempt to limit the duration of disability benefits payable to Dr. Paula Berg, an anesthesiologist, after she became disabled.

Based on her age at the time she became disabled, Berg’s policy provided for a maximum of 48 months of benefits. However, she was entitled to receive only 12 months of benefits for “all disabilities due to mental illness.”

Mental illness was defined in the policy as “a psychiatric or psychological condition classified in the Diagnostic and Statistical Manual of Mental Health Disorders (DSM), published by the American Psychiatric Association, most current as of the start of a disability. Such disorders include, but are not limited to, psychotic, emotional or behavioral disorders, or disorders relatable to stress.”

Unum maintained that while Berg was initially treated for breast cancer, her cancer had gone into remission, although she remained disabled due to a cognitive impairment which was claimed to be subject to the mental illness limitation.

Berg argued that the medication she was taking to prevent a recurrence of cancer affected her memory and concentration, thus precluding her from returning to work. Although Berg bore the burden of proof in establishing her disability, pursuant to Okuno v. Reliance Standard Life Ins. Co., 836 F.3d 600, 609 (6th Cir. 2016), the insurance company had the burden of proving the applicability of the policy’s mental illness limitations.

The court found Berg met her burden of proof since the evidence established the presence of a cognitive impairment. Because prior rulings such as Chamness v. Liberty Life Assurance Co. of Bos., 234 F. Supp. 3d 885, 894-96 (W.D. Mich. 2017), supported a conclusion that the plaintiff’s work as a physician required mental fitness, the court determined Berg’s limitations prevented her from returning to work.

That left only the issue of “whether Unum has shown by a preponderance of evidence that but for the existence of a psychiatric or psychological condition, Dr. Berg would be able to work and would not be disabled.”

In support of its position, Unum raised a new argument for the first time in its briefing before the court. Unum argued that if Berg’s impairment was due to the medication she was taking, it would be subject to the mental illness limitation since one of the diagnoses listed in the Diagnostic and Statistical Manual of Mental Disorders (5th edition) (DSM-V) is “Substance/Medication-Induced Major or Mild Neurocognitive Disorder.”

The court disallowed that argument, though, deeming it a post hoc rationale not permitted in cases under the Employee Retirement Income Security Act (ERISA).

The court also concluded that while the issue was close, Unum failed to meet its burden of proving the applicability of the limitation. The court recounted the evidence presented by Berg in support of her contention that her impairment was caused by her cancer and by the cancer treatment, and that there was no other explanation for her cognitive symptoms.

Because Unum’s consulting doctors who maintained otherwise did not examine Berg, the court was unpersuaded by their opinions.

The court explained that the opinions offered by Unum’s doctors, while “compelling, when viewed in the context of the entire record, [ ] are insufficient to carry Unum’s burden to show that, but for a psychological condition, Berg would not be disabled.”

One key point made by the court was its finding that even though cognitive impairment relating to the cancer treatment was mild, even a mild cognitive impairment would preclude Berg from working as an anesthesiologist.

The court was also critical of Unum’s doctors for assessing Berg’s credibility without examining her. Consequently, the court found the opinions offered by the doctors who had examined Berg were more persuasive than Unum’s consultants’ opinions since they had no direct contact with her.

This ruling makes several important points. The first was the court’s recognition of the cognitively demanding duties of a physician and its finding that even a mild impairment would preclude employment in that profession.

Second, the court’s preclusion of Unum’s assertion of a post hoc rationale to support its benefit denial reinforced a basic theme under the ERISA law. Regulations promulgated by the U.S. Department of Labor require plans to furnish “[t]he specific reason or reasons for the adverse determination” when a claim is denied. 29 C.F.R. Sec. 2560.503-1(g)(1)(i).

Based on that requirement, if benefit plans were allowed to present shifting reasons for a claim denial, it would mean that claimants would end up having to hit a moving target and mandated pre-litigation appeals would be pointless.

Nor is this issue just limited to ERISA. The same rule applies in contract litigation and insurance coverage litigation, and is known as the “mend-the-hold doctrine.” See, Nardoni, “Mending the Hold,” 106 Ill. Bar. J. 32 (2018). The doctrine is derived from a wrestling term, and is intended to prevent a party from changing its position in litigation to secure an advantage over an opponent.

As applied to this case, though, even if Unum had been allowed to cite the DSM-V, it would have been to no avail. The court cited the Okuno ruling, which says the same thing as a 7th U.S. Circuit Court of Appeals case, Krolnik v. Prudential Ins. Co. of Am., 570 F.3d 841, 844 (7th Cir. 2009); i.e., that for a disability insurance policy’s mental impairment limitation to apply, the behavioral health condition has to be the “but for” cause of disability.

Since Berg’s disability was due to cancer and cancer treatment, the DSM-V listing is irrelevant. Since the court determined that Unum could not prove otherwise, the plaintiff won the day.

This article was first published by Chicago Daily Law Bulletin  on April 12, 2023.

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