The issue in Parker v. SunLife Assurance Co. of Canada, 2005 U.S. Dist. LEXIS 15436 (M.D. Fla., July 29), turned on whether the insurer properly invoked a 24-month limit on payment of benefits for mental and nervous disorders when the claimant was disabled due to a bipolar disorder.
The policy defined ”mental illness” as ”mental, nervous, psychological, emotional diseases, or behavioral disorders of any type.” The plaintiff sought to evade the limitation by arguing that the definition was ambiguous because the condition could be due to organic, genetic, physical or chemical causes rather than functional causes. Relying on Arkansas BCBS Inc. v. Doe, 22 Ark.App. 89, 733 S.W. 2d 429 (Ark.App. 1987) the plaintiff maintained that some courts have found bipolar disorder to be a physical illness. However, the court noted thatDoe merely held there was conflicting evidence on the cause of bipolar disorder and the court did not definitively rule that the condition was physical. Moreover, the court explained it was bound by Blake v. Union mutual Stock Life Insurance Co., 906 F.2d 1525 (11th Cir. 1990), where the 11th Circuit rejected a claim that postpartum mental illness was a physical condition and therefore exempt from policy limitations applicable to mental disorders.
Further, because the court was applying an arbitrary and capricious standard of review, even if the court were to credit the plaintiff’s evidence establishing a physical cause for Parker’s bipolar illness, other medical records and evidence supported the insurer’s conclusion that the condition was psychiatric. Indeed, even the plaintiff’s medical records contained notations that she was suffering from ”severe chronic Bipolar I disorder, a mental illness.”
Finally, the court found persuasive the analysis of the court in Equitable Life Assurance Society v. Berry, 212 Cal.App. 3d 832, 260 Cal.Rptr. 819 (1989). There, the court construed a ”mental illness” definition similar to the one in the SunLife policy as encompassing all mental illnesses, regardless of cause. Parker paraphrased Berry‘s ruling as finding that ”[m]anifestation, not cause, of the illness is the ‘yardstick’ and ‘every reasonable layman would view’ the manifestations of a person’s symptoms as one suffering from mental illness.” Thus, the court upheld the application of the policy limitation.
In contrast to this ruling, in Fitts v. Federal National Mortgage Association, 191 F.Supp.2d 67 (D.D.C. 2002), a district court held that bipolar mental illness would not fall within the mental impairment limitations of a UNUM long-term disability policy because the policy failed to specifically include that illness as a mental disorder and substantial evidence supported a conclusion that bipolar mental illness is organic. However, the Fitts opinion was later vacated. 2002 U.S. Dist. LEXIS 26212 (D.D.C. May 10, 2002).
The issue presented in Parker and Fitts is significant because courts have applied markedly different approaches to analyzing mental illness limitations in insurance policies. Some courts take the position that such limitations are ambiguous and can be negated under the principle that ambiguities in insurance policies are construed against the drafter of the plan. This principle is known by the Latin name, ”contra proferentem,” which is a rule of insurance policy construction applicable in all 50 states as well as the District of Columbia.
Applying that rule to mental illness limitations in insurance policies, in Phillips v. Lincoln National Life Insurance Co., 978 F.2d 302 (7th Cir. 1992), the 7th Circuit questioned whether an organic mental illness was subject to an insurance policy limitation for ”mental disorders” in the absence of a policy definition for that term. The court held that if the cause of the disorder is organic, the policy’s lack of a specific definition made the limitation of benefits for ”mental disorders” ambiguous and required coverage of the condition in the same manner as any physical illness would be covered.
Other courts have issued similar decisions. For example, Kunin v. Benefit Trust Life Insurance Co., 910 F.2d 534 (9th Cir. 1990), held that treatment for autism could not be excluded as a mental disorder because the evidence showed the condition was organically based. The court therefore ruled that the definition of ”mental illness” was ambiguous as applied to autism, thus requiring coverage.
Kunin resulted in the publication of a survey of cases discussing this issue. The American Law Reports published an article titled ”What Constitutes Mental Illness or Disorder, Insanity, or the Like, Within Provision Limiting or Excluding Coverage Under Health or Disability Policy” (19 ALR 5th 533). The article summarizes its findings:
”The primary factor underlying many, but not all, of the decisions, is the concept that ‘mental disorders’ under the policies should be limited to diseases that are primarily psychiatric in nature and which do not have a direct physical cause.” 19 ALR5th at 540.
Phillips and Kunin were later followed in a disability case issued by the 9th Circuit, Patterson v. Hughes Aircraft Co., 11 F.3d 948 (9th Cir. 1993). Patterson suffered from a disability due to headaches, and was awarded long-term disability benefits. Later, however, the insurer determined that Patterson’s condition was a ”mental disorder” and terminated benefits.
In reviewing the claim, the court ruled that the definition of ”mental disorder” was ambiguous, and held:
”First, the Plan does not specify whether a disability is to be classified as ‘mental’ by looking to the cause of the disability or to its symptoms. Since the ambiguity is to be resolved in Patterson’s favor, his disability is not a mental disorder subject to the two-year limitation on payments if it is either manifested by headaches though caused by depression, or caused by headaches but manifested by depression. See Kunin, 910 F.2d at 541; Phillips, 978 F.2d at 310-11.
”Second, the Plan does not make clear whether a disability qualifies as a ‘mental disorder’ when it results from a combination of physical and mental factors. See Kunin, 910 F.2d at 541. Patterson’s disability may result solely from depression, or solely from headaches, or from a combination of the two. Since this ambiguity must also be resolved in Patterson’s favor, he is not within the limitation for mental disorders if his disability is caused in any part by headaches. 11 F.3d at 950.”
A slightly different approach was taken by a state court in New Jersey. In Heaton v. State Health Benefits Commission, 624 A.2d 69 (N.J. Super.A.D. 1993), the court ruled that a benefit limitation for mental disorders did not apply to Alzheimer’s disease since the illness results from a known physical cause. According to the court, only ”functional” illnesses, of no known physical cause, would be subject to the limitation.
The court ruled that the focus must be on etiology rather than treatment. 624 A.2d at 73. The ruling was based on two principles of insurance law: ambiguity and reasonable expectations of the insured. The latter doctrine invalidates hidden or unfair reservations in insurance policies. 624 A.2d at 74. Heaton followed an earlier ruling, Sachs v. Commercial Insurance Co. of Newark, N.J., 290 A.2d 760 (1972), which analyzed mental illness limitations in insurance policies as follows:
”It is reasonable to assume that the limitation was intended to delimit claims in cases of insanity or other degrees of mental aberration which are functional in origin. The public would not expect that such a limitation would control merely because the end result of an organic disease may affect the mental function of the individual. 290 A.2d at 764.”
Notwithstanding these cases, in addition to Parker and the cases cited in that opinion, Brewer v. Lincoln National Life Insurance Co., 921 F.2d 150 (8th Cir. 1990); cert. denied 111 S.Ct. 2872 (1991) refused to distinguish between organic and functional mental illnesses.
What makes these cases so difficult is that even the fundamental text of the mental health profession notes in its introduction:
”[T]he term mental disorder unfortunately implies a distinction between ‘mental’ disorders and ‘physical’ disorders that is a reductionistic anachronism of mind/body dualism. A compelling literature documents that there is much ‘physical’ in ‘mental’ disorders and much ‘mental’ in ‘physical’ disorders. The problem raised by the term ‘mental’ disorders has been much clearer than its solution, and, unfortunately, the term persists in the title of DSM-IV because we have not found an appropriate substitute. Moreover, although this manual provides a classification of mental disorders, it must be admitted that no definition adequately specifies precise boundaries for the concept of ‘mental disorders.’ Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition (DSM-IV).”
Thus, so long as no law limits mental illness exclusions and limitations in disability policies (the federal Mental Health Parity law applies only to health insurance policies), cases such as Parker will be repeatedly cited to limit the benefits due so long as the policy contains a definition of mental illness that encompasses the condition at issue (many policies explicitly do not apply mental illness limitations to enumerated organic illnesses such as Alzheimer’s disease).
Nor have challenges to the distinction between physical and mental disabilities brought under the Americans with Disabilities Act been successful (see, EEOC v. CNA Insurance Cos., 96 F.3d 1039 (7th Cir. 1996); Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104 (9th Cir. 2000)) with the possible exception of Iwata v. Intel Corp., 349 F.Supp.2d 135 (D.Mass. 2004). Those rulings have found the ADA does not regulate the contents of insurance policies, allowing insurers to limit benefits.
Given the growing knowledge, though, of the relationship between neurochemical triggers and psychiatric symptoms, it is questionable how much longer policyholders will tolerate the issuance of policies limiting benefits for mental disorders. No one would consider purchasing disability insurance that excluded coronary disease or spinal impairments; why should insureds be faced with a gaping hole in coverage for mental disorders and diseases?
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This article was initially published in the Chicago Daily Law Bulletin.