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The Sky’s the Limit, But Not in Your Long-Term Disability Policy

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Many of our San Francisco Bay Area long-term disability clients sought an attorney’s advice about the limitations in their employer-provided disability plan. Most of them had not even reviewed the actual policy containing all of the plan terms, rather, they were alerted to benefit limitations in letters from the insurance company informing them of their entitlement to benefits. What surprises many people is that their policy will pay limited benefits for certain conditions, most commonly, for disabilities caused by mental illnesses. Because insurance companies will typically only pay benefits for 24 months for disabilities caused or contributed to by mental illnesses, they will try to characterize a disability as one caused by a mental illness, even if there is a significant physical component to the disability.

This is a common fact pattern that we see: Client A develops severe multi-level spinal stenosis which makes it difficult to sit, stand, and walk at work. Client A must also take strong narcotic pain medication to help dull the pain. As a result of the pain and medication side effects, Client A is forced to stop working. As a result of the pain, inability to work, and increased reliance on others for help with basic activities, Client A also develops disabling depression. Insurance Company X pays Client A disability benefits, but because of the depression, determines that benefits are payable for only 24 months. Without the depression, Insurance Company X would pay Client A benefits until she reaches retirement age.  Insurance Company X explains that it is able to limit benefits because the disability plan pays benefits for only 24 months if the Disability is “cause by or contributed to by” Mental Illness. But, where the depression developed as a result of the physical disability, and where the physical disability alone is disabling, is the Insurance Company’s decision fair?

Not only is it unfair, it is contrary to a reasonable interpretation of the plan terms. The most recent court to make this determination is the Sixth Circuit Court of Appeals, in Okuno v. Reliance Standard Life Ins. Co., No. 15-4043 (6 th Cir. Sept. 7, 2016). In Okuno, the Sixth Circuit explicitly adopted the standard employed by the other federal Circuits that have considered this issue:  The phrase “caused by or contributed to by,” only excludes coverage where a claimant’s physical disability is insufficient to render him totally disabled. The Court found that because Okuno’s physical ailments were disabling when considered apart from any mental illness, Reliance Standard could not limit payment under the policy.

Okuno and its progeny bodes well for disability claimants, but the line between physical and mental is often blurred. In fact, some doctors believe that you cannot really separate consideration of “physical” and “mental” because the two realms are too interconnected. Although the ability to do so may be a legal fiction, it is necessary to establish in order to get a disability claim paid for the maximum policy duration. Unfortunately, mental health parity does not extend to long-term disability plans, so for as long as mental illness claims may be lawfully limited, disability claimants suffering from both mental and physical illnesses will have an additional hurdle to overcome.

If you are disabled by a physical condition, but the insurance company is trying to limit paying you on the basis of a mental illness, it’s important to consult with an experienced ERISA attorney about your rights and the best way to prove your entitlement to benefits.

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