Do Mental Illness Limitations Always Apply in Disability Policies?

Every year thousands of long term disability insurance claimants have their disability insurance claim limited to a specific payment period due to a Mental Illness limitation provision in their disability policy. On a daily basis our disability attorneys handle cases in which we try to get claimants paid beyond the limitation period. We recently received a great comment on our blog discussing the Mental Health Limitation:

Posted by Brad:

There are some exceptions to the Mental Illness Limitation, in certain circuit courts, specifically, take a look at California and the 9th circuit court of appeals. As you know, California has passed a law that voids discretionary language in insurance policies, and the 9th circuit has confirmed that ERISA preemption doesn’t supersede the state’s ban of discretionary language.

As such, in California, the majority of ERISA lawsuits, going forward, will be held under the de novo review. Under the de novo review, the 9th circuit has come out with many opinions that the term “mental illness” in ERISA plans is ambiguous. Often, particularly older ERISA plans, the term “mental illness” is not defined in the plan and is considered vague and ambiguous. Under de novo review, when a term in the plan is ambiguous, meaning there is more than one reasonable interpretation of the plan term, the definition that favors the claimant (against the drafter – insurance company) prevails as a matter of law – Contra Proferentem.

California isn’t the only state that has banned, or is looking at banning discretionary language in insurance contracts, included ERISA plans. I would suggest that claimants’ not give up just because they are disabled by a mental illness and their plan has a mental illness limitation (typically 24-months). These need to be looked at on a case by case basis, depending on the state the lawsuit will be filled, and if the corresponding federal circuit court has upheld that a ban in discretionary language is not preempted by ERISA.

I imagine the ERISA insurance companies will be “fixing” their plans to better define mental illness, but at this point, there still are a lot of older plans out there that offer claimants’ an opportunity to fight back on a more level playing field. Don’t give up just yet, even if you have a mental illness limitation in your plan. Have an experienced ERISA attorney (like Dell) check it out.

Our Response:

Brad,

Thanks for your great comment which is spot on. As you are aware the ultimate issue comes down to how the mental nervous limitation is defined in the contract. There are cases all over the country in which courts have invalidated or found the mental nervous limitation to be ambiguous. These are great cases for claimants. On another note, there are more than 18 states that have abolished discretionary clauses and we are lobbying different states every day to get rid of these discretionary clause. For a current status on the states that have abolished discretionary clauses please see this page.