Does the Mental Nervous Disorder Limitation in an ERISA Long Term Disability Plan Violate ADA Laws?

According to several Federal district courts throughout the country the answer to this question has historically been that the American with Disability Act (ADA) laws does not apply to an ERISA long term disability policy provided by an Employer. The reason the ADA has been found not to apply is because of a concept called ERISA Preemption. ERISA Preemption means that since ERISA is a Federal law it overrules and trumps a state law. There is a case pending in Massachusetts as of July 2015 which can possibly change the law to make mental nervous limitations in ERISA disability illegal.

In a recent long term disability insurance claim against Aetna insurance company, Aetna denied long term disability benefits after 24 months in accordance with the mental nervous limitation clause contained in the claimant’s disability policy. Rather than appeal Aetna’s long term disability denial, the claimant filed a claim of discrimination with the Massachusetts Commission Against Discrimination (“MCAD”). The claimant alleged that limiting his benefits for a mental/nervous disability violated both Massachusetts law and the Americans with Disability Act of 1990 (ADA). After several years of reviewing the charge, the MCAD decided to set the charge for a public hearing. Aetna and claimant’s previous employer filed a lawsuit against MCAD arguing that as a matter of law ERISA preempts this ADA claim and they have no right to continue with a public hearing on the matter. The MCAD disagreed and after extensive litigation on the issue, the First Circuit Court of Appeals issued a legal opinion on July 20, 2015 which held that the public hearing should move forward and that further legal analysis must be conducted in order to determine if this claimants ADA claim is preempted by ERISA laws. The Federal Courts ruling is extensive and very complex. A copy of the Court legal decision has been uploaded for your review.

It will be extremely interesting to watch for the future outcome of this public hearing. If the MCAD finds that the mental nervous limitation in a LTD policy violates the ADA, then you can be guaranteed that there will be an appeal to the United States Supreme Court for a final decision on the matter. As long term disability insurance attorneys we think the mental nervous limitation should be illegal as long term disability companies and employers should not be able to discriminate against employees that cannot work due to a mental condition.

The court described ERISA Preemption as follows:

ERISA preempts “any and all State laws insofar as they… relate to any employee benefit plan” covered by the statute. 29 U.S.C. § 1144(a). This sweeping language preempts a wide variety of state laws to the extent that they have the requisite connection with an ERISA plan. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 95-100 (1983). Although many state anti-discrimination laws that relate to ERISA plans may beget ERISA preemption, some do not. For example, ERISA does not preempt federal anti-discrimination laws (such as the ADA), see 29 U.S.C. § 1144(d), so state anti-discrimination laws are immune to ERISA preemption insofar as they prohibit conduct proscribed by federal law, see Tompkins v. United Healthcare of New Eng., Inc., 203 F.3d 90, 96-97 (1st Cir. 2000). But to the extent that a state anti-discrimination law prohibits more conduct than its federal counterpart, it is preempted when applied to an ERISA plan. See Shaw, 463 U.S. at 103-04.

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