Reliance Erred in Denying Disability Benefits When Physical Conditions Caused Disability

Patti Okuno was an art director with a clothing company when she developed a number of various symptoms, including extreme headaches, abdominal problems, vertigo and memory loss. She was diagnosed with narcolepsy, Crohn’s disease and Sjogren’s syndrome. Her medical records indicated that she also suffered with anxiety and depression.

Reliance Standard Life Insurance Company (Reliance), both the payer of benefits and plan administrator, awarded her short term disability benefits, agreeing that she was disabled from working in her own occupation. After 12 months, the definition of disability changed and in order to receive long term disability benefits, she was required to be disabled from any occupation. The disability policy also had a provision that only provided 12 months of benefits if the total disability was “caused by or contributed to by a mental or nervous disorder.”

Reliance denied Okuno’s application for long term disability benefits on several grounds, ultimately claiming her anxiety and depression were mental disorders that disqualified her from receiving disability benefits past the 12 months they had already paid her. After Okuno exhausted her administrative appeals, she filed this ERISA lawsuit in the Ohio federal District Court. The Court agreed with Reliance and Okuno appealed to the U.S. Court of Appeals for the Sixth Circuit.

The Sixth Circuit agreed with Okuna that her physical ailments “are disabling when considered apart from mental component” and remanded for the District Court to evaluate how her physical ailments impacted “her performance of any occupation.”

The Mental or Nervous Disorders Limitation

The Circuit Court adopted decisions of other circuits that interpret the mental or nervous disorders limitations to apply only “when the claimant’s physical disability was insufficient to render him totally disabled.” The standard is “whether the mental disability is a but-for cause of the total disability.” Reliance argued that it applied this standard when denying Okuna long term benefits. The Circuit Court disagreed, finding that that “assertion is not supported by the administrative record.”

The Court noted that the burden of proof was not on the plaintiff, but on Reliance to “show that the exclusion on which it based denial of benefits, the Mental and Nervous Disorder Limitation applies in this case.” After applying the “but-for” inquiry, the Court found that “an application is not appropriately denied on the basis that a mental or nervous disorder ‘contributes to’ a disabling condition; rather, the effect of an applicant’s physical ailments must be considered separately to satisfy the requirement that review be reasoned and deliberate.” Since Reliance had not considered Okuna’s physical ailments separately from the mental and nervous disorders component, the decision was not “rational.” The Court reversed the decision denying her benefits on this ground.

Reliance Acted Arbitrarily and Capriciously in Finding Plaintiff Was Not Physically Disabled

Reliance erred in several ways when evaluating Okuna’s physical disabilities:

· It relied exclusively on the use of file reviews by physicians it employed. File reviews are “questionable” when used to deny benefits where the claim has a mental illness component. Mental health evaluations are based on subjective symptoms and the evaluation depends on a personal interview and spending time with the claimant. Although Okuna did not base her application on a mental or nervous disorder, that was the basis of Reliance denying her claim; thus, an independent medical exam should have been conducted.

· The reviewing physicians did not have the relevant expertise in the specific field of medicine at issue. Further, none of them even interviewed the treating physicians. Reliance denied Okuna benefits based on a mental health component, but did not have her records reviewed by a mental health expert.

· Reliance arbitrarily rejected the opinions of the treating physicians without explaining why.

The Remedy

Okuna requested remand for a determination of “how her disability affects her performance of any occupation.” The Court concluded that was the appropriate remedy and remanded for further proceedings consistent with its opinion.

This case was not handled by our firm, but we believe it is instructive for those struggling with both physical ailments with perhaps a mental or nervous disorder. If you need help with a similar matter, contact our attorneys at Dell & Schaefer for a free consultation.

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