Reliance Standard limits disability insurance benefits to 24 months for mental nervous disorder, despite claimant’s diagnosis of multiple sclerosis

This case is an example of how a diagnosis of a disabling condition such as multiple sclerosis (“MS”) does not always mean the claimant is disabled by the medical condition. In this case, while the claimant had MS, the disabling condition was depression and not MS. Unfortunately, the Reliance Standard disability policy limited benefits to 24 months for a mental nervous disorder.

Igor Gunn participated in the Paine Webber Long Term Disability Plan (“the Plan”) which was administered by Reliance Standard Life Insurance Company (“Reliance”) during his course of employment for UBS/Paine Webber (“Paine Webber”). Gunn suffered from multiple sclerosis and was unable to work due to a mental or nervous disorder, namely, severe depression. Gunn was initially awarded long-term disability benefits by Reliance. Reliance later determined that Gunn was not eligible for benefits beyond the initial 24- month period because the policy precluded an award of benefits beyond the initial 24-month period for total disability “caused by or contributed to by” mental or nervous disorders.

The “Disability Plan” booklet prepared by Gunn’s employer differed from the policy language in that it precluded benefits for disability “due to” mental illness. Reliance argued that the language of the mental illness exclusion in the policy required Gunn to show that he was totally disabled solely due to his physical condition stemming from his multiple sclerosis, without taking into account the disabling effects of any mental or nervous disorders. The District Court interpreted the language as allowing benefits so long as Gunn’s disability was not due solely to mental illness and thus ruled in favor of Gunn by holding that Reliance’s denial of benefits was an abuse of discretion. Defendants appealed against the District Court’s order.

The Court of Appeals for the Ninth Circuit noted that the booklet informed employees including Gunn that the insurance policy was the controlling document, and an integration clause in the policy precluded the application of the language in the “Disability Plan” booklet to the extent that it differed from the language in the policy.

The records of Gunn’s treating physicians showed that Gunn’s multiple sclerosis alone was not disabling. Further, an independent medical examination of Gunn by a board-certified neurologist and psychiatrist recorded that Gunn had physical impairment in the form of mild gait instability, which was not in itself a disabling symptom, and opined that Gunn would not be prevented from working at a sedentary job by his multiple sclerosis.

Although some medical records stated that Gunn was disabled “both” as a result of multiple sclerosis and depression, the Court noted that such record was not sufficient to avoid the policy limitation precluding benefits where mental or nervous disorders caused “or contributed to” the applicant’s disability.

The question was whether Gunn could meet the definition of total disability based solely on his multiple sclerosis without considering his severe depression. Gunn argued that even if his disability must be due solely to multiple sclerosis, his mental symptoms of depression and cognitive dysfunction were attributable to multiple sclerosis, a physical disease; therefore, these mental symptoms could be considered in establishing disability without violating the limitation for mental and nervous disorders. The Ninth Circuit however noted that the medical records failed to establish that Gunn’s depression and cognitive dysfunction were solely attributable to his multiple sclerosis or attributable to a degree sufficient to result in disability based on the symptoms of multiple sclerosis.

The medical records indicated that Gunn’s multiple sclerosis was “mild” and Gunn’s “severe depression” was not solely a symptom of his multiple sclerosis. There was also additional evidence in the record which supported a finding that Gunn suffered from severe depressive and anxiety disorders of psychiatric origin which were independent of his multiple sclerosis. The record also included several reports indicating that Gunn had a documented history of depressive episodes long before he was diagnosed with multiple sclerosis, including one severe episode with suicidal thoughts while in his teens, which also supported a finding of a separate origin for his psychiatric problems.

The Ninth Circuit therefore concluded that Reliance’s decision to deny benefits was grounded on a reasonable factual basis for concluding that Gunn’s multiple sclerosis alone was not disabling because Gunn would be able to work, but for his psychiatric mental and nervous disorders.

Gunn argued that Reliance should have mentioned the mental illness limitation in its letter to Gunn which referred specifically to the new definition of “disability” applicable after 24 months but excluded Plan’s limitation for mental illness. The Ninth Circuit opined that Reliance’s failure did not give rise to an inference that Reliance acted in bad faith because Gunn was given a full and fair review of his claim. Gunn was given notice of the mental illness limitation in the initial denial letter which quoted the Plan provision concerning the limitation for mental or nervous disorders. Finally, the Ninth Circuit held that the conclusion that Gunn’s disability was attributable to his mental illness, severe depression, rather than to multiple sclerosis, did not establish that Reliance simply ignored the evidence relating to his multiple sclerosis or reached a biased result.

Mental nervous limitations in ERISA group disability insurance policies are found in almost every group policy. These clauses usually limits benefits to either 12 or 24 months. If a claimant has a mental as well as a physical disability, they need to work with their physician in order to provide sufficient medical evidence of the physical disability.

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