What is Required to trigger the “Mental Illness” Limitation in an ERISA Disability Policy?
Many, if not most disability insurance policies contain what is commonly referred to as a “M & N” (Mental and Nervous) limitation. Typically, that limitation provides that only 24 months of benefits, will be paid for mental and nervous impairments. However, those same policies usually provide benefits for physical disabilities until age 65 or normal retirement age. however, it is not unusual for a claimant to suffer both mental and physical impairments. How should the insurer or plan administrator treat a claimant who is physically disabled but also suffers from some form of mental or emotional impairment?
The usual verbiage of the M&N limitation is something like “Monthly Benefits for Total Disability caused by or contributed to by mental or nervous disorders will not be payable beyond an aggregate lifetime maximum duration of twenty-four (24) months.” But, to what degree must a mental or nervous disorder “contribute to” a physical disability to trigger that limitation?
The recent Fifth Circuit (US) decision in George v. Reliance Standard Life Ins. Co., 776 F.3d 349 (5th Cir. 1/15/2015) is illustrative of just how far an insurance company will seek to expand that limitation.
Mr. George was a US Army helicopter pilot who lost his leg in a helicopter crash. He retired from the army in 1987, and shortly thereafter began flying helicopters for Petroleum Helicopters, Inc. (“PHI”) He did that for more than twenty years with the use of a prosthesis. But in 2008 he began experiencing severe pain at the site of his amputation, which prevented him from safely wearing his prosthetic limb. As a result, he was no longer able to operate the foot controls of a helicopter, and he was forced to retire from flying. He filed a claim for long-term disability benefits with RSL.
Reliance determined that Mr. George had psychiatric conditions of depression and post traumatic stress disorder (“PTSD”) and that those conditions “contributed to his overall impairment status.” Thus, benefits were terminated after twenty-four months. After exhausting the administrative remedies, Mr. George filed suit in Federal District Court. After that court ruled against him, he appealed to the Fifth Circuit.
The Fifth Circuit reversed, but not before giving guidance to lower courts on two significant issues that often arise in ERISA benefits litigation.
First, it was not disputed that Mr. George was no longer physically able to perform the duties of a helicopter pilot, although the record contained no evidence that he was precluded from performing a sedentary job. But, there was evidence that his PTSD and depression did impair his ability to hold down a job.
The Fifth Circuit, after reviewing jurisprudence from other circuits, found that “Each of those courts has interpreted the ‘caused by or contributed to by’ language to exclude coverage only when the claimant’s physical disability was insufficient to render him totally disabled. Each of those courts has interpreted the “caused by or contributed to by” language to exclude coverage only when the claimant’s physical disability, standing alone, was insufficient to render him totally disabled. In other words, those courts have asked whether the mental disability is a but-for cause of the total disability. Black’s Law Dictionary 265 (10th ed. 2014) defines “but-for cause” as a “cause without which the event could not have occurred”. The Court agreed with its sister courts’ interpretation of the relevant language. Although there was evidence in the record that Mr. George was capable of working in some sedentary occupations, there was no evidence that he could earn a salary that was substantially similar to his earnings as a helicopter pilot. Thus, he was totally disabled and the court reversed and remanded to the district court for a determination of the amounts due.
The second relevant ruling by the Court might prove to be even more important. In court, the insurer sought to buttress its termination of benefits on the grounds that the Plaintiff had failed to carry his burden of proving that he was disabled. The court ruled:
… [W]e hold that we are limited to considering whether the record supports the reasons that RSL provided to George during the claims proceeding. See Spradley v. Owens–Ill. Hourly Emps. Welfare Benefit Plan, 686 F.3d 1135, 1140 (10th Cir.2012) (holding same); cf. Truitt, 729 F.3d at 510 (holding that our review of an administrator’s decision to deny benefits “focus[es] on whether the record adequately supports the administrator’s decision ” (emphasis added) (quoting Vega, 188 F.3d at 298)). Allowing plan administrators to offer new justifications for a denial after the claims process has ended would undermine the claims system that Congress envisioned when it drafted ERISA’s administrative review provisions. See 29 U.S.C. § 1133 (requiring administrator to give clear notice and providing for administrative review); 29 C.F.R. § 2560.503–1(g) (same); Spradley, 686 F.3d at 1140 (noting that Congress’s purposes, as expressed in these provisions, would be undermined if administrators could add new rationales to support decision after claims process ends). “A plan administrator may not treat the administrative process as a trial run and offer a post hoc rationale in district [or circuit] court.” Spradley, 686 F.3d at 1140–41 (internal quotation marks omitted).
George v. Reliance Standard Life Ins. Co., 776 F.3d 349, 353 (5th Cir. 2015)
According to Moyer v. Met Life Ins. Co., No. 13–1396, (6th Cir. 8/7/2014), 2014 WL 3866073, __ F.3d __,), the failure to do so will excuse a reasonably late filing of a lawsuit.
Mr. Moyer filed a claim disability benefits under an employer-sponsored disability insurance policy. The policy said: “[n]o lawsuit may be started more than 3 years after the time proof [of a claim] must be given.”
The policy, like most ERISA disability policies, had two different definitions of “disabled.” The first, (called “own occ”) provided that MetLife would pay disability benefits for the first 24 months that a covered employee was unable to perform all the duties of his normal occupation. Then, after 24 months, the second definition (“any occ”) came into play. Under this definition, the Claimant was required to prove that there was no occupation that he could perform.
Met Life paid the claim during the “own occ” period, but determined that Mr. Moyer could perform some work in “any occupation.” They notified him of the denial of benefits past the “own occ” period, and he filed an internal appeal. Met Life denied the appeal. The denial letter told him that he had the right to file suit, but did not tell him how long he had to do it. He filed suit after the three year period stated in the policy.
The district court dismissed the suit because it was filed after the three-year limitations provision in the policy. The court found that the notice in the policy was sufficient and MetLife had no affirmative duty to restate it in its final denial.
Mr. Moyer appealed. The Court of Appeal (6th Circuit) held that the regulations (specifically 29 C.F.R. Section 2560.503-1) require denial letters to provide information regarding the time limits in which a lawsuit must be filed:
The exclusion of the judicial review time limits from the adverse benefit determination letter was inconsistent with ensuring a fair opportunity for review and rendered the letter not in substantial compliance. Moreover, “[a] notice that fails to substantially comply with these [§ 1133] requirements does not trigger a time bar contained within the plan.” Burke v. Kodak Ret. Income Plan, 336 F.3d 103, 107 (2d Cir.2003).
Where an insurance company’s failure to comply with the procedural requirements of § 1133 represents a “significant error on a question of law,” a related claim should be remanded to the appropriate body for review. VanderKlok v. Provident Life & Acc. Ins. Co., Inc., 956 F.2d 610, 616–17 (6th Cir.1992); see also McCartha v. Nat’l City Corp., 419 F.3d 437, 444 (6th Cir.2005) (“If the denial notice is not in substantial compliance with § 1133, reversal and remand to the district court or to the plan administrator is ordinarily appropriate.”). Moyer was denied his right to judicial review as a result of MetLife’s failure to comply with § 1133. The appropriate remedy is to remand to the district court so that Moyer may now receive judicial review.
Moyer v. Metro. Life Ins. Co., 13-1396, 2014 WL 3866073 (6th Cir. Aug. 7, 2014)
BOOK REVIEW: Adobe Acrobat in One Hour for Lawyers
By Ernie Svenson (Ernie the Attorney; Paperless Chase)
Published 2013 by the Law Practice Division of the American Bar Association
I consider myself to be pretty tech savvy, and use Adobe Acrobat every day in my practice. I knew that the program had much more under the hood than I use, but without knowing exactly what that was, I thought I was getting about as much out of Acrobat as I needed for my law practice. The task of really studying Acrobat to see if there was anything else it could do for me seemed to me to be too daunting for the slim possibility of some small reward.
Then I was lucky enough to receive a reviewers copy of Mr. Svenson’s book. This easily comprehensible short book unlocks some of the power of Acrobat that I had no idea existed. (I say some of the power, because the book is divided into Part I, Basic Skills, and Part II, Intermediate Skills, holding out the prospect that there will be a later effort to teach us some advanced skills.)
Chapters 1 through 7 are pretty basic, but there are some gems included here as well as in the later chapters. For example, did you know that by a simple click of the mouse you can choose to have everything you highlight in an Acrobat document added to your comments? And that you could save those comments as a separate document with page references to the original? It’s all in Chapter 1. Chapter 2 explains options for viewing pdf’s. Chapter 3 teaches you all you need to know about navigating through a pdf. Chapter 4 is an explanation of the various Acrobat menus and how they are used. Chapter 5 is all about the various ways of creating pdf’s and Chapter 6 talks about examining them. Chapter 7 explains the pages menu with some very useful tips, such as how to rearrange pages in a pdf.
Beyond the basics, the book is a treasure trove of information, explanations, and tips for getting the most out of Adobe Acrobat.
Did you know that you can use bookmarks to split a long document into its various components? This one little trick is worth the price of the book. For example, I received an 1132 page administrative record in an ERISA case. That record included medical reports, correspondence, insurance policy, summary plan description, and a computer log of everything that had occurred during the administration of the claim. By using what I learned in Chapter 8, I was able to go through the long document and mark the beginning of each of its components; then, with one click of the mouse, I was able to save all the component documents with their correct names in the correct folder. Wow! This cut hours off the task of separating out each document, naming it and filing it in the client’s folder.
Chapter 9 is all about commenting. Remember that in Chapter 1, the author showed us how to convert highlights to comments. Chapter 9 shows us how to add additional notes to the highlighted text that will show up with those comments, and contains other useful gems as well.
Chapters 10 and 11 cover text editing and OCR. These are very important tools for any lawyer who works with pdf’s.
Chapter 12 is really cool. Here, I learned how to create a digital signature that looks like one that was signed with pen and ink. The next chapter is about digital signatures, but Chapter 12’s instructions about how to make a signature stamp that looks real is far better, in my opinion. Besides, if you create a digital signature as you can learn to do in Chapter 13, you may have problems trying to file it in federal court using their CM/ECF system; I have been instructed not to use them.
Chapter 14 shows you how easy it is to apply “Bates” numbers to pdf’s, and chapter 15 covers redaction of sensitive material.
Did you know that every pdf you create contains metadata, some of which you might not want to make public? You can learn how to remove it in Chapter 16. Chapter 17 contains a good exposition of the search capabilities of Acrobat and is worth the read, even if you routinely search pdf’s already.
Chapter 18 explains how to protect your pdf documents in two ways. You can limit who can read it by requiring a “document opening password” and you can limit what those who can read it can do with it by requiring a “document permissions password.”
Chapter 19 is all about PDF/A’s – why they exist and how to create them. You might think of a pdf/a as a stripped document. They contain no hyperlinks, no imbedded files such as photos or audio files, and are meant for long-term archiving.
The author also includes an appendix with recommended preference settings, a keyboard shortcut cheat sheet, sample workflows and a host of other tidbits for the lawyer who uses pdf’s in his practice.
SUMMARY: Every lawyer who handles large PDF documents (and who doesn’t?) should have a copy of this book somewhere in his or her office. Whether the lawyer uses it or some other person in the office does, Adobe Acrobat in One Hour for Lawyers is bound to increase the productivity of anyone who wrestles with pdf’s.
Why do district courts ignore compelling Supreme Court precedent in ERISA benefits cases? In a recent case from Texas, Lopez v. Liberty Life, a district court judge did just that. And, unfortunately, it’s not unusual. But, they seem to do it only in ERISA benefits cases. The judicial cards are already stacked against a party claiming an ERISA benefit in federal court, and that litigant cannot go to any other court. So, why do federal judges insist on piling on? There may be many answers to the question, but none of them justify this wholesale disregard of the few Supreme Court opinions that help the disabled worker.
Rebecca Lopez was disabled from work after a fall in which she suffered an aggravation of a serious spinal condition, including a tumor on her spinal cord. She applied for disability benefits and was initially approved. But, those benefits were terminated after 7 months. After an unsuccessful appeal to the insurance company, as she was required to do, she filed suit in federal court.
ERISA provides that a beneficiary may file suit for withheld benefits, and “. . . to obtain other appropriate equitable relief. . .” In a 1996 case, Varity Corp. v. Howe, the United States Supreme Court held that when a beneficiary states a claim for a specific benefit, he or she cannot maintain a claim “other equitable relief”. The Court had held that this provision was a “catchall” or “remedial” phrase and was only for people whose claims did not fall into the one of the specifically named causes of action. In other words, if you claimed withheld benefits, you could not also claim “other equitable relief”.
Then, the Supreme Court, in Cigna Corp. v. Amara, held that a beneficiary could state a cause of action for monetary damages and for equitable relief. The Supreme Court specifically ruled that a court could award a “surcharge” to make a beneficiary whole. In the wake of Amara, Gearlds v. Entergy Services, Inc., was decided by the U.S. 5th Circuit (that has supervisory jurisdiction over courts in Louisiana, Mississippi, and Texas). The Gearlds court ruled that because of the holding in Amara, just because a beneficiary is seeking monetary damages “is not the end of the inquiry into equity”. The court concluded that even though the plaintiff had stated a claim for monetary damages, he had also stated a claim plausible claim for equitable relief, in the form of a “surcharge”.
Mrs. Lopez’s lawyer was aware of the holdings in Amara and Gearlds and sued for reinstatement of her benefits and for equitable relief in the form of a surcharge on the withheld benefits equal to the profit that Liberty Life had made on those benefits during the period they were not paid.
In spite of Amara and Gearlds the district court judge reached the impossible conclusion that Mrs. Lopez “. . . has a potential remedy [for monetary damages] and is not entitled to relief under the catchall provision.” In other words, it is perfectly OK for Liberty to stop paying benefits to her and invest the amount of those benefits in the market. If it is found that the benefits were wrongfully withheld, Liberty will have to pay them back, BUT CAN KEEP THE PROFITS IT MADE OFF HER MONEY! This is not only insane reasoning, it is also patently unfair, and it violates the very principles of equity.
But, then, this is ERISA!
A young parent secures a reasonably well-paying job with good benefits. In truth, because the family is young and dependent on her income, the fringe benefits are a significant factor in the decision to take the job. The new job holder feels secure in the knowledge that the job will pay enough to make ends meet and maybe even save a little, will take care of the medical bills when any family member is sick, and will pay benefits if she becomes disabled.
During the next few years, as the children grow, there are the inevitable illnesses and accidents, and while they may exact a toll, at least the medical bills are covered. But, then, occasionally, the insurance company will deny a claim for medical expense. The denial may be based on lack of medical necessity or a claim that the treatment is experimental. Or maybe a family member needs surgery. The insurance company may want a second opinion – and the second opinion agrees with the first. They are told that everything will be covered, after meeting their deductible and co-pays.
Paying the deductibles and co-pays may create a strain, but the family has stewarded its resources carefully and there are savings that will cover them. The surgery is believed to be a complete success and the patient is on the road to complete recovery.
Then the bills start coming in. The patient then discovers that the anesthesiologist was not “in network”. The insurer will pay only 10% of his bill. The bill is nearly $3,000, and the family must pay 90% of that. A second surgeon was on standby during the surgery and his bill is not covered; the family must pay that.
These extra bills create problems, what with the co-pays and deductibles that they have already had to pay. But, they weather the storm.
The good feeling of knowing that the family will be taken care of if something happens to the bread-winner begins to fade, to be replaced by worry. What if something really serious occurs?
The patient takes a turn for the worse. It turns out that the surgery wasn’t a complete success, and that the road to recovery may be somewhat longer than was first thought. But, thank heaven the patient works for a company that provides good benefits. If she is off work due to an injury or illness, the company has a salary continuation plan that pays full salary for up to 90 days. Then, if she is still unable to work, she will receive disability insurance benefits.
During the first 90 days the patient finds out that she is not going to be unable to work for much longer than 90 days. A nice lady in the Employer’s HR department gives her the forms to fill out to apply for disability insurance, and maybe even helps her fill them out. She gets them filled out as soon as she can so that there will be no delay the transition between her employer’s salary continuation plan and the disability benefits.
After submitting the application for disability benefits she receives a form letter from the insurance company that tells her that they are investigating her claim. They tell her that her claim is governed by ERISA, and that they will decide her eligibility within 45 days unless they need more time, and then they can take an additional 30 days to decide.
When the salary continuation payments are about to end, our young mother begins to panic. The family’s savings are depleted and she has heard nothing more from the disability insurance company. After navigating through the complicated telephone menu, she gets the voice mail of the person who she believes can give her information about her claim. This may be repeated every day for several days, but finally she speaks to a human. She is told that they are very near a decision and that she will hear from them shortly.
Ninety days go by and still not word. Voice mail messages go unanswered. The salary continuation has ended and either there is no income or the family has to depend on the income of only one parent while its expenses are based on the combined incomes of both parents.
Finally, she gets a letter from the insurance company. But the news is not good. The letter says that the insurer has had her medical records examined by independent physicians. These physicians have concluded that although she does have a verifiable medical condition, it does not prevent her from working. Therefore, the insurance company has decided that she is not entitled to disability benefits.
The letter also tells her that she has appeal rights. She can appeal the decision withing 180 days, and she can include with her appeal any additional information that she wants the insurer to consider. She doesn’t have any idea what additional information she needs to include. So, she sends a letter to the insurance company telling them that she appeals their decision.
The insurer has the records examined by other “independent” doctors and sends her a letter telling her that the new doctors agree with the original decision to deny benefits and that they are affirming their original decision. The letter also tells her that the decision is final and if she still disagrees with it the only thing she can do is to file a law suit in federal court.
Filing a suit in federal court is not something our disability claimant can do by herself. She knows she needs a lawyer. There is a nice lawyer who is a member of her church who recently drafted wills for her and her husband, so she calls and makes an appointment with him.
Now the reality of ERISA becomes apparent. This lawyer explains to her that ERISA is the Employee Income Security Act. That under this law, the claims file generated by the insurance company is the only thing a court will look at if she files a suit. She cannot file a suit and tell her story to a jury. She cannot call witnesses to testify. He tells her that hardly anyone ever wins an ERISA case, and that he doesn’t handle them. If she is lucky, this attorney will refer her to an experienced ERISA attorney. Unfortunately, many lawyers who do not routinely handle ERISA cases will either try to handle one or will not know any lawyers to refer her to and tell her that she doesn’t have any chance to win.
This claimant is one of the lucky ones. She manages to find her way to a lawyer experienced in handling ERISA claims. She meets with the ERISA lawyer who tells her that although ERISA claims are difficult, they are not altogether hopeless. There are ways in some cases to get around the harsh rules imposed by courts in ERISA litigation. There are no guarantees , but this lawyer thinks she has a fighting chance to win and agrees to take her case.
ERISA DISABILITY INSURANCE
Unfortunately, the above scenario is not a rare occurrence – it happens many times every day. The insurance companies and plan administrators have the upper hand. They know the way in and through the ERISA maze; a journey full of traps for the unwary. But there are lawyers who have discovered ways to help claimants navigate these difficult waters.
What can experienced ERISA counsel do to help?