In Maurer v. Reliance Standard Life Insurance Co., No. 11-16044, 2012 WL 6101903 (9th Cir. Dec. 10, 2012), the Ninth Circuit interpreted a policy provision favorably for insurers, holding that a policy’s mental nervous limitation may permissibly limit long-term disability (“LTD”) benefits where the beneficiary would otherwise be capable of working, but for the mental or nervous disorder.
Sara Maurer (“Maurer”) ceased working as an attorney and filed a claim for disability benefits based on chronic neck and back pain, and fibromyalgia. Maurer’s insurer, Reliance Standard Life Insurance Company (“RSL”), determined that Maurer was disabled by fibromyalgia “with a significant psych component to chronic pain” and paid twenty-four months of benefits. In connection with its concurrent review of Maurer’s benefit claim, RSL received updated treatment records indicating that Maurer suffered from depression, anxiety and “bi-polar diathesis,” indicating Maurer’s predisposition to the condition when stressed. After paying LTD benefits for three years, RSL performed another review and concluded that without the contribution of mental nervous illness, Maurer’s medical records indicated that she was capable of performing full time sedentary work. RSL therefore notified Maurer that it was terminating her benefits.
On administrative appeal, Maurer argued that she was completely disabled by psoriatic arthritis. RSL obtained an independent medical evaluation by a board-certified rheumatologist, who could not confirm that diagnosis and opined that Maurer’s alleged symptoms were primarily related to chronic pain and psychiatric dysfunction rather than inflammatory disease. RSL’s administrative appeals process resulted in the conclusion that the prior termination of benefits was appropriate. The U.S. District Court granted summary judgment to RSL, finding that RSL’s coverage determination was not an abuse of discretion.
On appeal, the Ninth Circuit considered whether Maurer’s claim for LTD benefits was limited to the twenty-four month period applicable to mental nervous disorders. The employee welfare benefit plan provided benefits for policyholders who become “totally disabled.” The policy also included a “Mental/Nervous Limitation,” which provided that benefits for total disability “caused or contributed to by mental nervous disorders . . . will not be payable beyond an aggregate lifetime maximum duration of twenty-four (24) months. . . .” Maurer argued that the mental nervous limitation should not apply unless RSL could demonstrate that the mental nervous condition was the sole cause of the disability. The Ninth Circuit rejected Maurer’s argument and ruled that the insurer “permissibly interpreted the ‘mental/nervous’ limitation to preclude coverage when, in the absence of a mental or nervous disorder, a beneficiary would be physically capable of working.”
While this decision may result in other courts following the Ninth Circuit’s lead, insurers should carefully consider whether to apply a mental illness limitation in cases involving both physical and mental conditions – under Maurer, insurers must be able to show that, but for the mental illness, the claimant would be capable of working.