Limits on LTD Benefits for Mental Disorders Upheld

The U.S. Court of Appeals for the First Circuit has affirmed a district court’s decision in favor of a long-term disability (LTD) plan’s benefit limitation of 24 months for disabilities caused by mental disorders. This decision illustrates the complexities of disability determinations involving both physical and mental conditions.

The defendant, Standard Insurance Company insured and administered a disability benefits plan that limited long-term disability benefits to 24 months during your entire lifetime for a Disability caused or contributed by mental disorders, substance abuse or other limited conditions. The plan also gave the following “Rules for Disabilities Subject to Limited Pay Periods”:

  1. If you are Disabled as a result of a MentalDisorder or any Physical Disease or Injury for which payment of LTD Benefits is subject to a limited pay period, and at the same time are Disabled as a result of a Physical Disease, Injury or Pregnancy that is not subject to such limitation, LTD Benefits will be payable first for conditions that are subject to the limitation.
  2. No LTD Benefits will be payable after the end of the limited pay period, unless on that date you continue to be Disabled as a result of a Physical Disease, Injury, or Pregnancy for which payment of LTD Benefits is not limited.

According to the plan terms, Standard also maintained “full and exclusive authority to control and manage the Group Policy, to administer claims, and to interpret the Group Policy and resolve all questions arising in the administration, interpretation, and application of the Group Policy.”

The plaintiff, Mark Dutkewych participated in an employer-sponsored disability plan insured and administered by the defendant insurance company. In early 2008, the plaintiff started to show a number of different symptoms including chronic pain, problems with reading comprehension, short-term memory difficulty, stomach irritation and a rash. Dutkewych tested positive for Lyme disease in November 2008 under the IGeneX diagnostic criteria but negative under the Centers for Disease Control (CDC) standards. A psychiatrist diagnosed the plaintiff with major depressive disorder, obsessive-compulsive disorder and anxiety disorder.

Standard approved LTD benefits on April 16, 2009.  In the approval letter, Standard notified Dutkewych that payments for mental-related disabilities were limited to 24 months. The plan stated that if a participant was disabled as a result of a mental disorder or any physical disease at the same time, disability benefits would be payable first for any conditions that were subject to the 24-month limitation period. On June 1, 2011, Standard terminated Dutkewych’s benefits “due to the end of the 24-month Limitation Period” and affirmed the termination on internal appeal.

Dutkewych filed a claim for extended benefits with the defendant on the basis of his Lyme disease diagnosis, arguing that it was a physical illness not limited under the terms of the plan. Standard’s board-certified physician and expert in the treatment and research of chronic Lyme disease concluded Dutkewych’s test was a false positive. Standard concluded that Dutkewych was not disabled as the result of a physical disease or injury.

Dutkewych appealed the termination of his benefits with the backing of his physicians. They believed that his cognitive limitations, depression and anxiety were all the result of Lyme disease. Standard used an internal review that relied on two independent physicians who concluded that Dutkewych’s test did not meet the CDC criteria for Lyme disease. Also he did not display the clinical indications corresponding to Lyme disease.

Standard contended that the mental disorder limitations would apply even if Dutkewych was physically disabled from Lyme disease because Dutkewych’s mental disorders contributed to his disability.

The court agreed with the district court stating that the mental disorder limitation applied to the claimant’s disability. The court concluded that Standard’s limitation of Dutkewych’s benefits to 24 months was not an arbitrary decision and affirmed the district court’s grant of summary judgment in favor of the defendant.

About John Garner

John Garner has over thirty five years of experience in employee benefits. He specializes in compliance, health care reform, the Health Insurance Portability and Accountability Act (HIPAA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), and the Employee Retirement Income Security Act (ERISA). He helps clients with life, health, and disability benefits, cost containment, flexible benefits, and claim consulting.

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