There has been substantial activity in the courts arising from the use by Reliance Standard Life Insurance Company of clauses in its disability insurance policies to deny or limit claims based on the insured's mental or nervous disorders. A case decided only this week by the United States Court of Appeals for the Sixth Circuit, which covers Kentucky, provides a good example. The case is Okuno v. Reliance Standard Life Insurance Company.


The disability insurance policy in question had a “Mental or Nervous Disorders” limitation that limited disability benefits to a payable period of 12 months where the disability was “caused by or contributed to by mental or nervous disorders.” The policy had a similar provision regarding “pre-existing conditions” that restricted benefits for a total disability “caused by,” “contributed to by,” or “resulting from” a pre-existing condition.


The claimant in this case was diagnosed with Crohn’s disease, narcolepsy, and fibromuscular dyspasia. As is not uncommon, she developed depression and related symptoms attendant to her physical ailments that rendered her unable to continue working. The insurance company seized on her “depression and anxiety” to deny her claim.


The claimant argued in the appeals court that Reliance Standard erroneously interpreted the mental or nervous disorders limitation to apply “whenever a claimant’s medical history includes a psychiatric component.” The claimant’s argument was that where a claimant is disabled by physical conditions alone, then the mere presence of a psychiatric component or condition does not justify application of the one-year limitation on benefits due to a mental health condition.


This argument was accepted by the appeals court. It noted a number of other decisions from federal appeals courts around the country that had ruled that the phrase “caused by or contributed to by” in the mental and nervous disorders limitation should be read “to exclude coverage only when the claimant’s physical disability was insufficient to render him totally disabled.”


The importance of this ruling is as follows: if the claimant’s physical conditions considered alone render him or her disabled under the terms of policy, the presence of a depression or other similar diagnosis will not support the denial or limitation of benefits.


The court’s ruling should also help claimants with regard to denials based on pre-existing condition. The mere presence of a pre-existing condition should not support a denial or limitation on benefits, where a different condition or conditions, which arose after whatever the pre-existing condition is did, would support adequately the claim.

The Okuno case also illustrates the value an absolute necessity of an experienced and knowledgeable disability insurance benefits lawyer. The claimant first filed her claim sometime prior to May 18, 2012, which is the date on which Reliance Standard first communicated its denial of her claim. Following that initial denial there were a total of three appeals over the course of the next 25 months, the final denial being on June 12, 2014. The claimant filed suit in federal district court following denial of the third appeal in 2014. The appeals court decision comes on September 7, 2016, and it does not  award her benefits; instead, it sends the case back to the federal district court to determine what benefits she may be able to receive based on her physical illnesses and disabilities. Probably the case will get settled and the claimant will get paid her benefits, those payments commencing some four and half years or so after she filed her claim.