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Two-Year Mental Illness Limitations Clause

The Two-Year Mental Illness Limitations Clause

There is an important distinction between an employer-provided group disability plan (ERISA) and the disability benefits provided by the Social Security Act (SSDI), with respect to disability based on emotional, psychological or psychiatric conditions.

The Two-Year Mental Illness Limitations Clause Under ERISA

In most ERISA long-term disability (LTD) policies, there is usually a Mental Illness Limitation that limits payment of disability benefits to no more than 2 years for mental, psychological, or psychiatric disorders. The following is an example of the language used in such a limitation on benefits:

... the benefit for disability due to Mental Illness ... will not exceed a period of 24 months ..., where Mental Illness means a psychiatric or psychological condition classified as such in the most current edition of the Diagnostic and Statistical Manual of Mental Disorders (DSM) regardless of the underlying cause of the Mental Illness.

After a hard-fought battle with the insurance carrier to obtain LTD benefits, the insurance carrier may try to limit those benefits to only 2 years by claiming that they fit the definition of a Mental Illness exclusion in the policy.

If the disability is based on a Mental Illness, then the 2-year limitations period may apply. However, if an applicant is disabled based on his physical condition, then the fact that there is also a mental illness, may not require limiting benefits to two years.

In Gunn v. Reliance Standard Life Ins. Co., 399 F. Appx 147, 151 (9th Cir. 2010), the court pointed out that every federal circuit that has considered the meaning of a mental illness limitations clause, has read it to exclude coverage only when the claimant's physical disability was insufficient to, on its own, render him totally disabled. (“The language of the mental illness exclusion [required applicant] to show that he was totally disabled solely due to his physical condition ... without taking into account the disabling effects of any mental or nervous disorder.”)

Therefore, even if an applicant's stress or depression contributed to his disability, if that contribution was de minimis, and the applicant's physical impairments were, on their own, entirely enough to render him totally disabled, then a mental illness limitations clause, for psychiatric or psychological symptoms, should not apply to limit benefits.

In Maurer v. Reliance Standard Life Ins. Co., 500 Fed. Appx. 626, 628 (9th Cir. 2011), the court held that a disability claim is not appropriately denied on the basis that a mental or nervous condition “contributes to” a disabling condition; rather, the effect of an applicant's physical ailments must be considered separately to satisfy the requirement that the review be reasoned and deliberate.

In George v. Reliance Standard Life Ins. Co., 776 F.3d 349, 355-56, n.9 (5th Cir. 2015), the court considered an insurer's mischaracterization of an applicant's disabling symptoms as psychological or psychiatric as a factor in determining whether an insurer abused its discretion in denying benefits.

There is No Two-Year Mental Illness Limitation Under SSDI

Under SSDI, there is no Mental Illness limitation for disability based on emotional, psychological, or psychiatric symptoms or conditions. An applicant who is applying for SSDI benefits need not be concerned that his/her SSDI benefits will be terminated in 2-years. SSDI benefits for emotional, psychological, or psychiatric disability continue if the applicant remains disabled.

Of course, SSDI and ERISA disability claims may be filed together or at least in close proximity.In fact, an ERISA disability plan typically require filing an SSDI claim if LTD benefits are awarded under the ERISA plan. That may give rise to some inconsistencies, if emotional, psychological, or psychiatric symptoms are emphasized in an SSDI filing, but minimized in an ERISA claim.

Conclusion

It is prudent to be aware of the 2-year limitation for Mental Illness. It limits disability benefits under ERISA, but not under SSDI.

ERISA law is complicated. At Law Med, we are ERISA knowledgeable and experienced.

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