The chicken or the egg question is a tough one to answer, but not for disability insurance carriers. Whichever answer permits them to stop disability income payments to a claimant is the right one for them.
Recently, a Federal District Court in Pennsylvania ruled against Prudential even after giving the company the benefit of the deference rule in making its decision. Ironically, the claimant was a former Prudential life insurance salesman. See Morgan v. Prudential Ins. Co., 2010 WL 5097811 (E.D., Pa.).
The issue is a common one. The claimant suffered from fibromyalgia, but also was afflicted with anxiety and depression, mental conditions which under the terms of the policy would limit his disability benefits to 2 years.
As a matter of course, Prudential jumped on the fact that its former employee suffered from anxiety and depression and limited disability benefits to only two years. (If Pru had done anything else, it probably would have been cashiered from the disability income insurance company “union”).
Although the insurer was quick to jump on the psychiatric ailment as a foundation for halting disability payments, the court said: “Not so fast". The court analyzed the situation as one in which the fibromyalgia was the cause of the disability while the psychiatric problems resulted from the disability caused by the fibromyalgia.
The Federal District Court set forth in easy to understand terms the rationale for deciding which impairment is the cause of a disability:
“…A mental illness secondary to a physical condition is not the cause of the physical condition and the resulting disability. If but for the physical condition there would be no mental illness, the latter cannot be considered a cause of an impairment. Even if the mental illness contributes to the impairment causing the disability, it is the physical condition, not the mental condition, that is the cause of the disability. Otherwise, whenever a claimant’s physical disease or condition causes anxiety and depression, the mental illness limitation would always apply…”
In the world of disability income insurance, insurers seem almost automatically to find that any psychiatric problems came first and therefore disability benefits, if any, are limited pursuant to the policy language.
However, as the Morgan Court so wisely pointed out, a physical disability which afflicts a healthy person and prevents that person from earning a living, thereby severely upsetting that person’s way of life, ordinarily causes that person to suffer from anxiety and depression. To suffer a mental collapse from such overwhelming circumstances is certainly not surprising.
But, to insurance companies which have to pay disability benefits for which they have already received premiums, it can be a windfall. If they take the position that the mental illness caused the disability, benefits may be limited by the policy terms (usually 2 years for mental illness).
When there is a question of mental stress as there is in many disabilities where a person’s livelihood is cut off, insurers are certain to decide that the mental illness came first.
But, when judges evaluate the evidence, as the Court did in Morgan, even giving Prudential deference, the Court found that the fibromyalgia came first and the mental problems later. When that is the case, the mental illness limitation doesn’t apply.
This ruling doesn’t answer the chicken or the egg question, but it makes perfect sense to us.