Court Rejects Expanded Mental Illness Limitation to Coverage

In Jarillo v. Reliance Standard Life Ins. Co., Judge Michael M. Anello of the United States District Court of the Southern District of California held that plaintiff Marife Jarillo met her burden of proof and was entitled to benefits under the ERISA. For about eight years, Jarillo worked in the marketing department of the Sycuan Band of The Kumeyaay Nation (a federally recognized Native American tribe located near San Diego). In 2010, Jarillo injured her back at work while attempting to lift a heavy box.

After the injury, Jarillo experienced progressively worsening back pain. She was diagnosed with lumbar radiculitis by a spinal surgeon following an MRI. Treatment attempts and physical therapy failed to improve her condition. As a result, Jarillo also began to experience severe depression and anxiety. Eventually, she was also diagnosed with chronic pain syndrome, anxiety and depression.

Jarillo submitted a claim to Reliance Standard Life Insurance for long-term disability benefits shortly after the injury. Reliance approved her claim of being “totally disabled” and began paying her long-term disability benefits each month. But in 2015, Reliance terminated these benefits, claiming that her anxiety and depression triggered the insurance plan’s mental illness coverage limitation, and that a new IME report showed that she could work. Jarillo appealed this decision, but Reliance upheld it.

The Mental Illness Limitation

Like most disability insurance policies, the Reliance group’s LTD Plan limited benefits for disabilities caused by a mental illness or disorder. According to the plan:
Monthly Benefits for Total Disability caused by or contributed to by mental or nervous disorders will not be payable beyond an aggregate lifetime maximum duration of twenty-four (24) months unless the Insured is in a Hospital or Institution at the end of the twenty-four (24) month period.

The Lawsuit

This case presented two main issues:
1) Whether the mental illness limitation applied; and
2) Whether Jarillo was “totally disabled.”

Judge Anello determined that the cause of Jarillo’s disability was her back injury. Although her anxiety and depression may have worsened her condition, these were merely symptoms of her physical injury. Moreover, Jarillo was never formally diagnosed with a mental disorder by a psychiatrist. Additionally, the court also noted that “the Plan is ambiguous as to how the limitation applies when both a physical and mental condition contribute to a disability.” Following common legal doctrine, the court held that in cases where an insurance plan is drafted ambiguously, the court should find an interpretation favorable to the non-drafter of the plan (ie, the insured). For all of these reasons, the court held that the mental illness limitation to coverage did not apply.

On the second issue, the court also agreed with Jarillo. The IME report cited by Reliance stated that Jarillo was able to perform “full duty at a light work level,” and video surveillance footage that showed Jarillo was able to walk without a cane. However, another doctor reported that when it came to light work, “she would be unable to maintain this for several consecutive hours, and she would be unable to tolerate repeating this each day during a work week.” Other medical evidence, including a Functional Capacity Evaluation, supported a finding of total disability. The court found that the IME and other evidence relied on by Reliance was insufficient to overcome the weight of evidence pointing to her full disability.

This case was not handled by our office, but we believe it can provide guidance for those in similar situations. If you have any questions about this case or your own quest for disability benefits, contact any of our attorneys at Dell & Schaefer for a free consultation.