The 1st Circuit issued a precedential ruling on Jan. 17, creating a circuit split when it found that the risk of relapsing back into an addiction constitutes a current disability in Colby v. Union Security Insurance Company.

Julie Colby was a staff anesthesiologist at Merrimack Valley Anesthesia Associates. In July 2004, a colleague discovered Colby passed out on a table in the hospital. She tested positive for Fentanyl, an opioid used in the practice, so she took a leave of absence and entered inpatient treatment.

When Colby applied to Union Security Insurance Co. (USIC) for long-term disability (LTD) benefits, the company approved them only for the time she was in treatment, not after. Although Colby was still under the care of a doctor and at risk for relapsing back into her addiction to Fentanyl, the insurance company said a “risk for relapse is not the same as a current disability.”

When Colby eventually sued the insurance company, the district court found this denial of benefits unreasonable. The court gave USIC the chance to re-analyze Colby's claim, but USIC stuck to its guns and refused to pay past Nov. 20, 2004, when Colby left treatment. The district court awarded her 36 months of benefits, the maximum possible under the plan.

On appeal, the 1st Circuit upheld the district court's ruling, finding that USIC had abused the discretion afforded it under the Employee Retirement Income Security Act (ERISA).

In finding that the relapse risk alone constitutes a disability, the 1st Circuit differed from the 4th Circuit, which found in a similar case that a patient must actually relapse to qualify for benefits (see “Differing Opinions”).

Contending Coverage

Colby's plan with USIC covered conditions that required the claimant to “be under the regular care and attendance of a doctor, and prevent [her] from performing at least one of the material duties of [her] regular occupation” (emphasis in plan).

Colby argued that she met these qualifications, adding that “this risk of relapse was particularly acute because returning to work as a physician would afford her easy access to opioids and other addictive substances,” according to the decision.

Several medical experts agreed that even after leaving inpatient treatment, Colby was still disabled. Colby's therapist, Patricia Dell-Ross, considered many factors in Colby's life that contributed to her addiction including job stress, back pain and struggles in her personal life. Colby's “access to opiates … combined with the usual and unusual stressors of everyday life and work would make her relapse almost inevitable,” Dell-Ross wrote in a letter.

“We had a strong record in this case regarding the particular facts … and how significant the risk of relapse really was,” says Mala Rafik, managing partner at Rosenfeld Rafik & Sullivan, and lead counsel for Colby in this case.

 

Invisible Exclusions

In the face of this evidence, USIC argued that “a doctor's opinion that there is a high probability of relapse is not objective or even reliable evidence of a current disability.” But the court felt that USIC was just reiterating the same argument: that no risk of relapse could qualify for LTD benefits under its policy, when in fact no such exclusion existed.

“The discretion of a plan administrator is cabined by the text of the plan and the plain meaning of the words used,” the court wrote. “Plucking an exclusion for risk of relapse out of thin air would undermine the integrity of an ERISA plan.”

“If [USIC was] that adamant that the policy never contemplated doing it, then why didn't [it] write it that way?” says Peter Kochenburger, executive director of the Insurance Law Center at University of Connecticut School of Law. 

The 1st Circuit also noted that such an exclusion would encompass physical as well as mental conditions. The court drew a comparison between Colby and an air traffic controller with a seizure disorder who is disabled by flickering lights on the runway.

“[The court] understood the medicine of addiction and really, without saying [it was] doing it, created a decision that was as much a mental health parity case as anything else,” Rafik says.

In the end, USIC's “all or nothing” approach was its downfall, and in-house counsel should be careful not to repeat its mistakes. According to the 1st Circuit, the insurance company might have avoided paying for the entire period had it argued that Colby's risk of relapse diminished over time. Or it could have actually written in the exclusion that it kept trying to apply.

“The clear solution is to address [risk of relapse] explicitly,” Kochenburger says. “That doesn't mean exclude it, but if you want to avoid this kind of controversy, then you address it clearly in the plan.”

The 1st Circuit issued a precedential ruling on Jan. 17, creating a circuit split when it found that the risk of relapsing back into an addiction constitutes a current disability in Colby v. Union Security Insurance Company.

Julie Colby was a staff anesthesiologist at Merrimack Valley Anesthesia Associates. In July 2004, a colleague discovered Colby passed out on a table in the hospital. She tested positive for Fentanyl, an opioid used in the practice, so she took a leave of absence and entered inpatient treatment.

When Colby applied to Union Security Insurance Co. (USIC) for long-term disability (LTD) benefits, the company approved them only for the time she was in treatment, not after. Although Colby was still under the care of a doctor and at risk for relapsing back into her addiction to Fentanyl, the insurance company said a “risk for relapse is not the same as a current disability.”

When Colby eventually sued the insurance company, the district court found this denial of benefits unreasonable. The court gave USIC the chance to re-analyze Colby's claim, but USIC stuck to its guns and refused to pay past Nov. 20, 2004, when Colby left treatment. The district court awarded her 36 months of benefits, the maximum possible under the plan.

On appeal, the 1st Circuit upheld the district court's ruling, finding that USIC had abused the discretion afforded it under the Employee Retirement Income Security Act (ERISA).

In finding that the relapse risk alone constitutes a disability, the 1st Circuit differed from the 4th Circuit, which found in a similar case that a patient must actually relapse to qualify for benefits (see “Differing Opinions”).

Contending Coverage

Colby's plan with USIC covered conditions that required the claimant to “be under the regular care and attendance of a doctor, and prevent [her] from performing at least one of the material duties of [her] regular occupation” (emphasis in plan).

Colby argued that she met these qualifications, adding that “this risk of relapse was particularly acute because returning to work as a physician would afford her easy access to opioids and other addictive substances,” according to the decision.

Several medical experts agreed that even after leaving inpatient treatment, Colby was still disabled. Colby's therapist, Patricia Dell-Ross, considered many factors in Colby's life that contributed to her addiction including job stress, back pain and struggles in her personal life. Colby's “access to opiates … combined with the usual and unusual stressors of everyday life and work would make her relapse almost inevitable,” Dell-Ross wrote in a letter.

“We had a strong record in this case regarding the particular facts … and how significant the risk of relapse really was,” says Mala Rafik, managing partner at Rosenfeld Rafik & Sullivan, and lead counsel for Colby in this case.

 

Invisible Exclusions

In the face of this evidence, USIC argued that “a doctor's opinion that there is a high probability of relapse is not objective or even reliable evidence of a current disability.” But the court felt that USIC was just reiterating the same argument: that no risk of relapse could qualify for LTD benefits under its policy, when in fact no such exclusion existed.

“The discretion of a plan administrator is cabined by the text of the plan and the plain meaning of the words used,” the court wrote. “Plucking an exclusion for risk of relapse out of thin air would undermine the integrity of an ERISA plan.”

“If [USIC was] that adamant that the policy never contemplated doing it, then why didn't [it] write it that way?” says Peter Kochenburger, executive director of the Insurance Law Center at University of Connecticut School of Law. 

The 1st Circuit also noted that such an exclusion would encompass physical as well as mental conditions. The court drew a comparison between Colby and an air traffic controller with a seizure disorder who is disabled by flickering lights on the runway.

“[The court] understood the medicine of addiction and really, without saying [it was] doing it, created a decision that was as much a mental health parity case as anything else,” Rafik says.

In the end, USIC's “all or nothing” approach was its downfall, and in-house counsel should be careful not to repeat its mistakes. According to the 1st Circuit, the insurance company might have avoided paying for the entire period had it argued that Colby's risk of relapse diminished over time. Or it could have actually written in the exclusion that it kept trying to apply.

“The clear solution is to address [risk of relapse] explicitly,” Kochenburger says. “That doesn't mean exclude it, but if you want to avoid this kind of controversy, then you address it clearly in the plan.”