Recovering addict can get LTD benefits

An insurance company must pay long-term disability benefits to a drug-addicted doctor for periods during which she was drug-free but at risk for a relapse, the 1st U.S. Circuit Court of Appeals has ruled.

The doctor argued that she remained disabled even after completing her inpatient substance abuse treatment.

The 1st Circuit agreed in what a unanimous panel described as a “cutting-edge case” that creates a split among the circuits.

“In our view, a risk of relapse into substance dependence — like a risk of relapse into cardiac distress or a risk of relapse into orthopedic complications — can swell to so significant a level as to constitute a current disability,” Judge Bruce M. Selya wrote for the panel.

“[The insurer] took a categorical approach, steadfastly maintaining that risk of relapse, whatever the degree, could not constitute a current disability under the plan,” he added. “We conclude that the defense is not viable in this case: given the language of the plan, categorically excluding risk of relapse as a source of disability is simply unreasonable.”

The 24-page decision is Colby v. Union Security Insurance Company & Management Company for Merrimack Anesthesia Associates Long Term Disability Plan, et al.

A sound rejection

Mala M. Rafik of Boston, who represented the plaintiff, said the 4th Circuit considered the same issue in 2008, reaching the opposite conclusion in Stanford v. Cont’l Cas. Co.

While the circuit split means Colby could eventually be decided by the U.S. Supreme Court, Rafik said she expects the defendants to seek en banc review.

“The [Colby] court soundly rejected the opinion of the 4th Circuit, which had held that the risk of relapse couldn’t possibly be a disabling condition because that decision found that addiction is a choice,” she noted. “But here the court said the risk of relapse in the addiction context can swell to such a level that it can be disabling, and that’s a really important pronouncement.”

The court’s holding will make it much more difficult for defendants to prevail at motions to dismiss and summary judgment, said Rafik, who practices at Rosenfeld, Rafik & Sullivan.

“Now the 1st Circuit has settled the law in this area in this jurisdiction,” she said. “Obviously there is a circuit split, but this is a really important case that creates a great framework for people arguing these cases in the future.”

Rafik said the perception of ERISA practitioners has been that it is difficult to win a case for a disabled plaintiff in the 1st Circuit.

“But this opinion sets that aside because Judge Selya laid out a really clear and fair standard for what discretionary review means in an ERISA case,” she said. “It’s not just a rubberstamp by any means. It’s really what we in the plaintiffs’ bar had been pushing for years.”

Joshua Bachrach of Wilson, Elser, Moskowitz, Edelman & Dicker in Philadelphia, who represented the defendant employer, declined to comment.

A spokeswoman for Union Security Insurance Co., one of the defendants in the case, said the company was reviewing its options regarding an appeal.

Rehab and afterwards

The plaintiff, Dr. Julie Colby, was a partner at Merrimack Valley Anesthesia Associates. In 2004, a colleague found the plaintiff “sleeping or unconscious” on a table in the hospital.

The plaintiff tested positive for Fentanyl, an opioid used in her anesthesiology practice. It turned out she had for some time been self-administering opioids and had become addicted.

The plaintiff took a leave of absence and entered inpatient substance abuse treatment at the Talbott Recovery Campus in Atlanta.

When the plaintiff’s dependence on opioids came to light, her employer, Merrimack Valley Anesthesia, had in place a group employee benefit plan, underwritten and administered by Union Security Insurance Company & Management Company for Merrimack Anesthesia Associates Long Term Disability Plan (USIC), which included long-term disability benefits.

The defendant refused to pay benefits past the point at which the plaintiff’s stay at Talbott ended on Nov. 20, 2004. The defendant noted that the plaintiff had been discharged from Talbott and that, although she remained under a doctor’s care and feared a relapse, a “risk for relapse is not the same as a current disability.”

U.S. District Court Judge William G. Young in Boston ordered a remand, but the defendant insisted that “[u]nder the terms of the applicable policy, risk of a potential future disability is not considered a current disability for which benefits are available.”

Young then ruled “that categorically excluding the risk of drug abuse relapse is an unreasonable interpretation of the Plan.”

‘All-or-nothing’ approach

“The central question is whether, in an addiction context, a risk of relapse can be so significant as to constitute a current disability,” Selya said. “Although we recognize that our decision creates a circuit split, we answer this question affirmatively and uphold the district court’s award of LTD benefits to the plaintiff.”

The 1st Circuit found that the “overwhelming weight” of the evidence indicated that the plaintiff was, at least for some appreciable time after leaving Talbott, at a very significant risk of relapse.

The insurer, however, “took a categorical approach, steadfastly maintaining that risk of relapse, whatever the degree, could not constitute a current disability under the plan,” Selya said.

“To begin, the language of the plan admits of no such categorical bar,” he said. “Plucking an exclusion for risk of relapse out of thin air would undermine the integrity of an ERISA plan. We think it is a commonsense proposition that a substance-dependent individual’s risk of relapse can swell to a critical mass of disability.”

The court cautioned that its holding was narrow and was based on the plain language of the plan as well as the insurer’s “all-or-nothing” approach to its benefits determination.

“USIC could have written into the plan an exclusion for risk of relapse, but it did not choose to do so,” Selya said. “Without such a written exclusion in place, we believe that USIC acted arbitrarily and capriciously in refusing to consider whether the plaintiff’s risk of relapse swelled to the level of a disability. A benefits determination cannot be ‘reasoned’ when the plan administrator sidesteps the central inquiry.”

David E. Frank contributed to this story.