24-Month Limitations on Mental Health Disability Coverage and When They Can Be Challenged

Many, if not all, long term disability (“LTD”) insurance policies, including those covered by ERISA, contain a clause that states some variation of “if Employee’s disability, as determined by Insurer, is caused at least in part by a mental, psychoneurotic or personality disorder, benefits are not payable for Employee’s disability for more than 24 months.” Often times, a disability that qualifies an employee for benefits may have many symptoms and diagnoses. What caused the disability becomes a vital question. The insurer undoubtedly wishes to peg the cause of the disability to a mental, psychoneurotic or personality disorder in order to cap its liability to 24 months of benefits. So an equally paramount question is whether an employee on disability leave must wait to stop receiving benefits after 24 months to challenge the insurer’s decision.

The answer is found buried in a regulation on claims procedures defining “adverse benefit determination.” Under ERISA, every plan must establish a reasonable claims procedure. ERISA § 503(2). Pursuant to Department of Labor regulations, the claims procedure is applicable to actual claims for benefits, rather than informal requests of whether coverage applies. 29 C.F.R. § 2560.503-1(e). In order to appeal the administrator’s decision, there must have therefore been an actual “adverse benefit determination.” Id. § 2560.503-1(m)(4). So in the example described above, where an employee has already filed a claim and been awarded benefits, but thinks the benefits will lapse under the 24-month limitation on mental health disabilities, if there has been an adverse benefit determination the employee should be able to appeal.

Often times, the insurer will outright state in its initial benefit award letter, or in subsequent correspondence, that the benefits will be terminated after 24 months. In such cases, an employee may be able to immediately appeal the determination without awaiting a termination of the benefit payments. Such was the case in Madonado v. Prudential Insurance Co. of America, 2011 U.S. Dist. LEXIS 21712, at *9 (D. Colo. Mar. 2, 2011). Because the insurer stated in its initial benefit award letter that the benefits would be subject to the 24-month limitation, at that time there had been an adverse benefit determination.

If you are receiving disability benefits through disability insurance and believe the insurer may try to terminate your benefits because of a 24-month limitation on benefits payable for disabilities caused by a mental, psychoneurotic or personality disorder, consult an attorney versed in ERISA.