First Circuit Creates Split; Unwritten Risk-of-Relapse Exclusion Unreasonable

The U.S. Court of Appeals for the First Circuit ruled Jan. 17 that a plan administrator abused its discretion by terminating a participant's long-term disability benefits based on the administrator's conclusion that the risk of substance abuse relapse was not a disability (Colby v. Union Security Insurance Co. & Management Co. for Merrimack Anesthesia Associates Long Term Disability Plan,1st Cir., No. 11-2270, 1/17/13).

The participant filed a lawsuit after the plan administrator terminated her long-term disability benefits after she was discharged from an inpatient substance abuse treatment facility. The plan administrator terminated benefits after concluding that the risk of relapse was not a disability under the plan.
Judge Bruce M. Selya, writing for the court, described the ruling as narrow but concluded that the plan administrator's decision denying benefits based on an unwritten categorical exclusion for risk of relapse was unreasonable. The court acknowledged that its decision created a split among the circuits regarding whether the risk of relapse into substance abuse dependence constituted a current disability.
An attorney representing the participant, Mala M. Rafik of Rosenfeld Rafik & Sullivan in Boston, told BNA Jan. 18 that the case represented a sea change for individuals suffering from disabilities due to addiction and leveled the playing field between physical disabilities and mental and substance abuse disabilities, when the individual suffers from a significant risk of relapse. The First Circuit also recognized that insurers cannot read in exclusions to coverage when unsupported by the plain language of the policy, Rafik said.
According to Rafik, the First Circuit's decision will help establish a framework for ERISA claimants challenging benefit decisions that run contrary to the clear language of policies purchased by their employers and for which they paid premiums over time.
The attorney for the defendant, Union Security Insurance Company & Management Company for Merrimack Anesthesia Associates Long Term Disability Plan (USIC), did not respond to a request for comment.

Excerpted from a story that ran in Pension & Benefits Daily (1/29/13).