The First Circuit recently split from the Fourth Circuit in concluding that, absent clear plan language to the contrary, the risk of relapsing into addiction can constitute a current disability under a long-term disability plan. Colby v. Union Sec. Ins. Co., Civ. A. No. 11-2270, 2013 WL 174419 (1st Cir. Jan. 17, 2013). Welfare plan sponsors and fiduciaries should take note of the decision, not only because of its potential impact on the administration of ERISA disability plans, but also because it serves as a reminder of the importance of clear, unambiguous plan language.

Background

Plaintiff Julie Colby was an anesthesiologist who became addicted to Fentanyl and was diagnosed with, among other things, opioid dependence. After Colby’s employer learned of her condition, Colby took a leave of absence and began inpatient treatment for her addiction. As she was receiving inpatient treatment, Colby received disability benefits.

After Colby was discharged from the inpatient treatment center, she remained under regular medical supervision on an outpatient basis. During this time, she sought benefits under her employer’s long-term disability (LTD) plan. The LTD plan provided a maximum of thirty-six months of coverage for claimants who suffered an injury or sickness that: (i) required a claimant to be under the regular care and attendance of a doctor, or (ii) prevented a claimant from performing at least one of the material duties of the claimant’s regular occupation. Colby argued that she could not perform the material functions of her job because she was at a significant risk of relapse, and returning to work as an anesthesiologist would allow her easy access to opioids and other addictive substances. Her assertion regarding the risk of relapse was uncontested and, in fact, was supported by several medical experts.

The plan denied Colby’s request for LTD benefits on the grounds that after she had been discharged from the treatment facility she no longer met the plan’s definition of disabled. The plan reasoned that, although Colby remained under a doctor’s care and feared a relapse, a risk of relapse in the future is not the same as a current disability.

Colby subsequently filed suit alleging that the denial of benefits violated ERISA Section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). The district court found that the plan’s denial of LTD benefits was arbitrary and capricious because categorically excluding the risk of drug abuse relapse was an unreasonable interpretation of the plan.

The First Circuit’s Decision

On appeal, the First Circuit agreed with the district court that the plan’s decision to deny LTD benefits was arbitrary and capricious because the plan did not specifically state that it did not cover future risks generally or treat physical and psychological risks differently. The Court concluded that the facts presented in this case demonstrated that an individual’s risk of relapse can swell so much as to constitute a current disability. Moreover, mindful that exclusions from coverage under an ERISA plan are not favored, the Court concluded it was unreasonable for the plan administrator to read an exclusion into the plan that was nowhere expressed in the plan itself.

The First Circuit recognized that its decision was directly at odds with the Fourth Circuit’s decision in Stanford v. Continental Cas. Co., 514 F.3d 354 (4th Cir. 2008). In Stanford, the Fourth Circuit upheld a plan administrator’s decision to terminate the disability benefits of a nurse anesthetist who, like the plaintiff in Colby, suffered from an addiction to Fentanyl. The Stanford plan’s definition of disability was similar to the Colby plan’s definition: it required an injury or sickness that rendered the participant continuously unable to perform the material and substantial duties of his or her regular occupation. The Fourth Circuit drew a distinction between the recurrence of a physical condition such as a heart attack and a psychological condition such as addiction, and concluded that it was not unreasonable for the plan administrator to find that the risk of relapse did not constitute a disability under the plan. In the Fourth Circuit’s view, a claimant had to undergo a relapse in order to maintain his or her entitlement to benefits.

Practical Implications

Apparently seeking to limit the potentially broader implications of its holding, the First Circuit went out of its way to state that its holding was narrow. In the First Circuit’s view, its decision “pivots on a fusion of the plain language of the plan,” and the fact that the plan could have had an exclusion written in for the risk of relapse, but chose not to. But is the First Circuit’s holding really as narrow as it suggests? Read literally, the First Circuit seems to be suggesting that the plan fiduciary’s interpretation was unreasonable because it “gap-filled” an ambiguous plan provision by concluding that the risk of relapse was not a disability under the plan. If this is in fact what the First Circuit meant, it would appear to be at odds with well-established case law holding that a plan fiduciary’s reasonable interpretation should be deferred to, even in the face of other reasonable interpretations.

While there now appears to be a circuit split on the issue of whether, and the extent to which, courts will conclude that the risk of a relapse is so severe that it constitutes a current (as opposed to future) disability under a long-term disability benefit plan, plan sponsors and fiduciaries can take steps to avoid potential litigation and liability on this issue through plan draftmanship. As the First Circuit observed, the plan sponsor could have written into the plan an exclusion for risk of relapse, but it apparently chose not to do so.