The U.S. Court of Appeals for the Eleventh Circuit, in Bradshaw v. Reliance Standard Life Insurance Co., has rejected a disability insurer’s decision to deny disability benefits to an insured who suffered a stroke days after giving birth on the basis that her pregnancy was a pre-existing condition.
Law. While the Affordable Care Act has eliminated health insurers’ exclusion of insureds who have pre-existing conditions, such exclusions remain valid and enforceable under disability insurance policies.
Background. In Bradshaw, the plaintiff became disabled after suffering a stroke caused by complications related to her pregnancy. Because the plaintiff was pregnant when the disability policy went into effect, the insurer rejected her claim for benefits on the basis of the policy’s provisions that excluded coverage for disabling impairments “contributed to” by a “pre-existing condition”, which the policy defined to include pregnancy.
The plaintiff sued the insurer in federal district court after it denied her claim on the basis that her pregnancy contributed to the stroke and qualified as a pre-existing condition. The district court granted judgment in favor of the defendant-insurer, and the plaintiff appealed the adverse determination to the Eleventh Circuit.
Eleventh Circuit. On appeal, the plaintiff argued that the insurer had incorrectly and unreasonably applied the pre-existing-condition rule exclusion because she had not received treatment for a stroke during the relevant period.
In response, the insurer asserted that it had reasonably applied the policy’s exclusion for a pre-existing condition because: (i) the plaintiff had not been employed for a full year, (ii) she was pregnant during the “look-back period,” and (iii) her pregnancy “contributed to” the stroke.
In reviewing the matter, the Eleventh Circuit noted that the policy permitted the insurer to deny benefits for a total disability based on terms that were not clearly defined in the policy (i.e., “caused by, contributed to by, or resulting from” a pre-existing condition). Accordingly, the court determined that the insurer’s interpretation of the pre-existing-condition clause and, in particular, the phrase “contributed to,” was “unreasonable” and “at odds with the goals of ERISA.”
The Eleventh Circuit next explained that the exclusion of coverage for a loss contributed to by a pre-existing condition, strictly construed, would preclude coverage if any pre-existing health conditions in some way might have contributed to the loss. The court concluded that the policy would essentially require a claimant to be in perfect health at the time of obtaining the policy before the policy would benefit the claimant during the succeeding 12-month period, which would be next to impossible for anyone.
The Eleventh Circuit then ruled that the language “contributed to by …a pre-existing condition” excluded coverage for only those losses “substantially caused by, substantially contributed to by, or substantially resulting from a pre-existing condition.” In the court’s view, this interpretation of the policy language advanced ERISA’s “clear purpose to provide greater coverage to beneficiaries.”
Finally, the Eleventh Circuit rejected the insurer’s “but for” argument (i.e., that but for the insured’s pregnancy, she would not have developed high blood pressure; but for her high blood pressure, she would not have developed preeclampsia; but for her preeclampsia, she would not have suffered a stroke; and, finally, but for her stroke, she would not have become totally disabled) on the basis that it required too many links. As a result, the court concluded that the “only condition” that the insured had during the look-back period was a healthy pregnancy, and her pregnancy could not be said to have substantially “contributed to” her total disability. Accordingly, the court remanded the matter back to the district court for further review in accordance with its determination.