Sometimes insurance companies deny claims on grounds other than by arguing that their insured is not disabled. Indeed, it is not unusual for insurance companies to initially agree that an insured is disabled under the terms of the policy not only from her own occupation, but from any occupation, but then to claim that the benefits are limited to a relatively short period of time, like 24 months, due to a policy’s limitations on paying for disabilities caused by mental and nervous impairments.
However, if an insured finds herself in this situation she should be aware that in such a circumstance the insurance company bears the burden of proof. The “mental and nervous limitation” insurance companies often rely on to deny a claim is a coverage exclusion, serving as an affirmative defense to a claim which would otherwise be paid. In that situation the insurance company must bear the burden of proving that exclusion by a preponderance of the evidence.
This is, of course, the exception to the general rule that ERISA benefits claimants bear the burden of proving their entitlement to benefits. “Generally, the burden of proving a disability is on the employee. See Gallagher v. Reliance Std. Life Ins. Co., 305 F.3d 264, 270, 275 (4th Cir. 2002). However, ‘[u]nder ERISA, an insurer bears the burden to prove facts supporting an exclusion of coverage’ because ‘federal courts treat insurer claims of policy exclusions as affirmative defenses.’ Fought v. UNUM Life Ins. Co., 379 F.3d 997, 1007 (10th Cir.2004). Thus, in [such a case an insurance company] has the burden of proving by a preponderance of the evidence that [a policy’s] mental illness exclusion applies…” Jewell v. Life Ins. Co. of North America, 2009 WL 792227, *11 (D. Colo. 2009) (unpublished, opinion attached).
This rule is established in the 6th Circuit, as well. “ERISA places the burden of proving an exclusion from coverage in an ERISA-regulated welfare plan on the plan administrator.” Caffey v. Unum Life Ins. Co., 302 F.3d 576, 580 (6th Cir. 2002). “According to common law trust principles, the administrator of an ERISA-regulated plan has the burden to prove exclusions from coverage. See Farley v. Benefit Trust Life Ins. Co., 979 F.2d 653, 658 (8th Cir.1992). Inasmuch as [an insurance company] seeks to establish an exclusion from coverage, the burden rests with it to establish by a preponderance of the evidence that the Pre-Existing Condition exclusion prevents [a plaintiff] from prevailing. Miller v. United Welfare Fund, 72 F.3d 1066, 1074 (2d Cir.1995) (citing Fuja v. Benefit Trust Life Ins. Co., 18 F.3d 1405, 1408 (7th Cir.1994)); Farley, 979 F.2d at 658.” Caffey v. Unum Life Ins. Co. of America, 107 F.3d 11 (Table), 1997 WL 49128 at 3 (6th Cir. 1997). This reversal of the normal burden of proof rules is particularly relevant in cases such where an insured claims to be disabled from a physical condition, such as fibromyalgia or chronic fatigue disorder, but the insurance company treats it as a mental condition. See, e.g., Jewell at *14. That is, in many cases where an insurance company stops benefits the company is really trying to turn a physical diagnosis into a mental or psychological diagnosis. Fortunately, it is the insurance company that bears the burden of proof in those specific matters.