Insurance companies will go to great lengths to avoid paying claims. One way in which they do that is by trying to shoehorn the facts of the claim into a particular policy exclusion. One of their favorite exclusions is the pre-existing condition exclusion. A good example of this is found in Gustafson-Feis v. Reliance Standard Life Insurance Company, 535 F.Supp.3d 1076 (W.D. Wash. 2021). In Gustafson-Feis, the plan participant/insured, Lisa Gustafson-Feis, suffered a labral tear in her hip area during a work trip to China. She applied for long-term disability (“LTD”) benefits through her company-sponsored ERISA plan, which was insured by Reliance Standard. Reliance Standard denied her claim contending that coverage was precluded by the policy’s pre-existing condition exclusion that is typical in LTD policies. It contended that Gustafson-Feis’s injuries were caused by a pre-existing condition because the insured, although otherwise fully recovered from a prior vehicle-accident injury to her spine and pelvic region that occurred approximately two years before, was still taking pain medication for that injury. The court determined that Reliance Standard failed to demonstrate that the plan participant’s labral tear and ensuing disabling pain represented continued progression of her prior serious hip injury (instead of a new injury) and thus fell within scope of the ERISA long-term disability plan’s pre-existing condition exclusion
Reliance Standard’s paper-reviewing consulting physician Carol Hulett, M.D. opined that Gustafson-Feis’s current hip injury was most likely the result of a gradual progression of the symptoms from her prior injury instead of being a new injury. The paper reviewer’s opinion failed to address how the prior condition caused the new injury, and it ignored the evidence that the new injury was likely caused by a congenital condition, not by the previous injury.
Gustafson-Feis filed suit to receive the benefits that Reliance Standard improperly denied under the ERISA LTD policy. Under Ninth Circuit law, courts apply federal common law to decide ERISA coverage disputes. Under federal common law, in order to bar the insured’s claim, Reliance Standard had the burden to show that the pre-existing condition exclusion applied. It had the burden to show that the new disability was “substantially caused or contributed to by the preexisting condition.” (Emphasis added.) Gustafson-Feis, 535 F.Supp.3d at 1085, citing Haddad v. SMG Long Term Disability Plan, 752 F.App’x 493, 494 (9th Cir. 2019). Because the exclusionary provision at issue was “narrow” – applying only if the disability results from, or is caused or contributed to by, a pre-existing condition – Reliance Standard needed to show that the pre-existing condition itself substantially caused or contributed to the disability. The court also noted that, under controlling Ninth Circuit law, the determination that a cause is “substantial” requires “some evidence of a significant magnitude of causation.” (Emphasis added.) Gustafson-Feis, at 1085, quoting Dowdy v. Metropolitan Life Ins. Co., 890 F.3d 802, 809 (9th Cir. 2018).
The court granted the insured’s motion for summary judgment and ordered Reliance Standard to pay LTD benefits. It found that Reliance Standard had not met its burden of proof. It explained that Reliance Standard’s mere contention that the new injury was “directly related” to the prior injury was insufficient to prove causation and that Reliance Standard’s paper reviewers did not identify, even generally, any degree of causation between the two injuries, much less the “significant magnitude of causation” required under applicable Ninth Circuit precedent. The court summarized its holding:
Dr. Hulett’s statement that Gustafson-Feis’s records are “most consistent with a gradual progression of symptoms” does not account for Gustafson-Feis’s trajectory—continued improvement and recovery through her return to work without restrictions in December of 2017, followed by severe impairment following the labral tear on her trip to China in May 2018. Specifically, Dr. Hulett does not explain how a labral tear would result from a gradual progression of the prior fractures or pain, does not assert that Gustafson-Feis would have been disabled by the lingering effects of her 2016 injuries had she not suffered the labral tear, and does not identify a degree of causation between the 2016 injuries and the 2018 labral tear. See id. at 809–10 (while wound healing was complicated by diabetes, the record did not show, “even generally,” how much of a role that complicating factor played in the plaintiff’s failure to recover).
. . .
Reliance has failed to engage with, let alone carry, its burden to establish that the  accident was a substantial cause of Gustafson-Feis’s 2018 disability. There is certainly conflicting medical evidence in the record, and there is evidence from which a factfinder could find some degree of causation between the 2016 injuries and the 2018 disability. However, Reliance has the burden to prove substantial causation, and it has not made a sufficient showing to survive summary judgment.
Gustafson-Feis, at 1086.
It is important for individuals confronted by improper denials of disability coverage to seek counsel to review and assess the facts and policy terms and, if appropriate, sue to receive the benefits to which they are entitled. This is especially true with respect to insurer denials based on a policy’s pre-existing condition exclusion.