On May 9, 2024, in the matter of Jason Kim v. The Guardian Life Insurance Company of America, 8:23-cv-01579, 2024 WL 2106240 (C.D. Cal. May 9, 2024), the Honorable David O. Carter of the Central District of California ruled in favor of McKennon Law Group PC’s client, Jason Kim, ruling that our client was entitled to long-term disability (“LTD”) benefits under a group disability policy (the “Policy”) governed by ERISA. The insurer, Guardian Life Insurance Company of America (“Guardian”), had denied the claim based on a pre-existing condition exclusionary clause. Judge Carter ruled that Guardian had erred in denying the claim.

For greater context, pre-existing condition exclusions are portions of disability insurance policies that preclude coverage if the insured had the disabling condition, or a condition related thereto, before coverage under the policy began. These clauses are aggressively used by insurers to protect their profit margins. Of note, whereas an insured usually carries the burden of establishing entitlement to coverage under an insurance policy, if an insurer invokes a pre-existing condition exclusion, then the insurer has the burden of establishing that the exclusion applies.

Here, the insurer invoked the clause when it simply did not apply. Before obtaining coverage under the Policy, our client suffered from mild depression, anxiety, and attention deficit hyperactivity disorder (“ADHD”). Of note, these conditions were sufficiently mild that they were borderline subclinical. In January 2021, however, everything changed. Our client developed COVID-19. Shortly thereafter, he developed a wide array of serious symptoms. These included brain fog, cognitive impairments, extreme pacing (our client wore out a pair of shoes in a couple of days), fever, chills, insomnia, panic attacks, restlessness, agitation, “pressure in the head,” loss of the ability to communicate, short-term memory damage, psychosis, and damage to the ability to process information. He was prescribed the medication Zyprexa. Unfortunately, he had a severe reaction to the medication. He developed tardive dyskinesia (“TD”) and tardive akathisia (“TA”). These are severe and disabling neurological/movement disorders.

Our client submitted a claim for LTD benefits under the Policy. Guardian denied the claim. It insisted that our client’s anxiety, depression, and ADHD were pre-existing conditions for the myriad of symptoms he developed in January 2021. Of note, virtually everyone who had knowledge of the claim insisted that the pre-existing condition exclusion did not apply. Even the insurance broker who sold the Policy insisted that the clause did not apply. Guardian, however, refused to listen. It denied the claim.

We sued Guardian for the outstanding benefits under the Policy. The case ultimately went to trial. The parties submitted extensive briefing and the 6,000-page administrative record to the Court. The Court heard over two days’ worth of oral argument and then requested a second round of briefing. Ultimately, on May 9, 2024, the Court ruled in our client’s favor.

Guardian’s case relied almost entirely on a few medical records related Mr. Kim’s prescription of Zyprexa. In particular, the medical records stated that Mr. Kim was prescribed the medication for anxiety and depression. Guardian reasoned that, therefore, ALL of Mr. Kim’s symptoms were related to anxiety and depression, the pre-existing conditions. We, in turn, explained that, per the medical records, his then-treating physician had only spoken to Mr. Kim for five minutes over the phone before prescribing the medication. He had not physically examined Mr. Kim or administered any tests. We also explained to the Court that all of Mr. Kim’s subsequent treating physicians agreed that he was not suffering from common anxiety and depression in January 2021. They attributed his symptoms to COVID-19 or psychosis. The Court concluded that a five-minute phone call was insufficient evidence to rely on. It stated:

Guardian focuses on the fact that the records from Dr. Moldawsky reference pre-existing anxiety and depression. However, medical diagnoses often change over time as symptoms develop and emerge. That Dr. Moldawsky believed at the onset of Plaintiff’s severe symptoms that pre-existing anxiety and depression may have been reasonable at the time, even though it later became clear that Plaintiff’s condition was substantially different. Guardian’s insistence that Plaintiff’s psychosis was simply a more severe form of his prior anxiety and depression is not consistent with the facts or evidence. (Id. at *8)

Other evidence revealed how unreasonable Guardian’s position was. Not only did the agent who sold the Policy argue against the exclusion’s applicability, but even one of Guardian’s own peer review doctors specifically explained that there was no connection between Mr. Kim’s disability and his pre-existing conditions. See id. at *6.

We argued that COVID-19 caused Mr. Kim’s symptoms. Multiple treating physicians had reached that conclusion. However, although Guardian and its physician rejected this conclusion, as the Court explained:

Plaintiff’s medical records demonstrate that COVID-19 has been shown to cause psychosis and could potentially have caused psychosis here. Guardian’s own employee acknowledged this. It is not necessary for Plaintiff’s claim, however, to demonstrate that COVID-19 triggered his health problems in early 2021. Plaintiff must demonstrate that what rendered Plaintiff disabled was not caused or substantially contributed to by a pre-existing condition or its treatment. The prior identified mental health conditions/treatments did not “cause or substantially contribute to” the disability during the lookback period. (Id. at *6)

Having concluded that the pre-existing condition exclusion did not apply, the Court then proceeded to analyze whether Mr. Kim was disabled under the Policy. See id. at *7. The Court explained that Guardian had failed to argue before the Court that Mr. Kim was not disabled. See id. at *7. It further noted that there was significant medical evidence documenting Mr. Kim’s disability. See id. It determined that, in fact, he had been disabled during the time period in question.

Our client has sufficiently recovered that he has returned to work. As such, the Court awarded our client his benefits for a closed-end period.

Insurers tend to be overly aggressive when invoking pre-existing condition exclusions. However, it is the insurer’s burden to establish that the exclusion applies. This case served as yet another example, and warning, to insurers. They cannot carelessly invoke exclusions like the one involved here.