A recent district court ruling involving a commercial airline pilot discussed a fascinating issue known as "legal" disability. A legal disability, in contrast to a factual disability, occurs on account of a loss of licensure or certification to practice in a profession. The cases discussing legal disabilities involve issues such as loss of a medical license due to improprieties with patients, substance abuse, or infection with a communicable disease. In such cases, an underlying medical disorder is not itself severe enough to preclude working or that criminal conduct, not illness, was the cause of the loss of license.

Hannagan v. Piedmont Airlines, 2010 U.S.Dist.LEXIS 31472 (N.D.N.Y. March 31, 2010), is illustrative of how courts address these issues. Michael Hannagan, an airline pilot, suffered from obsessive compulsive disorder and severe allergies that required treatment with medications that the Federal Aviation Authority disallows for commercial airline pilots due to potential adverse effects. Consequently, Hannagan's pilot license was suspended. He then applied for benefits under his employer's disability plan (administered by Hartford) asserting that diagnoses of OCD and anaphylaxis rendered him disabled. Hartford disagreed and denied the claim, maintaining that it was not the symptoms of his disability that disabled Hannagan, but the medications he took for his conditions. The insurer further argued that the symptoms of Hannagan's impairments were ameliorated by the medications; hence, there was no functional impairment or limitation due to the plaintiff's medical conditions. Instead, it was the suspension of Hannagan's license that precluded him from flying and not his medical condition. The court disagreed and overturned the denial.

The court explained the general rule that "[t]he fact that there exists a legal disability, however, does not negate a health-related disability on which such legal detriment is based." (citing Mass. Mut. Life Ins. Co. v. Millstein, 129 F.3d 688, 690-91 (2d Cir. 1997) and Paul Revere Life Ins. Co. v. Bavaro, 957 F. Supp. 444, 449 (S.D.N.Y. 1997)). Those cases hold that if the insured is unable to work on account of a medical condition, the legal disability is secondary and the claimant is entitled to benefits irrespective of a subsequent legal disability. However, as Millstein illustrates, if the loss of license is due to criminal conduct (an attorney who stole from his clients), a legal disability is not compensable.

The court also addressed a second related issue, risk of disability, otherwise known as the doctrine of common care and prudence. A risk of disability situation exists where the claimant has a medical condition that in its current state is not disabling. However, if the claimant were to return to work, there would be a risk of severe consequences, including death. Thus, the court noted,

Courts have refused to allow administrators to deny benefits for future risk when such a denial would put claimants and/or others at risk unless the policy at issue expressly denies coverage of such future risks. See, e.g., Kufner v. Jefferson Pilot Fin. Ins. Co., 595 F. Supp. 2d 785, 797 (W.D. Mich. 2009) (finding denial of benefits was arbitrary and capricious because it failed to account for medical evidence of doctor's risk of relapse into substance abuse); Lasser v. Reliance Standard Life Ins. Co., 344 F.3d 381, 391 (3d Cir. 2003) (finding that return to stressful occupation would pose substantial and increased risk of heart attack and could thereby constitute a disability). The inquiry that the administrator must focus on when assessing whether a future risk of harm or relapse is a disability is the probability of its future occurrence. See Lasser, 344 F.3d at 391 n.12 (noting that "whether risk of future effects creates a present disability depends on the probability of the future risk's occurrence").

Although risk of disability claims are controversial, the court's discussion and distinction of Stanford v. Cont'l Cas. Co., 514 F.3d 354 (4th Cir. 2008), was illuminating. Stanford involved a nurse anesthetist who became addicted to Fentanyl in the course of his work and then entered a rehabilitation program. Stanford's disability insurer compensated him while he was in rehabilitation; however, benefits were cut off once the rehabilitation program was successfully completed even though the insured claimed that if he returned to work, his condition was still in such a fragile state, he risked a relapse if exposed to Fentanyl. The court disagreed, finding no current impairment on account of the past drug addiction. Here, however, the situation was markedly different. Hartford never considered whether Hannagan could return to flying if he stopped taking prescribed medication. Hence, the court pointed out, "It is not that a return to work would necessarily further aggravate his condition; the disability arises from the grave risk that plaintiff would pose to himself and those aboard his plane if he did not take the prescribed medication." The court also distinguished other cases in which licenses were revoked on account of illegal drug use, "not because of any underlying disability from which they might have suffered." In contrast, Hannagan showed he "suffered from functional limitations before taking the medication — which included obsessive behavior and an inability to focus — that prevented him from flying."

The court then set forth its rationale for finding Hartford's interpretation unreasonable:

It is entirely irrational for the defendants to read the policy as allowing defendant Hartford to deny benefits without considering if the plaintiff would be incapable of flying if he were not taking this medication. This interpretation would allow defendant Hartford to deny benefits to any pilot who is required to take any medication that the FAA prohibits without determining if, but for the medication, the claimant would be functionally incapable of performing any essential function of his occupation. Moreover, it would encourage pilots to hide illnesses that could put the lives of others in jeopardy. Defendant Hartford cannot divorce the underlying need for medication from the symptoms the medication is helping to ameliorate or any side effects the medication may cause.

The court thus thoroughly rejected the insurer's argument that claimants would have to show they were "physically" unable to perform the duties of an airline pilot because such an interpretation would render parts of the policy illusory. Such an interpretation would negate coverage for mental illness or substance abuse and deprive policyholders of their reasonable expectations. The court noted, "Many mental illnesses would not render a person physically incapable of performing the duties of a pilot; the appropriate inquiry, therefore, must focus on whether the mental illness renders the claimant incapable of performing those duties safely." Consequently, the court awarded benefits, finding it would be "manifestly unfair to remand this matter so that defendant may now further augment its record."

This ruling was issued just days before the FAA revised its medication policy. On April 2, 2010, the FAA announced it would begin permitting pilots who use Prozac, Celexa, Lexapro or Zoloft (Hannagan was prescribed Zoloft) to fly commercial aircraft. "Ban Lifted: Pilots Can Take Antidepressants on Job," The Associated Press, April 3, 2010.

The new rule still requires proof of treatment for at least one year without any side effects that would present safety hazards. But the point made in the Hannagan ruling is an important one. Without treatment, Hannagan faced a hazard that could affect the safe operation of an aircraft; and the treatment itself was viewed as potentially causing sedation, which, in turn, could affect the ability to fly safely.

The insurer simply focused on the fact that Hannagan's condition was not itself disabling and that he was successfully treated. But that deprived him of the benefit of his policy that protected his income if he were unable to pilot an aircraft due to a physical or psychiatric illness or injury. The situation here is therefore distinguishable from a frequently cited case, Dang v. Northwestern Mutual Life Insurance Co., 960 F.Supp. 215 (D.Neb. 1997) where a physician who was a carrier of Hepatitis B sought disability benefits because the hospital where he practiced barred him from performing certain surgical procedures. The insurer denied payment on the ground that the doctor was physically able to engage in his occupational duties, and was therefore not "factually disabled." The court upheld the insurer's decision, ruling that the policy only provided benefits when the insured was physically unable to perform the duties of his occupation. Here, however, Hannagan was both physically and psychiatrically disabled if not treated (unlike Dang who was merely a carrier), but the treatment disqualified him from receiving his license to pilot an aircraft. Both the condition itself and the treatment made Hannagan a safety risk; thus, since he was unable to perform the duties of an airline pilot, he was appropriately awarded disability benefits.