NurseWeek

Court sides with AIDS patient denied disability benefits

By José Alaniz
July 2, 2000


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San Francisco. In a case involving an AIDS patient whose insurance policy went into effect in 1988 despite his HIV status, the California Supreme Court reaffirmed June 26 that insurance companies may not deny benefits for pre-existing conditions more than two years after the purchase of a policy.

Mark Galanty, a court reporter from Studio City, had been diagnosed with HIV in 1987; the Paul Revere Life Insurance Company nonetheless approved his application the following year. When he applied for disability benefits in 1994 due to symptoms of full-blown AIDS, the company initially obliged but revoked coverage one year later citing a pre-existing condition.

The court, overturning two previous decisions, ruled that action illegal since insurance policies’ "incontestability clause" provides a two-year limit for challenging benefits. Galanty had consistently paid all premiums for five years before his disability claim. Only in proven cases of misrepresentation and fraud could an insurance provider refuse payment, the court decided.

"It was as if the insurance company did a bait and switch," said Jon Davidson, a Lambda Legal Defense and Education Fund attorney who served as co-counsel. "People bought this policy, thinking they were protected, and then when the condition set in, the insurer said, ‘No, you’re not protected for that.’ "

As a result of this and other recent rulings, as well as technological breakthroughs such as gene mapping, insurance companies are designing less "consumer-friendly" policies, said Frank Darras, a Claremont disability claims lawyer.

"They’re putting into these new policies 12-month chronic fatigue clauses and 12-month mental illness clauses, during which time they can revoke benefits, precisely because the techniques for predicting whether someone will come down with a condition are much better," Darras said. "That’s why those with the older insurance policies from the ‘70s, ‘80s and ‘90s need to hold on to them."

Paul Revere agreed to pay Galanty more than $100,00 in denied benefits. Under California law, insurance companies cannot ask a prospective policyholder’s HIV status, but can require an HIV test.