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In a case plaintiffs’ lawyers describe as straight out of John Grisham’s “The Rainmaker,” the California Supreme Court Monday said an insurance company cannot deny benefits based on a man’s AIDS-related disability. In a victory for consumers and a first-of-its kind ruling in California, Justice Kathryn Mickle Werdegar wrote for the unanimous court that the state’s incontestability clause bars an insurer from denying benefits for certain pre-existing conditions if a policy has been in place for two years. “It is hard to imagine a clearer statement of intent to bar denials of coverage for pre-existing conditions than to require coverage even of those conditions concealed from the insurer by misstatements in the application,” Werdegar wrote in Galanty v. Paul Revere Life Insurance Company, 00 C.D.O.S. 4891. Consumer attorneys say Werdegar’s opinion in the closely watched case will not only allow people with AIDS to collect on policies, but will open the door for other Californians who have been denied insurance based on pre-existing conditions. Jon Davidson, supervising attorney in the Los Angeles office of the Lambda Legal Defense and Education Fund Inc., said the decision sends a strong message to insurance companies. “The court’s opinion is a victory for all California consumers,” Davidson said. “People who have become disabled — regardless of the cause — need no longer worry that an insurance company will dig through their medical files in an attempt to find a previous lab result, genetic test or medical condition to use as an excuse for refusing payment.” He added that the decision puts a halt to post-claim underwriting — a practice of selling a policy before deciding what will be covered. Paul Revere’s attorney, Gail Cohen of Los Angeles’ Barger & Wolen, was in court and could not return a call seeking comment. Davidson represented Mark Galanty, a Studio City, Calif., court reporter who was diagnosed in 1987 with HIV. A year later Galanty applied for a disability policy with Paul Revere. In 1994 he presented a claim for benefits due to AIDS. Paul Revere later denied Galanty’s claim on the basis that his illness had manifested itself prior to the date when the policy was issued. A trial judge and the 2nd District Court of Appeal agreed. But the Supreme Court did not reach the question of whether HIV is related to AIDS. The court instead said the incontestability clause was controlling. Still, Werdegar touched on Galanty’s illness when she criticized Paul Revere’s argument as “depending upon an unexpected and inobvious, if not unnatural, definition of the term ‘existed.’” But Werdegar also stressed that following the statutory provisions shouldn’t destroy an insurer’s ability to limit its risk. “Only an insurer, like Paul Revere in the case before us, that chooses to forgo both contractual protections against fraud and timely verification of the insured’s medical condition runs the risk of having to pay a claim that may turn out to be related to a sickness that first manifested itself before the policy’s inception date,” Werdegar wrote. California is just the latest state to tackle the issue. The Supreme Courts of Delaware, Hawaii, Maryland, Minnesota and New York have also resolved the question in the insured’s favor. At least four other states have reached similar conclusions in lower courts. Seven states have gone the other way. Galanty, whose birthday is this week, said he was relieved by the court’s decision. “I was trying to be responsible when I accepted a sales agent’s pitch about this policy,” Galanty said in a press release. “I was shocked when years later my claims were rejected.”

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