Lambda Fights Insurer's Refusal to Pay Disability Benefits to Man with AIDS

(LOS ANGELES, May 27, 1998) -- Lambda Legal Defense and Education Fund is urging a California appeals court to rule against an insurance industry practice aimed at denying disability benefits to people with AIDS and other illnesses.

On Wednesday, May 27, at the California Court of Appeal in Los Angeles, Lambda will argue on behalf of Mark Galanty, who is appealing a trial court decision that upheld the Paul Revere Life Insurance Company's refusal to pay his AIDS-related disability claim.

Following the hearing, Galanty and his counsel, Lambda Cooperating Attorney Mary Newcombe and Supervising Attorney Jon W. Davidson, will be available to talk to reporters in the lobby of the ground floor of the courthouse building.

Paul Revere sold Galanty a disability income insurance policy in 1988, but after accepting his premiums for more than five years, insisted that, because he had tested positive for HIV antibodies before he bought the policy, he was ineligible for benefits for an AIDS-related disability.

Galanty, a 50-year-old Los Angeles resident, worked as a court reporter until 1994, when he was diagnosed with AIDS and began to suffer from pain in his hands and other medical conditions that forced him to stop working.

Said Galanty, "Paul Revere was happy to take my premium payments while I worked; it's unconscionable that the company then turned around and refused to honor its promise to pay me if I later became disabled. It didn't bother asking about my immune system when it issued the policy -- Paul Revere is just using HIV as an excuse."

Davidson said, "For many people living with AIDS, disability insurance is the only thing that stands between them and poverty. We are very hopeful that the appellate court in California will join the increasing number of courts around the country that are stopping insurance companies from making such devious end-runs around their legal obligations in violation of the rights of people living with AIDS and other illnesses."

California, like most states, prohibits insurers from denying claims for disabilities that start more than two years after a policy is issued, and the policy the Massachusetts-based company sold Galanty expressly contained such an "incontestability" clause.

"The point of the 'incontestability' provision is to prohibit exactly what occurred here --- 'post-claim underwriting,'" said Newcombe, adding, "Just like the insurance giant in John Grisham's The Rainmaker, this company must be stopped from the practice of selling an insurance policy then fashioning an excuse not to pay once a claim is made."

Explaining post-claim underwriting, Newcombe said, "Instead of investigating and processing a policy application thoroughly at the outset, some insurers sell policies then check records only if and when a disability occurs. At that point, the policy owner is left high and dry -- he or she has paid years of premiums and can no longer negotiate a different policy with a different carrier. If Mark had high blood pressure, the law would not permit Paul Revere to take his money for five years then deny a claim for disability based on a heart attack unless the policy actually excluded such coverage. The fact that the disability in this case was AIDS-related does not justify any different result."

The lawsuit includes claims for breach of contract and bad faith insurance practices. In December 1996, Los Angeles Superior Court Judge David Workman, describing this as a question of "first impression" in California, granted Paul Revere's motion for summary judgment and dismissed the case. The appellate court will hear an appeal of that ruling.

WHO: Lambda Supervising Attorney Jon W. Davidson and Lambda Cooperating Attorney Mary Newcombe of Caldwell, Leslie, Newcombe & Pettit represent Mark Galanty in appeal against an insurer's refusal to pay HIV-related disability claim

WHAT: Oral argument in Galanty v. The Paul Revere Life Insurance Company

WHEN: Wednesday, May 27, 9:00 a.m. Pacific time

WHERE: Division One of the Second Appellate District of the California Court of Appeal, 300 South Spring Street, Second Floor, Los Angeles

Contact: Jon Davidson 213-937-2728, ext. 228; Peg Byron 212-809-8585, 888-987-1984