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by Robin Gerber, AARP Bulletin, October 12, 2009
Editor’s note: Hear Ye! Hear Ye! explores a real court case. Read about it below and decide how you would rule. Then read the actual verdict and let us know if you agree.
Health insurance woes
Thomas Aul, a lawyer with his own practice, and his wife, Patricia, were in their mid-50s and in good health. But their skyrocketing health insurance premiums had sent them into despair. Searching for new insurance, they found Golden Rule, a company with premiums almost 50 percent lower than what they were paying. The Auls sent in their application on June 28, 2000. In it, they included a disclosure that Patricia had benign breast cysts, which her doctor assured her were of no concern.
Soon, Patricia received a call from an underwriter at Golden Rule. After some questions, the underwriter noted that Patricia had tests to keep track of changes in a small, noncancerous cyst. Golden Rule then sent the Auls an amendment to the application that said, “Patricia has a breast cyst which is being followed. The results of all exams were normal.” Thomas Aul signed the amendment and returned it on July 27, 2000.
A new policy
On Aug. 7, the Auls received an insurance policy effective Aug. 1 with a rider that excluded coverage for “any disease or disorder of the breasts.” When Patricia called Golden Rule to find out why, she was told that the cyst had prompted the rider even though the company’s underwriting manual did not require it. She could not convince Golden Rule to remove the rider or make it any less strict. She was told that if the cyst went away, she could request that the rider be removed, although there were no guarantees.
The Auls thought the rider was too broad and not warranted by Patricia’s health history, but they decided they had to accept the policy and fight over the exclusion once they were insured. Their other insurance policy had ended Aug. 1, and they didn’t want to be left without coverage.
About five months after getting the policy, Patricia had a follow-up mammogram, which showed the cysts still benign. The Auls assumed that their insurance agent or Golden Rule would adjust the rider and did not directly request any kind of alteration.
Twenty-two months later, Patricia was diagnosed with breast cancer. When the Auls submitted claims for $123,000 to Golden Rule, they were told that coverage was denied. The restrictive rider was still in effect.
In 2004, the Auls sued Golden Rule in circuit court claiming that the rider was unconscionable. They argued that there was no medical basis for the rider because breast cancer had no connection to Patricia’s fibrocystic breast condition. They provided doctors’ letters stating that the rider did not make medical sense. Their surgeon wrote that the rider was “unethically placed.” Golden Rule, the Auls said, had forced them into accepting the unfair exclusion by sending the policy after their other coverage had lapsed. If they had not accepted the Golden Rule policy, they would have been without coverage and would have had to disclose Golden Rule’s unfair rider to other insurers. With the black mark of Golden Rule’s rider on their record, they would never have found another policy, the Auls argued. It was unconscionable for Golden Rule to force them into the policy through a rider that was totally unwarranted.
Golden Rule argued that the Auls were fully aware of the rider, which was part of the contract they signed to receive insurance. Insurers have the right to limit their liability and Patricia’s breast cysts had triggered the rider. If the Auls didn’t like their policy, they could have applied for other insurance.
Do you think the rider on the Auls’ policy was fair? How would you rule?
Robin Gerber is a lawyer and the author of Barbie and Ruth: The Story of the World’s Most Famous Doll and the Woman Who Created Her.
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