Group disability insurance offers financial protection by providing income replacement in the event of an individual’s inability to work due to illness or injury. Yet, navigating these policies can be complex, particularly due to the often-included pre-existing condition exclusions. These exclusions limit coverage for conditions that existed before the policy’s effective date, frequently leading to unforeseen hurdles and claim denials.  In this article, we aim to demystify nuances of pre-existing condition exclusions in disability claims, providing you with essential knowledge and guidance to navigate these challenges effectively.

What are Pre-Existing Conditions?

A pre-existing condition refers to any health issue, injury, or illness an individual has before obtaining the insurance coverage. The goal of pre-existing conditions policy exclusions to  is to prevent individuals from securing coverage after discovering or anticipating a condition that could result in a disability claim.

Function of Pre-Existing Condition Exclusions

Pre-existing condition exclusions serve as a means for insurance companies to manage risk. They help prevent adverse selection, where individuals might obtain coverage knowing they have an imminent risk of disability due to a pre-existing condition.

Typically, these exclusions may restrict coverage for a specified period after the policy’s effective date. During this period, the policy might not cover disabilities caused by pre-existing conditions. However, once this waiting period elapses, coverage for pre-existing conditions could begin.

Ambiguity in Pre-Existing Condition Exclusion Language

One major point of contention in legal cases involving pre-existing condition exclusions is the ambiguity of the policy language. If the exclusion’s wording is vague or open to interpretation, courts tend to favor the insured party. Ambiguous language could result in a broader interpretation of coverage, potentially favoring the insured’s claim.
Related Article: How to Defeat Ambiguities in Disability Insurance Claim Forms

Pre-Existing Condition Must Be Known or Suspected

Disability insurers will sometimes try to stretch the language of a pre-existing condition exclusion to encompass treatment for conditions that were neither diagnosed nor suspected during the lookback period. For example, in Lawson ex rel. Lawson v. Fortis Ins. Co., 301 F.3d 159, 165 (3d Cir. 2002), the defendant insurer denied coverage for the claimant’s cancer diagnosis because she received treatment during the lookback period for a respiratory infection that later proved to related to a cancer diagnosis.  The Third Circuit Court of Appeals ruled that the insurer abused its discretion because a patient cannot receive treatment “for” a condition that is neither diagnosed nor expected, and where the treatment offered was the wrong treatment for a cancer patient.

Similarly, in Pitcher v. Principal Mut. Life Ins. Co., 93 F.3d 407 (7th Cir. 1996), the Seventh Circuit ruled that an insurer abused its discretion when it denied disability benefits to breast cancer patient who underwent mammogram during the lookback period, observing that the mammogram was not “for” breast cancer but rather for the monitoring for her longstanding fibrocystic breast condition.  The court further noted that mammograms are not “treatment” but rather a diagnostic procedure.

Proximate Causation Required

Disability insurers may not interpret the pre-existing condition exclusion in a policy so broadly as to encompass complications resulting from a pre-existing condition. In Fought v. UNUM Life Ins. Co. of Am., 379 F.3d 997 (10th Cir. 2004), the defendant insurer denied coverage for the claimant’s due to staph infection that resulted from an elective heart surgery she underwent during the lookback period.  The Tenth Circuit ruled that the forgoing decision was an abuse of discretion because it relied on classic but/for causation when proximate causation is required.

Policyholder Responsibilities Relating to Pre-Existing Conditions

Policyholders have a duty to disclose their medical history accurately when applying for disability insurance. Failure to disclose pre-existing conditions may result in the denial of claims if those conditions lead to a disability during the exclusionary period.

Seeking Legal Advice for Pre-existing Condition Exclusions in Disability Claims

In cases where disability benefits disputes arise over the application of pre-existing condition exclusions, seeking legal advice becomes crucial. An experienced disability insurance attorney can help interpret policy language, assess the validity of a claim denial, and advocate for the policyholder’s rights.

Pre-existing condition exclusions in group disability insurance policies serve as a crucial component for insurers to manage risk. However, the interpretation and application of these exclusions can become contentious, especially in cases where the language is ambiguous or subject to multiple interpretations. Policyholders should carefully review policy terms and seek legal guidance when faced with claim denials based on pre-existing condition exclusions to ensure fair treatment and proper understanding of their coverage rights.

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