California Supreme Court Rules in Favor of AIDS Disability Claim.

Business Editors

FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Aug. 9, 2000

-- Mutual Benefits Corp. Applauds the Recent California Supreme Court Ruling Which Further Supports the Definition of Contestability Periods and Banishes Any Uncertainty When a Claim is Filed --

Mutual Benefits Corporation (MBC), the country's leading viatical and senior settlement provider since 1994, feels that the recent California Supreme Court's unanimous ruling in favor of an individual's right of insurance coverage once again confirms the validity of contestability periods in insurance law. The precedent had already been set for this case by similar rulings of the Supreme Courts of Delaware, Hawaii, Maryland, Minnesota and New York, and by lower courts all across the country. This ruling not only helps protect any consumer who purchases a life insurance policy, it makes the process of receiving a claim easier and clearer.

On June 18th, the court ruled that California law gives insurance companies two years to screen new policyholders for pre-existing conditions and then entitles them to coverage for disabilities, even if they were ill when signed up. Specifically, Mark Galanty, 52, of San Fernando Valley, tested positive for HIV in 1987. He was told the result was inconclusive unless confirmed by a second test, which he chose not to take. At the time, state law banned asking about HIV on insurance forms. He bought his Paul Revere disability policy in 1989. In 1994, Galanty was diagnosed with AIDS. The insurer paid his benefits to April 1995, then ceased paying benefits once they discovered the HIV test. The Supreme Court's decision overturned the lower court's ruling that allowed an insurance company to deny AIDS disability benefits to a man who had his policy for five years on the grounds that his undisclosed HIV test showed that the disease had already manifested itself, making him ineligible for coverage under the terms of the policy. The lower court ruling alarmed advocates of AIDS and terminal illnesses and disability rights groups. They feared that insurance companies would use the same reasoning to cut off benefits on grounds that undisclosed tests done years earlier had shown a susceptibility to a later disease such as high cholesterol or blood sugar or genetic markers for breast and prostate cancer. They also believed that denying benefits in these cases would discourage people from getting medical testing.

Vice President of Mutual Benefits Corp., Steven Steiner says, "The contestability of every insurance policy must hold up in court once it has been met. Insurance companies have at least two years to contest any policy and we feel this is ample time to investigate an insured's medical background. Insurers can ask for any type of testing in their applications. In this particular case in California, the insurance company asked for and received Mr. Galanty's medical records before issuing the policy. The company did not at that time ask Galanty to submit to any tests of any kind. How could the Supreme Court of California not find in favor of Mr. Galanty when it is so clear he complied with the insurer's requirements? This is a victory not only for AIDS patients everywhere, hopefully it will set a precedent when dealing with collecting benefits for anyone with any disability."

The NAIC (National Association of Insurance Commissioners) model statute the California legislation adopted was understood, according to the Supreme Court's published opinion, "by its drafters, including the Insurance Commissioner who urged the law's adoption, as introducing a new principal...in insurance by guarantying to the insured, that after the policy has been in force, no claim will be denied on the basis of misstatements in the application. Paul Revere was free, before issuing its policy to Galanty, to examine his medical condition and to exclude any preexisting condition by name." . MBC is licensed in more states than any other viatical company that funds policies through individual purchasers. The sale of a life insurance policy by someone who is terminally ill to a private purchaser who collects the benefits when the policy matures is known as a viatical settlement. Most recently, MBC participated, through its legal counsel, in the additions to Senate Bill 1956 in Florida which called for additional disclosures about the specifics of a viatical transaction to be made available to purchasers and that stronger penalties were instituted against fraudulent activities. MBC's policy has always been to protect both the viators and purchasers by funding only noncontestible policies from insurance companies rated B+ or better by AM Best, Moody's or Standard and Poors. MBC is the largest viatical and life settlement provider in the U.S. and the face value of insurance policies viaticated by them totals more than $700 million, to date.

If you'd like to interview Steven Steiner, or receive the full text of California Supreme Court's Opinion on Galanty vs. Paul Revere, or if you require any further information, please contact Kim Morgan at Mutual Benefits Corporation, [phone] or at 1-800-896-7990 Fax: [phone], e-mail: [e-mail]