Denial by Operation of an Exclusion Clause

Contracts of insurance coverage are famous (some would say infamous) for what is commonly known as the “small print”. These are the often hard to read, densely worded sections of coverage that contractually permit an insurer to deny a claim for a diverse number of reasons or preconditions of coverage. In the case of group and individual disability contracts these exclusion clauses usually fall within one of the following categories:

  1. Pre-existing Condition

A denial because of a pre-existing condition is based on the occurrence of symptoms and/or medical treatment which occur during a specified time frame[1] before or after the “effective date of coverage” for a contract of insurance. The effective date of coverage is generally the first of the month on which you or your employer begin paying premiums.

A pre-existing condition denial is based on a review of your medical history, usually through the clinical records of your treating doctors. Although each case depends on the specific wording of the insurance contract, the exclusion clause generally states that if you showed signs or symptoms of the disabling condition within 90 days before or after the effective date of coverage, the insurance company does not have to pay benefits. The language that governs terms such as pre-existing clause exclusions can be difficult to understand and often involves use of and some understanding of medical terms and conditions. Certain words can have different meanings in different contexts.

Once again, just because the insurance company tells you your claim is excluded as a pre-existing condition, this doesn’t mean the insurer’s analysis is correct or conforms with legal or medical realities. An example of this is a claim for disability involving a specific medical condition, such as cancer. After the claim is received the insurance company will order and review clinical records which may reveal doctor’s visits within the pre-existing time period and which may reveal complaints of certain symptoms. The insurer may then deny your claim on the basis that you had signs, symptoms or treatment for pre-existing cancer. This may not be a valid analysis. The insurer is working back from the diagnosis and may be analyzing your prior symptoms and medical visits out of context. Your clinical records may in fact be consistent with an alternative diagnosis or condition and medically have nothing to do with your cancer.

If you have been denied benefits on the basis of a pre-existing condition, remember there is always another side to the story. The sooner you put the facts before experienced legal counsel, the sooner you will understand your options.

  1. Not Actively at Work

Many group policies contain an exclusionary provision that requires the insured to be “actively at work” within a specific time frame before an application for coverage is made.

The “actively at work” clause usually stipulates a minimum number of hours per week and a minimum number of weeks which you must have completed within weeks or months of making your application.

This clause can become a tragic catch-22 for people who struggle to continue with employment in spite of a disabling condition and start to work fewer hours. If the delay between full time work and reduced work is long enough, once a claim is actually made, the insurer can claim that you are excluded from coverage because your circumstances do not comply with the “actively at work” clause.

If your claim has been denied on this basis, an experienced legal counsel may be able to apply certain equitable principles of the common law to assist you, but it is a very good idea to involve both your HR department and your insurer as soon as you start to decrease your work hours as a result of a medical condition.

[1] The time frame can be as long as five years or more prior to coverage, but in the case of wage replacement coverage, is usually in the range of 90 days. A similar time frame usually applies after the effective date of coverage.