A Claim Declined

Insurance providers pay claims. Obviously - but what makes a claim valid or not is the WORDING of the Contract. Your insurance policy, being a contract, is subject to legal obligations and legal limitations.

Recently a friend – let’s call him Pete - was diagnosed as having a gene mutation that meant he had an 80% chance of developing a hereditary form of stomach cancer that is incredibly difficult to detect, until it is at what is terms “Stage IV”. At that point, death within 12 months is the most usual outcome.

Pete had seen his older sister and other family members die from this disease – Hereditary Diffuse Gastric Cancer (HDGC). Just 2 years ago, his sister had a biopsy and the histology showed that she had already developed cancer to Stage IV. She died within the year.

Pete is in his early 40s and has three children - aged 15, 4 & 2. He undertook the gene test and it proved positive. He was advised that the best course of action was to have the total gastrectomy. This involves having the whole stomach removed and the oesophagus connected  directly  to  the  small  colon.

Pretty  radical,  I  know,  but  necessary  and  effective.. The Public System won’t provide this treatment until the cancer is present, but of course by then, it is too late. Catch #22.

Having a private medical insurance policy, Pete proceeded with all due haste. Once he had  a potential date for the operation, he put in his claim application. Hearing nothing back, he assumed it was all ‘okay’ and went into hospital for his surgery.

Now, I just want to point out that I was not his insurance adviser at that time. He’d purchased the policy through another adviser, since gone from the industry, meaning a third adviser was ‘holding’ the policy but had not, as yet, provided any review opportunities.

So, the procedure was completed and Pete was in Recovery when his wife had to inform him that the Insurance Company had declined the claim, under a ‘general exclusion’. The bill they were presented with was for $49,780.

A ‘General Exclusion’ is one that applies to ALL policies rather than one that is specific to the Life Insured. The most common example of a General Exclusion is that no life insurance policy will pay out if the Insured dies by suicide within the first 13 months.

In this case, the policy had a general exclusion on ‘prophylactic procedures where there was no sign or symptom of the disease present’. In this case, this general exclusion applied because, while the medical community recommended the gastrectomy as the ‘best practice’ option for Pete, the insurance policy contract wording COULD NOT pay because he had no ‘sign or symptom’ of diffuse gastric cancer.

You can imagine the stress that this decision caused to Pete & his partner with their young family.

$50,000 is a huge sum of money. Pete called me to ask whether I could explain the reasoning of the Insurance Company’s declining under this exclusion. I did some research around the legal position, and undertook to appeal to the Insurer to reconsider the decision.

My argument was simple enough. The most common prophylactic surgical procedure is elective mastectomy, in cases where the BRCA1 gene mutation is present (viz. Angelina Jolie). I pointed out that this is a whole different ballgame to Pete’s situation. With breast cancer, both early detection and effective treatment are entirely possible with very good longevity outcomes, which are improving all the time.

With Pete’s HDGC situation, early detection and treatment is not practically possible, and that the gastrectomy was, in fact, the only effective treatment available.

The Outcome? While Contractual Law made it impossible for the Insurer to be able to pay out under the policy, due to the exclusion being a general one, the Insurer did still see the point of the argument and elected to pay ‘ex gratia’ – the full amount of $49,780 (less his $250 excess).

The Point? Without an advocate to take the argument back to the Insurer, this expense would probably still be hanging over them, or would have maxed out their mortgage, in either paying the bill or a lawyer. Your valued adviser can advocate on your behalf as a client – and not charge for the service. Good luck trying to argue a contentious claim with your Bank Insurer…who do even you call? Probably a lawyer…

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