The headline reads "Mutual of Colorado Cancels Coverage of Child With Cancer". Wow. Outrageous and heartless.
What if the headline read "Mutual of Colorado accuses father of lying about the health history of his child" ?
The focus of the story should be:
WAS THERE A LIE ?
Hashing over the sad circumstance of the illness and how the lives of the family have been disrupted has nothing to do with answering the question: WAS THERE A LIE ?
Consider the headline: "Mutual of Colorado accuses truck driver of lying about painful bunions"
I never see bunion stories in the newspaper.
But the claims process is the same for the tuck driver and the child with cancer.
CLAIMS PROCESS
When a claim is filed shortly after the effective date of the policy, for a condition that is chronic, the insurance company is suspicious. Subsequent investigation is addressed to the questions 1) when did this condition begin? 2) is there a history of treatment for this condition, or any associated condition, in recent past? 3) is there a history of ANY other serious conditions in recent past?
Then, the information gathered is compared to the written application, which was the basis for the issuance of the contract.
The claims examiner asks:
Were the questions responded to accurately?
At the point in time the application was signed, what was the condition of the child?
Had there been a Dr visit a month prior? Three months prior? Had an appointment been made to see a Dr in the next few weeks?
In other words, did the parent make a material misrepresentation on the application.
At this point in the claims process, the contract is ripe for a rescission action.
But a good claims examiner looks at other facts.
Has this parent and child been covered by some form of insurance in the past 60 months? Or is this the first time they have joined the ranks of paying dues for health coverage? What is the reputation of the agent writing the coverage?
Has he been known to advise applicants to omit certain items of health history? Are the questions on the application clear? Would an applicant understand which question related to which disease process? Did this parent and child have coverage with Mutual of Colorado in the past under some group insurance plan? Could there be records in the file room at Mutual of Colorado describing the entire health history of the child when covered under the group insurance plan? Could the writing agent have attempted to place coverage with other insurers and failed because of the adverse health history?
At this point, the claims examiner has an accurate health history, an understanding of the information disclosed (and not disclosed) on the application, and the mitigating circumstances.
Claims examiner weighs the facts and asks "should I rescind?"
Or, "should I pay and expose my employer to hundreds of thousands of dollars of expenses for someone that did not obtain health insurance until recently? While other insured persons have been paying their premiums for the past 40 months, this insured had no insurance in force. Is this fair to the long term customers?"
These claims investigation processes are complex.
Good insurance companies rescind with well established facts. Bad insurance companies rescind based on suspicion and vague health history.
It is the duty of the various Departments of Insurance to sort out the good from the bad, and fine the offending companies in order that they may change their ways.
You would not expect an auto liability carrier to protect you if you purchased the policy the day after you ran the red light, nor would you expect your homeowners carrier to protect you if you purchased your policy the day after you had a burglary. Lies have consequences.
