Insurance Coverage – Do You Have It?

Residents of Grand Prairie, Arlington, Fort Worth, Dallas, Irving, Richardson, Hurst, Euless, Bedford, Grapevine, Mansfield, and other places all over the metroplex area of North Texas may wonder if the insurance coverage they have bought for themselves is good. Or is the insurance company going to find a reason to not honor their end of the bargain. The following case is an example of how these cases get examined.
The case is styled, Provident American Insurance Company v. Denise Castaneda. The opinion was issued in 1998, by the Texas Supreme Court. Here is some background information.
Denise Castaneda’s father, Guillermo, applied for medical insurance with Provident American Insurance Company in May 1991. He sought a policy that would cover the entire family including Denise., who was twenty-one at the time, her sister, and their brother Guillermo, Jr. During the application process, Guillermo failed to disclose that just two days before he applied for the policy, Jr. had received medical attention from a physician for jaundice, anemia, and suspected hepatitis. Denise had received treatment for jaundice and hepatitis several years prior to the date the insurance was applied for.
Provident issued a policy effective June 17, 1991. The policy contained two limitations that are relevant to the case. (1) it did not cover expenses resulting from a sickness that “manifests” within thirty days of the policy’s effective date; and (2) it excluded diseases or disorders of certain internal organs, including the gallbladder, unless the loss occurred more than six months after the policy’s effective date.
Less than thirty days after the policy issued, the family learned that Denise’s uncle had been diagnosed with hemolytic spherocytosis (HS). The treatment for this condition is to remove the spleen and, if gallstones are present, the gallbladder. The Castanedas were tested for HS at the request of their doctor. Denise and Jr. had exhibited conditions of this disease all of their lives, and on July 20, 1991, the third day after the thirty day period expired, they were taken to a physician who diagnosed them that same day with HS. Two weeks later, Denise and Jr. each had their spleen and gallbladder surgically removed.
The Castanedas submitted claims to Provident, which were denied. Provident first asserted the six-month policy exclusion for disorders of the gallbladder but later denied the claims on the basis that HS had manifested within thirty days of the policy’s effective date.
The Castaneda’s sued Provident and a jury found in their favor. This appeal followed.
This court began its analysis of the case by seeing (1) whether Provident denied the claim without a reasonable basis or after its liability had become reasonably clear, (2) whether there was a misrepresentation about the policy, and (3) whether Provident had engaged in unfair claims settlement practices.
In reviewing the case, the court said that at varying times, Provident gave varying reasons for denying the claim, but all were grounded in a common nucleus of facts. Provident cited a policy provision that excluded coverage for a sickness or disorder involving the gallbladder unless the loss occurred more than six months after the date the policy went into effect. Provident also relied on policy provisions that limited coverage to an illness or disease that first manifested more than sixty days after the policy went into effect. At least one Provident employee thought that the claim could have been denied based on the pre-existing condition provision of the policy, although that clause was never invoked. Based on all of this the Court concluded that there was plenty of evidence for Providence to deny the claim, thus there was no basis for the jury to find that Provident was being unreasonable.
In its opinion the court used several pages in a discussion of the claims and the insurance policy and ultimately decided the Provident did nothing wrong and thus reversed the jury’s verdict and rendered judgment that Castaneda take nothing.
The facts in this case when compared to the policy were strong against Castaneda. But the case is a good example for showing how the court looked at and reviewed this case and how they would look at other, similar types of cases.