86 Hawai'i 262, Estate of Doe v. Paul Revere Ins. Group

• Decision Date: 18 December 1997
• Docket Number: No. 19403,19403
• Citation: 948 P.2d 1103
• Parties: 86 Hawai'i 262 ESTATE OF John DOE, a pseudonym, Plaintiff-Appellant/Cross-Appellee, v. PAUL REVERE INSURANCE GROUP, a Subsidiary of Textron, Inc., James Lui-Kwan, Defendants-Appellees/Cross-Appellants, and John Does 1-10; Jane Does 1-10; Doe Corporations 1-10; Doe Partnerships 1-10; Roe "Non-Profit" Corporations 1-10; Roe Governmental Agencies 1-10, Defendants.
• Court: Hawaii Supreme Court

Page 1103

948 P.2d 1103

86 Hawai'i 262

ESTATE OF John DOE, a pseudonym, Plaintiff-Appellant/Cross-Appellee, v. PAUL REVERE INSURANCE GROUP, a Subsidiary of Textron, Inc., James Lui-Kwan, Defendants-Appellees/Cross-Appellants, and John Does 1-10; Jane Does 1-10; Doe Corporations 1-10;

Doe Partnerships 1-10; Roe "Non-Profit"

Corporations 1-10; Roe Governmental

Agencies 1-10, Defendants.

No. 19403.

Supreme Court of Hawai'i.

Dec. 18, 1997.

Kirk H. Cashmere and David S. Brustein, on the briefs, Honolulu, for plaintiff-appellant/cross-appellee Estate of John Doe.

John R. Lacy and Margaret Jenkins Leong, of Goodsill Anderson Quinn and Stifel, on the briefs, Honolulu, for defendant-appellee/cross-appellant Paul Revere Insurance Group.

Before MOON, C.J., and KLEIN, LEVINSON, NAKAYAMA and RAMIL, JJ.

LEVINSON, Justice.

This appeal affords us our first opportunity to construe the application of Hawai'i Revised Statutes (HRS) chapter 431, article 10A, part I (1993), which governs "individual accident and sickness [insurance] policies," to the provisions of a "disability income insurance policy." The outcome-dispositive question presented is whether, under Hawai'i law, the standard "incontestability clause" of such a policy precludes an insurer from denying total disability benefits caused by an insured's HIV infection that arguably "manifested" itself prior to the policy's effective date of coverage, even though (1) the insurer is not seeking to void the policy on the ground that the insured fraudulently misstated his physical or medical condition on his insurance application, (2) the "disease or physical condition" is "not excluded from coverage by name or specific description" as of the effective date of coverage, and (3) the "contestability period" set forth in the policy has already lapsed. We answer the question in the affirmative.

In brief, the present dispute arises out of a disability income insurance policy (the policy), issued on October 22, 1985 to the former plaintiff-appellant John Doe (now deceased), ¹ by the defendant-appellee Paul Revere Insurance Company (Paul Revere). ² In November 1991, Doe tendered a claim for benefits, asserting that he was totally disabled due to his HIV infection. ³ After making disability income payments for three months, Paul Revere terminated further benefits and demanded that Doe repay the $4500.00 that he had already received. Paul Revere asserted that Doe's disability was not a covered loss under the terms of the policy because his HIV infection first "manifested" itself before the policy's date of issue. Doe then filed suit, inter alia, against Paul Revere, see supra notes 1 and 2, alleging claims for relief sounding in breach of contract (first claim), promissory estoppel and unjust enrichment (second claim), specific performance (or any other appropriate equitable remedy) by virtue of waiver, acquiescence, laches, equitable estoppel, and unclean hands (third claim), breach of the duty to deal in good faith (fifth claim), and unfair and deceptive trade practices (sixth claim). ⁴

Doe appeals from the circuit court's judgment entered in favor of Paul Revere and against Doe after the circuit court granted Paul Revere's motion for summary judgment. Doe asserts as points of error that the circuit court: (1) erred in ruling--notwithstanding that the "contestability" period had run--that the policy's "incontestability" clause did not bar Paul Revere from denying coverage for an illness that first "manifested" itself prior to the policy's effective date; (2) erred in ruling that Doe's HIV infection constituted a preexisting condition excluded from coverage under the policy; (3) misapplied the appropriate standard to determine when a condition is "manifest" where an insured has previously sought medical care or treatment; (4) erred in ruling that Doe's condition was "manifest" prior to the policy's effective date; and (5) misconstrued the medical evidence in ruling that it was undisputed that Doe had received treatment for HIV infection prior to the policy's effective date. ⁵

It is unnecessary for us to reach Doe's third, fourth, and fifth points of error in order to render our decision in this appeal. Because we agree with Doe's first two points, and for the reasons discussed in this opinion, we (1) vacate the circuit court's judgment and (2) remand this case for (a) the entry of an order granting partial summary judgment as to liability in favor of Doe's estate and against Paul Revere regarding Doe's first claim for relief (breach of contract) and (b) further proceedings, consistent with this opinion, regarding (i) the estate's damages in connection with the first claim for relief and (ii) all remaining issues regarding the second, third, and fifth claims for relief.

I. BACKGROUND

The record reflects the following undisputed facts: Doe was a dentist, who sought treatment in May 1983 from E. Blossom Wang, M.D., for nonspecific symptoms, including swelling of the lymph glands, ⁶ occasional diarrhea, and fatigue. Doe was diagnosed as having amebiasis, which was successfully treated with an antimicrobial. ⁷ Dr. Wang's records also indicate that Doe's "helper-suppressor ratio revealed a decreased helper to suppressor ratio with lower normal helper cells and decreased suppressor cells[,] which may indicate immune deficiency status." (Emphasis added.) ⁸ Nevertheless, at that time, Doe exhibited delayed hypersensitivity reactions to two of five antigens administered subcutaneously--a result that was not compatible with a diagnosis of AIDS. ⁹ Furthermore, the result of a gallium scan, ordered by Dr. Wang to detect the presence of AIDS-related infection or malignancy, was "basically normal."

Dr. Wang referred Doe to Steven Berman, M.D., an infectious disease specialist, to attempt to rule out AIDS as a possible diagnosis. Although his clinical record of Doe's July 20, 1983 examination indicates "POTENTIAL AIDS," Dr. Berman testified that this notation did not indicate that an AIDS diagnosis had been established; rather, in light of the intense publicity being given to AIDS (which was newly discovered as of the early 1980s), it reflected that Doe, like many other persons, was seeking medical evaluation because he had learned that he was in a high risk epidemiological group--such as homosexual and bisexual men, intravenous drug users, or persons with a history of blood transfusions--and desired reassurance that he was not infected with the HIV virus. Indeed, following his clinical examination, Dr. Berman noted in his records that Doe was a "[h]ealthy dentist" and recommended only that Doe revisit as needed. Doe did not see Dr. Berman again until 1986.

In a July 1985 health assessment, Dr. Wang reported that Doe's (1) leukopenia, ¹⁰ first observed in 1983, was "stable and improving," (2) 1983 "[a]bnormal T cell helper to suppressor ratio" had been "repeated in January of 1985 and [was] recently completely normal," and (3) "diffuse lymphadenopathy," noted in 1983, was "[n]ow completely resolved," and that, when she had "last seen [Doe] in 1985, both January and February, he looked well physically and had no complaints."

In October 1985, Doe completed a pre-printed application form, prepared by Paul Revere, seeking policies insuring him for "disability income" and "overhead expense." Doe disclosed on the application that Dr. Wang had examined and treated him and had performed various laboratory tests. In connection with his insurance application, Doe was examined by a paramedic, who was under contract with Paul Revere, and agreed to submit to medical testing. ¹¹ Despite the fact that Doe executed a release authorizing Paul Revere to review his medical records, Dr. Wang's records reflect no request from Paul Revere to do so, although they do document that she submitted clinical records and a medical report to two life insurance companies, which appear to have refused Doe coverage on the basis of his medical history.

As noted above, Paul Revere issued the policy to Doe on October 22, 1985. It appears to be uncontroverted that, at all times relevant to this litigation, Doe maintained the policy in full force and effect by making timely payment of all required premiums.

Pursuant to its terms, the policy obligated Paul Revere, as a general matter, to pay Doe "the benefits provided in this Policy for loss due to Injury or Sickness." The term "Sickness" (as opposed to "sickness"), the construction of which is pivotal to our analysis, was contractually defined to mean "sickness or disease which first manifests itself after the Date of Issue while [Doe's] Policy is in force." (Emphasis added.)

Specifically, the policy contracted in relevant part to

pay the Total Disability benefit during [Doe's] continuous Total Disability.[ ¹²] The monthly amount [Paul Revere] will pay is shown on the Policy Schedule.[ ¹³

This benefit will begin on the Commencement Date.[ ¹⁴] [Paul Revere] will continue to pay it while [Doe] remain[s] Totally Disabled. But in no event will [Paul Revere] pay beyond the Maximum Benefit Period.[ ¹⁵] ...

The policy, however, contained the following exclusion:

3.2 PRE-EXISTING CONDITIONS LIMITATION.

[Paul Revere] will not pay benefits for a Pre-existing Condition if it was not disclosed on [Doe's] application. Also, [Paul Revere] will not pay benefits for any loss [Paul Revere] ha[s] excluded by name or specific description.

In connection with the "pre-existing conditions limitation," the policy defined a "Pre-existing Condition" as a

Sickness [as opposed to "sickness"] or physical condition for which, prior to the Date of Issue:

a. Symptoms existed that would cause an ordinarily prudent person to seek diagnosis, care, or treatment; or

b. Medical advice or treatment was recommended by or received from a Physician.

(Emphases added.) Nevertheless, the policy contained the following "incontestability" provision:

10.2 INCONTESTABLE.

a. After [Doe's] Policy has...