Galanty v. Paul Revere Life Ins. Co.

• Decision Date: 17 August 1998
• Docket Number: No. B113007,B113007
• Citation: 77 Cal.Rptr.2d 589,66 Cal.App.4th 15
• Court: California Court of Appeals Court of Appeals
• Parties: Previously published at 66 Cal.App.4th 15 66 Cal.App.4th 15, 98 Cal. Daily Op. Serv. 6410, 98 Daily Journal D.A.R. 8853 Mark GALANTY, Plaintiff and Appellant, v. PAUL REVERE LIFE INSURANCE COMPANY, Defendant and Respondent.

Page 589

77 Cal.Rptr.2d 589

Previously published at 66 Cal.App.4th 15

66 Cal.App.4th 15, 98 Cal. Daily Op. Serv. 6410,

98 Daily Journal D.A.R. 8853

Mark GALANTY, Plaintiff and Appellant, v. PAUL REVERE LIFE INSURANCE COMPANY, Defendant and Respondent.

No. B113007.

Court of Appeal, Second District, Division 1, California.

Aug. 17, 1998.

Review Granted Nov. 4, 1998.

Lambda Legal Defense and Education Fund, Inc., Jon W. Davidson, Hedges & Caldwell, Caldwell, Leslie, Newcombe & Pettit and Mary Newcombe, Los Angeles, for Plaintiff and Appellant.

Barger & Wolen LLP, Gail E. Cohen and Larry M. Golub, San Francisco, for Defendant and Respondent.

MASTERSON, Associate Justice.

Mark Galanty appeals from a summary judgment in favor of respondent The Paul Revere Life Insurance Company. His appeal presents the following question of first impression: When a disability insurance policy limits its coverage to a "sickness" that "first manifests itself" after the effective date of the policy, does the incontestability clause of the policy override the coverage limitation and require coverage for a sickness that was manifest before coverage commenced? We hold that the incontestability clause does not have that effect and accordingly affirm the judgment.

BACKGROUND

As the result of a test in June of 1987, appellant learned that he was HIV positive. Shortly thereafter he consulted Dr. Anthony Scarsella, a physician who was an AIDS/HIV specialist. Appellant consulted Dr. Scarsella to ascertain whether symptoms he suffered were caused by his HIV positive condition or by the flu. Almost two years later appellant applied to respondent for a policy of disability insurance. The application for insurance (after a series of medical history questions) asked appellant if in the past five years he "had any medical advice or operation, physical exam, treatment, illness, abnormality or injury not listed above." Appellant answered "yes." In the space provided, he said that he had had a benign cyst removed in 1985 or 1986 and that in July 1987 and February 1988 he had seen Dr. Scarsella for "flu." Appellant did not tell respondent that he previously tested positive for HIV. In the course of deciding whether to issue the policy, respondent obtained Dr. Scarsella's medical records on appellant. Nothing in these records indicated that appellant had tested positive for HIV or that Dr. Scarsella was an AIDS/HIV specialist.

Respondent then issued to appellant a preferred professional disability income policy with an effective date ("Date of Issue") of March 17, 1989. The policy covered the risk of "sickness," which it defined as a "sickness or disease which first manifests itself" after the Date of Issue of the policy. The policy also contained an exclusion for preexisting conditions, viz., "We will not pay benefits for a Pre-Existing Condition if it was not disclosed on Your application. Pre-Existing Condition means a sickness or physical condition for which prior to the Date of Issue: [p] a. Symptoms existed that would cause an ordinarily prudent person to seek diagnosis, care, or treatment; or [p] b. Medical advice or treatment was recommended by or received from a Physician. [p] Also We will not pay benefits for any loss We have excluded by name or specific description."

The policy also contained, as required by law (Ins.Code, § 10350.2), an incontestability clause: "a. After Your Policy has been in force for 2 years, excluding any time You are Disabled, We cannot contest the statements in the application. [p] b. No claim for loss incurred or Disability that starts after 2 years from the Date of Issue will be reduced or denied because a sickness or physical condition not excluded by name or specific description before the date of loss had existed before the Date of Issue."

More than two years after the Date of Issue, appellant submitted a claim for disability benefits to respondent. He claimed that he was suffering from AIDS and related illnesses that prevented him from working. He said that he first saw his physician for this condition in July 1994 and became unable to work on August 24, 1994. Dr. Scarsella, the AIDS/HIV specialist who had seen appellant before he applied for the policy, filled out an attending physician's statement. Therein Dr. Scarsella stated his primary diagnosis as AIDS. Respondent began paying benefits under the policy on October 23, 1994.

In February 1995, respondent asked appellant to sign an authorization to obtain his medical records from UCLA. Appellant refused. In March 1995, respondent requested that appellant provide it with the date on which he tested positive for HIV and the facility at which he was tested. Appellant refused. Further correspondence over the

ensuing months was fruitless, since appellant failed to supply the requested information. Respondent then stopped paying the disability benefit. During the exchange of correspondence, one of appellant's attorneys told respondent that appellant's UCLA records could not be used to make any insurance determination pursuant to statute and that appellant had "tested positive for antibodies to HIV in July of 1987, long before he was solicited to buy the Policy."

CONTENTIONS

Appellant's principal contention is that the incontestability clause in the policy bars respondent from contesting his claim for benefits. Alternatively, he asserts that even if respondent were not so barred, summary judgment was not proper since there was a triable issue of material fact as to whether a positive HIV test constitutes a manifestation of sickness.

For its part, respondent contends that because appellant's sickness was manifest before the Date of Issue of the policy, it was not a covered risk and accordingly could not be used as a basis for seeking benefits under the policy.

DISCUSSION

1. Standard of Review

A summary judgment is properly granted if there is no question of fact and the issues raised by the pleadings may be decided as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Mars v. Wedbush Morgan Securities, Inc. (1991) 231 Cal.App.3d 1608, 1613, 283 Cal.Rptr. 238.) In determining the propriety of a summary judgment, we are limited to those facts shown by the evidentiary materials submitted, as well as those admitted and uncontested in the pleadings. (Sacks v. FSR Brokerage, Inc. (1992) 7 Cal.App.4th 950, 962, 9 Cal.Rptr.2d 306; McDaniel v. Sunset Manor Co. (1990) 220 Cal.App.3d 1, 5, 269 Cal.Rptr. 196.)

In our review we exercise independent judgment in determining whether there are no triable issues of material fact and the moving party is thus entitled to judgment as a matter of law. (Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 579, 37 Cal.Rptr.2d 653; Torres v. Cool Carriers A.B. (1994) 26 Cal.App.4th 900, 904, 31 Cal.Rptr.2d 790.) We will uphold the judgment if it is correct on any ground, regardless of the reasons the trial court gave. (Biljac Associates v. First Interstate Bank (1990) 218 Cal.App.3d 1410, 1419, 267 Cal.Rptr. 819.)

In the absence of conflicting extrinsic evidence, interpretation of an insurance policy is a question of law which may be resolved by the court on summary judgment. (Code Civ. Proc., § 437c, subd. (c); Pacific Employers Ins. Co. v. Superior Court (1990) 221 Cal.App.3d 1348, 1354, 270 Cal.Rptr. 779; Pepper Industries, Inc. v. Home Ins. Co. (1977) 67 Cal.App.3d 1012, 1018, 134 Cal.Rptr. 904.) We make an independent determination as to the meaning of the policy. (Pacific Employers Ins. Co. v. Superior Court, supra, 221 Cal.App.3d at p. 1354, 270 Cal.Rptr. 779.)

In interpreting the language of the policy, the words used should be given their plain, ordinary meaning unless the policy clearly indicates the contrary. (St. Paul Fire & Marine Ins. Co. v. Superior Court (1984) 161 Cal.App.3d 1199, 1202, 208 Cal.Rptr. 5.) Where the language is clear and unambiguous, we should not give it a strained interpretation in order to impose on an insurer a liability it has not assumed. (Ibid.; Pacific Employers Ins. Co. v. Superior Court, supra, 221 Cal.App.3d at p. 1354, 270 Cal.Rptr. 779.)

2. Coverage and Incontestability Clauses

The incontestability provision herein has two parts. Part a provides that after two years from Date of Issue, respondent may not rescind or invalidate the policy based on statements made or omitted by appellant in his application. This portion of the incontestability clause is not relevant to this case since respondent is not seeking to rescind or invalidate the policy based on any concealment by appellant of his HIV positive status.

Part b of the incontestability clause, which is relevant to this case, provides that if, after two years from the Date of Issue of the policy, an insured files a claim for sickness or disability, respondent cannot deny the claim on the ground that the sickness or disability "existed" before the Date of Issue. Appellant asserts that part b of the incontestability clause bars respondent from rejecting his disability claim. ¹ We disagree.

Numerous cases in other jurisdictions have considered the issue of a possible conflict between the "first manifest" language of a coverage provision and the incontestability clause. Indeed, we have been inundated by the parties with case citations, with each side claiming that its position is the "majority" (and so to be respected) and that the position of the opponent is the "minority" (hence to be scorned). We find this "case counting" to be of little value, but for purposes of illustration will discuss two cases from the different schools of thought that have emerged.

The view espoused by respondent is set forth in Massachusetts Casualty Insurance Co. v. Forman (5th Cir.1975) 516 F.2d 425. There the insured had been diagnosed with diabetes before he purchased a disability insurance policy. When he became disabled from his diabetes, he filed a claim for disability benefits. (Id. at p. 427.) As in the instant case, the policy...