Mutual Hospital Ins., Inc. v. Klapper

• Decision Date: 30 October 1972
• Docket Number: No. 272A93,272A93
• Citation: 288 N.E.2d 279,153 Ind.App. 555
• Parties: MUTUAL HOSPITAL INSURANCE, INC., Appellant (Defendant Below), v. Morris L. KLAPPER and Marietta Klapper, Appellees (Plaintiff Below).
• Court: Indiana Appellate Court

Page 279

288 N.E.2d 279

153 Ind.App. 555

MUTUAL HOSPITAL INSURANCE, INC., Appellant (Defendant Below), v. Morris L. KLAPPER and Marietta Klapper, Appellees (Plaintiff Below).

No. 272A93.

Court of Appeals of Indiana, Second District.

Oct. 30, 1972.

Kothe, Shotwell, Claycombe, Hendrickson & Kortepeter, Robert A. Claycombe, Indianapolis, for appellant

Morris L. Klapper, Indianapolis, for appellee.

BUCHANAN, Presiding Judge.

CASE SUMMARY--This is an appeal from a summary judgment entered in favor of plaintiffs-appellees, Morris L. and Marietta Klapper (Klapper), based on their claim for Blue Cross benefits for a 'preexisting condition' excluded by a health insurance policy issued by defendant-appellant, Mutual Hospital Insurance, Inc. (Blue Cross). We reverse.

FACTS--The facts most favorable to Klapper (appellee) and in support of the judgment are:

On December 15, 1969, a family health insurance policy issued by Blue Cross to Klapper became effective. It contained the following provision:

'ARTICLE XII--BLUE CROSS BENEFITS

E. Pre-Existing Conditions.

For any illness, injury or condition which existed prior to the effective date of the membership of the patient, Blue Cross will pay for hospital service only after a lapse of two hundred and seventy (270) consecutive days from the effective date of such membership.' (Emphasis supplied.)

(Hereinafter referred to as the 'exclusionary clause.')

On January 13, 1970, as the result of a routine eye examination, Klapper's four-year-old daughter (Laurel) was discovered Laurel underwent surgery for this condition, being hospitalized from January 21, 1970 through February 11, 1970. Blue Corss denied payment of medical and surgical bills amounting to $892.05 on the ground that the disease 'existed' prior to the effective date of the policy (December 15, 1969) and was therefore excluded by the exclusionary clause.

to have contracted an eye condition ¹ known as bilateral optic atrophy. The eye doctor estimated that the medical origin of this disease was some time between November of 1967 and July of 1969. However, neither the parents nor Laurel were aware of this disease or condition prior to January 13, 1970. There had been no previous symptomatic manifestations of the disease nor were there any complaints of eye discomfort by Laurel.

After Klapper filed suit to enforce the denied claim, both parties filed Motions for Summary Judgment agreeing that only a question of law existed. Klapper's Motion was granted and Blue Cross appeals.

ISSUES

ISSUE ONE. Does an illness 'exist' within the meaning of a health insurance policy clause excluding pre-existing conditions, at such time as it becomes known to the insured or is capable of being diagnosed by a physician, or does an illness 'exist' at the inception of its medical origin, regardless of when it becomes known to the insured or capable of diagnosis?

ISSUE TWO. Was a material issue of fact before the trial court as to whether Laurel's eye condition was capable of being diagnosed by a physician?

As to ISSUE ONE, Blue Cross contends that the word 'existed' contained in the exclusionary clause must be given its usual and ordinary meaning. If a disease is capable of being diagnosed, even though it has not yet manifested itself in the form of symptoms, it is in existence for purposes of health insurance coverage.

Klapper's position is that an illness is in existence when it first manifests itself or becomes known to the victim, and as the eye condition was not diagnosed until January 13, 1970, after the effective date of the insurance policy, his claim is valid.

As to ISSUE TWO, the parties make no argument. We deem it necessary to raise ISSUE TWO because on the basis of the record there was no consideration by the trial court or the parties of the material issue of fact as to whether Laurel's condition was capable of being diagnosed by a physician prior to the effective date of the policy (December 15, 1969).

DECISION

ISSUE ONE--An illness 'exists' within the meaning of a health insurance policy excluding pre-existing conditions at such time as the illness becomes known to the insured or is capable of being diagnosed by a physician. The medical original of an illness does not determine its existence.

With no pertinent Indiana authority to guide us, we seek succor from other jurisdictions. While there appear to be some cases to the contrary, most states adhere to the rule found in Southards v. Central Plains Insurance Co., (1968), 201 Kan. 499, 441 P.2d 808:

"It is generally recognized that provisions in a health or hospital insurance policy requiring that the illness or disease from which the assured suffers originate a specified time after the date of the policy to be within the policy coverage are strictly construed against the insurer, and the illness, disease, or disability will ordinarily be deemed to have its inception when it first becomes manifest or active or when there is a distinct symptom or condition from which one learned in medicine can with reasonable accuracy diagnose the disease." (Emphasis supplied.)

See also: National Casualty Co. v. Hudson (1945) 32 Ala.App. 69, 21 So.2d 568; Metropolitan Life Ins. Co. v. Reynolds (1936) 48 Ariz. 205, 60 P.2d 1070; Home Life Ins. Co. v. Allison (1929) 179 Ark. 65, 14 S.W.2d 229; Fohl v. Metropolitan Life Ins. Co. (1942) 54 Cal.App.2d 368, 129 P.2d 24; Wooten v. Life Ins. Co. of Georgia (1956) 93 Ga.App. 665, 92 S.E.2d 567; Mutual Ben. Health & Accident Assn. v. Ramage (1943) 293 Ky. 586, 169 S.W.2d 624; Cohen v. North American Life & Casualty Co. (1921) 150 Minn. 507, 185 N.W. 939; Union Bankers Ins. Co. v. May (1956) 227 Miss. 881, 87 So.2d 264; Hilts v. United States Casualty Co. (1913) 176 Mo.App. 635, 159 S.W. 771; Dowdall v. Commercial Travelers Mutual Acc. Ass'n (1962) 344 Mass. 71, 181 N.E.2d 594; Davidson v. First American Ins. Co. (1935) 129 Neb. 184, 261 N.W. 144; Reiser v. Metropolitan Life Ins. Co. (1941) 262 App.Div. 171, 28 N.Y.S.2d 283; Cudworth v. Reserve Life Ins. Co. (1956) 243 N.C. 584, 91 S.E.2d 580; Reserve Life Ins. Co. v. Lyle (1955, Okl.) 288 P.2d 717; Smith v. Industrial Hospital Ass'n (1952) 194 Or. 525, 242 P.2d 592; Wardlaw v. Woodmen of World Life Ins. Soc. (1956) 230 S.C. 234, 95 S.E.2d 253; American Casualty & Life Co. v. Gueringer (1947) Tex.Civ.App., 205 S.W.2d 423; Wilkins v. Grays Harbor Community Hospital, (1967) 71 Wash.2d 178, 427 P.2d 716; Leftwich v. Inter-Ocean Casualty Co., (1941) 123 W.Va. 577, 17 S.E.2d 209.

Similarly, in Royal Family Ins. Co. v. Grimes, (1964) 42 Ala.App. 481, 168 So.2d 262, it was held that:

'It is a well established rule of law that the 'word 'originates,' as appears in the exclusionary provision of the policy, refers ordinarily to the time the sickness or disease is manifested, although the medical cause existed prior to this time." (Emphasis supplied.)

The mere presence of latent germs or seeds of illness in the body prior to the issuance of a policy of health insurance does not alone preclude recovery. There must be something beyond the mere medical origin of the illness. Dowdall v. Commercial Travelers Mutual Acc. Ass'n, supra; Wilkins v. Grays Harbor Community Hospital, supra; Royal Family Ins. Co. v. Grimes, supra.

From these cases we deduce the desirable rule for adoption in Indiana to be that for a disease or illness or condition to 'exist' in a health insurance policy sense it must have become manifest or active or there must be some distinct symptom or condition from which a physician can make an accurate diagnosis of the disease.

Most cases have adopted the majority rule apparently on the basis that while insurance companies need protection from unscrupulous applicants who would fraudulently attempt to gain coverage for an illness of which they are already aware, such protection need not go so far as to consider a disease to exist at the time of its medical inception. Furthermore, to consider a disease to exist at a time when the victim is blissfully unaware of the medical 'seeds' visited upon his body, is to set a trap for the unwary purchaser of health insurance policies.

The majority rule recognizing a disease only to be in existence when it first manifests itself or is known to the victim or is capable of being diagnosed by a physician serves the dual purpose of protecting insurers from fraudulent applicants seeking coverage for known diseases while protecting innocent premium-paying insureds from being deprived of benefits for pre-existing conditions of which they have no knowledge. Ray v. Hospital Care Ass'n, (1952) 236 N.C. 562, 73 S.E.2d 475; Randa v. Bear, (1957) 50 Wish.2d 415, 312 P.2d 640.

ISSUE TWO--It is our opinion that Summary Judgment was improper because there was a material issue of fact as to whether Laurel's eye condition was capable of being diagnosed by a physician prior to the effective date of...