Mansell, Engel & Cole

Appeals court: insurer can't act contrary to clear policy terms

The following story conveys precisely the kind of news regarding insurance companies that makes legions of policyholders wary and even fearful when dealing with them.

Imagine that you have a health policy with a big-name national insurer. Owing to a bank glitch, your last calendar payment of the year is not credited for December.

Not knowing that, you schedule a needed surgery that month, which is preapproved by the insurance company. Following approval, the insurer sends you a letter discussing December's nonpayment. It tells you that your grace period allows you to make that payment through January 3 of the next year.

Knowing that, you have the surgery.

And then you get a denial letter on January 9 informing you that no payments will be made on your claim because your policy was canceled on December 1 owing to nonpayment.

We can well imagine how our readers across Oklahoma and elsewhere would reasonably respond to such a communication.

The policyholder in question filed a lawsuit to contest that result.

And he lost, at least on the first round, with the court being influenced by the insurer's language in its grace-period letter . The insurer stated therein that, although a January payment would keep the policy alive, the company would pay no claims during the grace period.

An appeals court subsequently reversed that ruling, holding that Anthem improperly canceled the policy retroactively.

It didn't take the appellate panel long to reach that conclusion. The court pointed directly to policy language allowing for cancellation "on the last day of the grace period."

And that was clearly January 3, well after the surgery date.

Moreover, the court pointed to lack of any policy language addressing claim payments relevant to services completed during a grace period.

For those reasons, the court ruled, it must be inferred that the insurer was responsible for service-related payments arising during the grace period.

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