Opinion ID: 1125183
Heading Depth: 3
Heading Rank: 1

Heading: Exclusion from coverage by name or specific description

Text: Incontestability provisions do not, of course, preclude [disability] insurers from expressly excluding coverage for losses arising from particular causes. Equitable Life Assurance Soc'y of the United States v. Bell, 27 F.3d 1274, 1279 (7th Cir.1994) (citations omitted). Indeed, by its plain language, HRS § 431:10A-105(2)(A)(ii) exempts diseases or physical conditions excluded from coverage by name or specific description from the general statutory mandate that [n]o claim for ... disability (as defined in the policy) commencing after three years from the date of issue of th[e] policy shall be ... denied on the ground that a disease or physical condition... effective on the date of loss had existed prior to the effective date of coverage of th[e] policy. Paul Revere urges that paragraph 10.2.b of the policy, see supra section I, which is expressly mandated by HRS § 431:10A-105(2)(A)(ii), see supra section III.A, does not protect Doe because[:] (1) Paul Revere is not denying coverage for Doe's HIV because the condition existed, but because the condition was manifest to Doe prior to the policy['s] date [of issue]; [22] and (2) because the policy defines [S]ickness to exclude conditions manifest before the policy['s] date [of issue], such conditions are excluded by specific description under Paragraph 10.2(b). We believe, however, that Paul Revere's interpretation of the relevant policy language does violence to the general rules of statutory construction, the specific rules of remedial statutory construction regarding insurance policies, and the general rules of contract construction outlined above. In particular, we agree with the following analysis of the United States Court of Appeals for the Seventh Circuit regarding a disability insurance policy's incontestability clause identical in all material respects to the one at issue in the present case: [T]he policy at issue here provides that after two years, disability coverage will not be denied on the ground that the underlying disease or physical condition pre-dated the policy, unless, effective on the date of the loss, such disease or physical condition was excluded from coverage by name or specific description.  [The insurer] suggests that this provision alone would bar coverage for [the insured's disability], in view of the policy terms defining covered sickness to include only those which first manifest themselves after the policy's effective date and excluding those that manifested themselves before. In our view, however, these terms merely address the general scope of the policy; they do not identify any disease or condition with particularity sufficient to render them excluded by name or specific description. As Judge McKinney reasoned in Wischmeyer: The most reasonable interpretation of these words is that a specific pre-existing condition, i.e., something such as tuberculosis or diabetes, may be specifically excluded from coverage by agreement of the parties if that condition is named or specifically described in the policy. If such an agreement of exclusion is reached by the parties, then the incontestable clause would not prevent the insurer from denying coverage based on that particular named pre-existing condition. If, on the other hand, such a specific pre-existing condition is not excluded from coverage by name or specific description, then the insurer cannot deny a claim based on that condition if the plaintiff's disability does not begin until more than two years from issuance of the policy. This interpretation simply follows the rule of construction that language in an insurance contract is to be given its plain, ordinary, and common sense meaning. Here the most reasonable interpretation is that in order to benefit from this final phrase of the contestable clause, the insurer must specifically name or describe a particular pre-existing condition, and not merely add a clause in the policy attempting to exclude all pre-existing conditions. [ Wischmeyer, ] 725 F.Supp. at 1004-05 [ (citations omitted) ] (emphasis in original). Bell, 27 F.3d at 1279-80 (some citations omitted) (emphasis in original). Accordingly, because we (1) construe the policy (a) according to the entirety of its terms and conditions, see HRS § 431:10-237, (b) liberally in favor of the insured, see Smith, 78 Hawai`i at 183, 891 P.2d at 270; Dawes, 77 Hawai`i at 121, 883 P.2d at 42, and (c) in accord with the reasonable expectations of a lay person, see Dawes, 77 Hawai`i at 121, 883 P.2d at 42; Sturla, Inc., 67 Haw. at 209, 684 P.2d at 964, (2) resolve any contractual ambiguities against the insurer, see Smith, 78 Hawai`i at 183, 891 P.2d at 270; Dawes, 77 Hawai`i at 121, 883 P.2d at 42, (3) read the provisions of HRS §§ 431:10A-105(2)(A) and (C) into the policy, see Vicente, 78 Hawai`i at 251, 891 P.2d at 1043; Dawes, 77 Hawai`i at 122, 883 P.2d at 43, and (4) liberally construe HRS §§ 431:10A-105(2)(A) and (C) in order to accomplish the purposes for which they were enacted, see Dawes, 77 Hawai`i at 123, 883 P.2d at 44; Flores, 70 Haw. at 12, 757 P.2d at 647, namely, (a) to suppress the perceived evil of lulling the insured, by inaction, into fancied security during the time when the facts could best be ascertained and proved, only to litigate them belatedly, possibly after the death of the insured and (b) to advance the enacted remedy of requir[ing] the insurer to investigate and act with reasonable promptness if it wishes to deny liability on the ground of false representation or warranty by the insured, see Insurance Comm'r of Maryland, 680 A.2d at 593; Oglesby, 889 F.Supp. at 774, we hold that the contractual phrase which first manifests itself after the Date of Issue contained within the policy's definition of a covered Sickness, see supra section I, does not exclude coverage of Doe's total disability due to HIV infection, see supra note 3, by name or specific description, within the meaning of the second sentence of the policy's pre-existing conditions limitation, see supra section I, or paragraph 10.2.b of the policy's incontestability provision, see id.