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Get Your Claim Paid: Common Health Claim Disputes

You have cataract surgery on your right eye. Three days later you begin experiencing pain and loss of vision in your right eye. You call your optomologist, but because it's Sunday, the answering service refers you to the physician on call. The on-call physician determines that the condition in your right eye is an emergency and calls another doctor, who determines that you have a severe staph infection and must immediately undergo surgery to save your eye.

Shortly thereafter, you learn that the surgeon who performed the surgery was not on your insurance plan. So, your insurance company won't pay the bill. You thought you were referred correctly. Your plan manual, states that emergency services do not require primary care physician approval and that a person could proceed to the nearest medical facility.

However, you learn later that the surgeon's office did not receive an explanation of benefits with the payment to close the account. As a result, your account could not be credited and closed. Because of an oversight on the insurance company's part, you were never notified of this.

When it comes to solving health insurance disputes, you are your best advocate. But standing up for your rights requires understanding your policy, keeping careful records and following procedures, including appeals to the proper state and federal agencies.

The June 1997 federal district court decision Eddie Lambros, Amanda Lambros, at al. v. PFL Life Insurance showed why health coverage is worth fighting for.

Insurance agent Jonathan Kaplan entered into an "independent agent contract" with United Group Association, Inc. (UGA), to sell PFL insurance products. While Kaplan was not directly compensated by PFL, PFL paid UGA, which paid Kaplan. In 1994, Kaplan contacted Eddie Lambros by telephone and requested that Lambros consider a new hospitalization insurance policy.

According to Lambros, Kaplan said he was an agent for PFL, and gave him an application, which bore the title "Enrollment Application to: PFL LIFE INSURANCE COMPANY." The application included a number of questions regarding medical history. Lambros gave his health history and then signed the application. However, many of the health history questions were left blank with regards to his wife and daughter.

Kaplan told Lambros that if no medical problems surfaced regarding his wife and daughter, the policy would be issued, and if some problems did surface, the policy could be issued with appropriate riders.

The Lambros family was subsequently issued a hospitalization expense policy. In December 1994, Karen Lambros was hospitalized in the Tri-City Health Care medical facility. In January 1995, The Lambros' daughter Amanda was also hospitalized in the same facility.

The family sought payment from PFL for the hospitalization costs, which totaled over $104,000. However, when investigating the claim, PFL discovered that many of the medical history questions in the Lambros' Application were answered falsely and that many of the women's health problems had not been disclosed. As a result, PFL denied the claims and canceled the policy.

The Lambros family assigned the benefits of the insurance policy to Tri-City, and sued PFL and Kaplan, raising claims of breach of contract, breach of the duty of good faith and fair dealing, negligence, gross negligence, negligent and fraudulent misrepresentations, and violations of the Fair Business Practices Act and the Uniform Deceptive Trade Practices Act.

PFL moved for summary judgment.

According to PFL, as a matter of law, Kaplan was not its agent. Thus, PFL is not estopped from denying coverage based on the misrepresentations in the application, and PFL cannot be held vicariously liable for the actions of Kaplan.

Lambros contended that the Georgia statute defining an "agent" for the purposes of licensing demonstrates that Kaplan was an agent of PFL.

However, Lambros and Tri-City have also argued that there is a genuine factual dispute as to whether Kaplan was actually an agent of PFL.

PFL claimed that there is a difference between a "mere independent soliciting agent" and "an agent who has the authority to bind a principal," and that Kaplan was only a soliciting agent with no authority to bind PFL.

In support of this argument PFL asserted that: (1) Kaplan entered into an independent agent agreement with UGA, not PFL, and UGA had only an independent contractor agreement with PFL; (2) PFL did not control the time or manner of Kaplan's work; (3) The application for insurance disclaimed any authority Kaplan had "to accept risks or to make, alter, or amend coverage" and stated that any policy would not take effect until approved by PFL; and (4) Both Kaplan and PFL deny the existence of an agency relationship.

In addition, said PFL, as the principal, it did not commit any acts to hold out Kaplan as its agent.

In response, Lambros and Tri-City contended that: (1) Kaplan is clearly an "agent" as defined by the insurance code of Georgia; (2) Kaplan identified himself to Lambros as an agent of PFL; (3) Kaplan gave Lambros a business card with Kaplan's name and PFL's name and address on it, which would create an inference that Kaplan was PFL's agent; (4) Kaplan did not solicit an application from any other insurance company; (5) The application which Kaplan gave Lambros was entitled "Enrollment Application to: PFL LIFE INSURANCE COMPANY"; (6) Language on the application and the medical history release repeatedly referred to Kaplan as "agent" or PFL's "representative"; (7) Kaplan collected a sum of money from Lambros at the time of application; (8) Kaplan's name was printed at the bottom of PFL's internal file on Lambros; and (9) PFL applied to the Georgia Commissioner of Insurance for Kaplan to be licensed to sell PFL policies in Georgia.

According to the court, genuine factual disputes existed as to whether or not Kaplan was an agent with authority to bind PFL and as to whether Kaplan had apparent authority to bind PFL due to PFL's holding him out as its agent.

The court held that an insurance company cannot be permitted to obtain the services of an agent and at the same time designate him as an independent contractor. "Given the evidence presented at summary judgment, it is unclear exactly what kind of organization UGA is, and it is entirely possible that the PFL-UGA structure exists (in preparation for lawsuits like this one) to insulate PFL from direct contact with its agents nationwide," said the court.

Further, "Kaplan solicits applications for PFL and is paid a commission for enrolling people in PFL policies. PFL has provided him with applications with the company's name on them, and the company allows him to put the company's name on his personal business cards. PFL petitioned for Kaplan's license in Georgia and has thus specifically ensured that Kaplan will be peddling its policies to Georgia residents. Clearly there is evidence from which a jury could conclude that Kaplan was an agent of PFL or had apparent authority to bind PFL."

PFL was not entitled to summary judgment on this issue. And because there is a genuine issue of fact as to whether Kaplan was an agent of PFL, the court could not find that PFL is entitled to summary judgment on the negligence, gross negligence, and misrepresentation claims. "If Kaplan was an agent of PFL, then his representations could bind PFL and his actions could be attributed to PFL. Therefore, any determination of these claims without a factual finding on the agency issue would be premature," said the court.

In addition, said the court, it could not grant summary judgment for PFL on the Fair Business Practices Act and Uniform Deceptive Trade Practices Act claims because there was a factual dispute as to whether Kaplan was an agent of PFL. If he was PFL's agent, his representations could be imputed to PFL, and PFL could be held liable on either or both of these claims.

Under Georgia case law, an applicant for insurance is prima facie charged with knowledge of the contents of an application signed by him, but if an applicant tells the truth to an agent who mistakenly or fraudulently records them on the application without the applicant's knowledge, the company will be estopped from avoiding liability for misrepresentation and from seeking rescission of the policy.

PFL said that it was not estopped from seeking rescission of Lambros' policy because the application contained materially false statements.

However, the court ruled that there was some behavior by Kaplan that prevented Lambros from knowing about the misstatements. In fact, Kaplan told Lambros that he need not answer the parts of the application regarding the medical history of his wife and daughter and that he need only provide Kaplan with the women's physician's name to complete the application. Given the language on the medical release stating that such authorization would "be used by PFL to determine eligibility," it would have been entirely reasonable for Lambros to sign the application with several answers left blank, said the court.

Because there was a genuine factual dispute as to whether Kaplan was an agent of PFL, and because there is a genuine factual dispute as to whether Kaplan prevented Lambros from discovering the falsity of several answers on his application, said the court, PFL was not entitled to deny Lambros's claim because of the false statements.

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