Background
Denise Child, who lost the use of her arms and legs in a car accident over forty years prior, enrolled in a guaranteed-issue long-term care insurance policy issued by Unum Life Insurance Company of America. The policy contained an existing-loss provision excluding coverage for losses of daily living activities that existed on the effective date of coverage. Child later filed a claim for benefits related to her pre-existing limitations, which Unum denied. Child sued for breach of contract, fraudulent misrepresentation, and bad faith, but the district court granted summary judgment for the insurer.
The court’s reasoning
The court reviewed the grant of summary judgment de novo under Iowa law. The policy’s plain terms stated that existing losses were only eligible for coverage if the insured recovered from them. Child did not provide acceptable proof of recovery. The court rejected Child’s argument that Iowa Code Section fifty-one-four-G seven three B required coverage, noting the statute prevents denial of coverage for losses beginning within six months of the effective date but does not mandate coverage for losses occurring before the policy was issued. The court also found the reasonable expectations doctrine inapplicable because the policy terms were clear, and Child failed to disclose the full extent of her condition when seeking coverage. Finally, the fraudulent misrepresentation and bad faith claims failed because Unum had a reasonable basis for denial and there was no evidence of intent to deceive.
What it means going forward
The decision reinforces that long-term care insurance policies generally cover future risks rather than known past losses, and that clear policy language excluding pre-effective-date losses will be enforced even if the insured believed they were covered.
Podcast (federal-narrative-summaries): Play in new window | Download