The Wall Street Journal - August 1, 1996
Leslie Scism, Staff Reporter of The Wall Street Journal

While a major industry trade group encourages disclosure to applicants, some big insurers don't routinely reveal test findings to applicants. The decision not to turn over such test results by Jackson National Life Insurance Co., a Lansing, Mich., unit of London-based Prudential Corp. PLC, a giant financial-services company, is the subject of a lawsuit filed in federal court by a woman whose husband died of complications from AIDS.

Jody Deramus of Vienna, Va., alleged in the suit that Jackson National failed to notify them promptly of the presence of HIV, the AIDS virus, detected in Mr. Deramus's blood in a test conducted by the insurer. The test was conducted when Mr. Deramus applied to increase his life-insurance coverage in early 1988. The company refused to sell him the additional coverage and wouldn't reveal the specific medical-test results that prompted the denial, the suit alleges.

Months later, Mr. Deramus became ill. Because her husband hadn't easily fit into conventional categories of AIDS victims, the couple "logged thousands of miles going to cancer doctors trying to find out the diagnosis, when [Jackson National officials] were sitting on the answer in their files," she said in an interview.

The couple learned the cause of his illness as a result of a blood test administered in October 1989 by one of the doctors they visited in their "medical odyssey," she said. Jackson National ultimately turned over its test results, but only days before Mr. Deramus died in June 1991, she said.

In addition, Mrs. Deramus alleged that Jackson National exposed her to harm by failing to promptly warn her of her husband's condition. Mrs. Deramus, who hasn't tested positive for the virus, has established a foundation to lobby additional states to adopt disclosure laws. "It's too late for my husband and me, but it shouldn't happen to anyone else," she said.

Mrs. Deramus lost the first round to Jackson National when a U.S. district judge in Jackson, Miss., last year dismissed the suit. Her appeal is scheduled to be argued today before the Fifth U.S. Circuit Court of Appeals in New Orleans.

A Jackson National lawyer declined to comment. But in court documents the insurer has argued that under the laws of Mississippi, where the couple lived when applying for the increased insurance coverage, the company "was without a duty to inform an applicant for life insurance of a medical condition discovered from a blood test obtained strictly for use by the insurance company in performing an underwriting evaluation of an application for life-insurance coverage."

The insurer also argued that "since HIV/AIDS is both incurable and fatal, an earlier medical diagnosis wouldn't have resulted in any substantial improvement" in Mr. Deramus's life expectancy, "nor would it have allowed him to survive his fatal condition." Breakthroughs in treatments, however, have made early notification more important in HIV cases. New protease-inhibitor drugs, used in combination with older medicines, have begun to show striking success in suppressing activity of the AIDS virus.

Many insurers already make available to applicants information obtained through underwriting tests, and more than half the states have adopted laws in recent years requiring such disclosure. In other states, however, insurers have wide-ranging discretion over how they handle discovery of medical problems.

Legislation pending in Congress would give consumers the right to see all medical reports compiled by insurers about them. Sen. Bob Bennett (R., Utah), who is a sponsor of the bill, said he was concerned that citizens "have the right to access their credit information to make corrections, but not the right to access their medical information. That didn't really make sense."

The measure, which is part of a bigger bill providing for confidentiality of medical records, has won widespread support, including backing by the Washington, D.C.-based American Council of Life Insurance. But the insurance industry generally calls the problem exaggerated. The ACLI said adverse medical information surfaces in about 8% of life-insurance applications. About half of these applicants are turned down for coverage, while the remainder are charged higher rates.

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