Baker, Pedersen & Robbins, P.A.

New Jersey Law Journal

Vol. CXL, No. 11, Index 1002
Copyright 1995 by American Lawyer Media, ALM LLC
June 12, 1995
Inadmissible

BUYING TIME

Ronald J. Fleury

It's the stuff television scripts are made of. A young attorney suffers from a life-threatening disease and needs a bone-marrow transplant to survive. Her sister has flown across the country to serve as a donor. But the hospital wants a substantial cash deposit up front. The attorney doesn't have it, and her health insurance carrier disputes whether she's covered for the operation and related expenses, which could come to a half-million dollars. A judge is called upon to make a life-or-death decision.

This is not an episode from "Law and Order." It's a case in Bergen County Superior Court. Phyllis Malinofsky, an Edison solo practitioner, suffers from aplastic anemia, a disease that prevents the bone marrow from producing sufficient blood cells. The 40-year-old lawyer has been hospitalized at Hackensack Medical Center since May 6, and her doctor says that her best hope of survival is through a bonemarrow transplant. The hospital wants $60,000 -- about 60 percent of the anticipated cost of the operation -- paid up front. According to Malinofsky's verified complaint, filed on May 31, her health insurance carrier, Washington National Insurance Company, has refused to pay for any of the medical costs related to the condition or the proposed treatment.

Not true, says Washington National's attorney, Steven Del Mauro of Del Mauro & Associates in Morristown. The carrier has not refused to pay; it is conducting an investigation on whether the claims are covered.

According to Del Mauro, the question is whether Malinofsky's illness was a pre-existing condition when she applied for health insurance last Feb. 7. Under the terms of the policy, which went into effect Feb. 9, pre-existing conditions are specifically excluded for the first 365 days of coverage. On Feb. 10, according to her verified complaint, Malinofsky was hospitalized for a week at Robert Wood Johnson Medical Center in New Brunswick and diagnosed with amegacarioytic thrombocytopenia, a condition related to aplastic anemia. The next month, she was diagnosed with aspergillus, a fungal infection, and finally as having aplastic anemia. Del Mauro says that the carrier has received about $19,000 in medical bills so far and that the Hackensack Medical Center has estimated the costs of her hospitalization so far at $112,000.

Del Mauro says that he is obtaining medical records from which he can determine whether Malinofsky suffered symptoms within six months before applying for the policy. If so, the insurer can deny coverage under New Jersey's insurance law. If coverage is not excluded, the carrier would be responsible for all bills related to the treatment of aplastic anemia. "We have to make that determination fairly and prudently," Del Mauro says. "We need time to conduct a thorough investigation."

But Malinofsky's lawyer Gerald Baker of Hoboken's Baker, Pedersen & Robbins, says that explanation only goes so far. "They could keep investigating for two months, and in the meantime she could die on us," Baker says. The complaint asks that the carrier be required to pay for all medical costs she has incurred since the policy went into effect. A second count seeks compensatory and punitive damages for alleged unfair trade and claim settlement practices. Del Mauro says the second count fails to state a cause of action because all the company is doing is investigating a claim.

What about the hospital's role in all of this? Was there ever a possibility that Malinofsky wouldn't get the treatment she needed? "We don't know for a fact that the hospital would have denied her the treatment," says Baker. "All we do know is that they requested the $60,000 in advance." But Robert Cavatto, director of corporate financial planning at Hackensack Medical Center, and Kathleen Curley, the hospital's general counsel, each say that the operation would have gone forward even without a guarantee of payment and that this was communicated to Baker. "This was never a pay-or-die case," says Curley. Cavatto says he told this to Baker at a meeting last Tuesday. "As I told Mr. Baker, this patient was going to be treated based upon her clinical needs, with or without the ability to pay," Cavatto says. Del Mauro says that the hospital has a statutory obligation to perform life-saving medical procedures without insisting on payment up front.

So maybe this wasn't as exigent as it was made out to be. Nevertheless, Baker and Del Mauro worked out a deal that forestalled a court ruling. Appearing at a show-cause hearing before Superior Court Judge Robert Hamer in Hackensack last Wednesday, the lawyers said that Malinofsky and her family will deposit $60,000 of their own funds into court, to be held in escrow. Washington National will conditionally cover the cost of the transplant operation up to that amount. If coverage is eventually found to lie, either by the carrier or the court, the escrow funds will be released to the Malinofsky family. If not, the carrier can apply to the court for reimbursement.

Hamer called the agreement "a great solution to a very difficult dilemma." But the underlying issues remain. According to both sides, the total cost of the operation might be as high as $150,000, which, in addition to the other bills incurred or to be incurred could exceed $500,000. That would dwarf the lawyers are scheduled to appear before Hamer on Aug. 1 unless the coverage dispute is resolved before then.

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