In Bialik v. AXA Equitable Life Insurance Company, an insured filed a disability claim based on loss of sight in his left eye.  Though he lost sight in one eye, the insured was working as a systems engineering consultant.  However, the insured alleged that his loss of sightimpaired his ability to perform his duties at work.  The insurer denied benefits based on an income provision, claiming that it was entitled to deny since the insured was receiving income from his occupation.  The insured sued for breach of contract relying on a Presumptive Disability provision, whereby certain disabilities, such as loss of sight, rendered the insured disabled regardless of whether he engaged in an occupation.

In effort to defend its position, the insurer sought discovery pertaining to the insured’s income.  After the insured refused to provide the requested discovery, the insurer moved to compel.  The insured opposed the motion maintaining that it was irrelevant since the terms of the policy did not restrict coverage based on his ability to remain employed.  Thus the insured argued that there was no basis for the income related discovery.  Initially the court granted the insurer’s motion, however on a motion to reargue, the court reversed.

The basis of its reversal was the fact that the insured’s breach of contract claim was based on the Presumptive Disability section of the policy which was to be read independent of portions of the policy relied upon by the insurer in moving to compel discovery pertaining to the insured’s income.  As such, the Court held that the insured did not have to provide responses to demands regarding financial information.

This case exemplifies the Courts’ tendency to interpret insurance policy terms against the insurer, even when this interpretation may negate our traditional sense of what an insurer may be entitled to in its defense of a lawsuit.

Thanks to Caroline Frelich for her contribution to this post.