AIDS Project Wins $646,800 Award for Canceled Insurance : Courts: Jury rules firm breached contract after being told that group’s staff had disease or had tested positive for HIV.

AIDS Project Los Angeles has won $646,800 in damages against a firm that canceled an agreement to provide health care coverage for the nonprofit group’s employees, attorneys for the project said Wednesday.

A Los Angeles Superior Court jury decided on March 20 that insurance broker Bayly, Martin & Fay breached its contract with the service organization after the company was told the project’s staff had AIDS or had tested positive for HIV, said James L. Seal, the project’s attorney.

“This would never have happened with IBM,” Seal said. “With this case, we sought to establish that AIDS Project Los Angeles had the same rights as any other employer who had obtained health care coverage.”

“This is a victory for all people with AIDS,” Stephen Bennett, the project’s chief executive, said. “The jury made it very clear in sending the message that discrimination against AIDS service organizations and people affected by HIV will not be tolerated.”

California law prohibits insurers from refusing coverage if a blood test for the AIDS antibody (HIV) is positive. Seal added that Bayly, Martin & Fay had no access to blood test results on the project’s staff of about 100.

When the insurance broker refused to provide benefits, which would have been purchased though CIGNA Healthplans, the project was forced to pay $643 per employee, per month to continue coverage with its previous insurer, California Blue Shield, Seal said.

The project had asked its broker, Chase Financial Insurance, to find another insurer, Seal said. Chase could not come up with another company, so the project turned to Bayly, Martin & Fay, which offered the coverage through CIGNA, according to the suit. But on the day CIGNA was to enroll the project’s staff, the company withdrew its offer because Chase told CIGNA that three to five project employees had active cases of AIDS and several more had tested positive for the antibody, the suit said.

CIGNA’s information came from Chase and two of its officers, John Nelson and John Nelson Jr., the suit said. The company stood to lose its Blue Shield commission if the project switched insurers, Seal said Wednesday.

The project filed suit seeking $900,000 in damages against Bayly, Martin & Fay; Chase; the Nelsons and CIGNA. Judge Robert O’Brien removed CIGNA as a defendant during the trial, and the project settled with Chase and the Nelsons, Seal said. A condition of the settlement is that its terms not be disclosed, he said.

Attorneys for Bayly, Martin & Fay, which has been acquired by Miller, Mason & Dickenson in North Hollywood, could not be reached for comment.

Seal said the jury’s verdict is the first one he knows of, adding that he hoped the case will make it easier for organizations providing care to people with AIDS to get health care coverage. But insurers are allowed to deny coverage to nonprofit organizations, he said, and the case “may have the unfortunate effect of making it more difficult to get coverage.”

The project now has health care coverage through Maxicare with a premium “we are satisfied with,” said David Wexler, the group’s chairman. “Because of our claims experience last year, we’re getting a rebate,” he said. “They are very happy, and we are very happy.”

Times staff writer Amy Pyle contributed to this story.