Case Name: Sam V. CATALDIE, Jr., Individually and as Administrator of the Estate of his Minor Child, Amie Cataldie v. LOUISIANA HEALTH SERVICE AND INDEMNITY COMPANY
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1984-09-10
Citations: 456 So. 2d 1373
Docket Number: No. 83-C-1750
Parties: Sam V. CATALDIE, Jr., Individually and as Administrator of the Estate of his Minor Child, Amie Cataldie v. LOUISIANA HEALTH SERVICE AND INDEMNITY COMPANY.
Judges: DIXON, C.J., dissents.
Reporter: Southern Reporter, Second Series
Volume: 456
Pages: 1373–1380

Head Matter:
Sam V. CATALDIE, Jr., Individually and as Administrator of the Estate of his Minor Child, Amie Cataldie v. LOUISIANA HEALTH SERVICE AND INDEMNITY COMPANY.
No. 83-C-1750.
Supreme Court of Louisiana.
Sept. 10, 1984.
Rehearing Denied Dec. 6,1984.
Alonzo P. Wilson, Trimble, Randow, Percy, Smith, Wilson & Foote, Alexandria, for applicant.
Joseph T. Dalrymple, Antoon & Dalrym-ple, Alexandria, for respondent.

Opinion:
DENNIS, Justice.
The insured, Sam V. Cataldie, Jr., brought this action for a declaratory judgment ordering that the insurer, Louisiana Health Service and Indemnity Company, popularly known as Blue Cross of Louisiana, must continue to afford coverage for hospital, surgical and major medical services related to the brain cancer of his daughter, Amie Cataldie, as provided for in an otherwise cancelled non-group family health and accident policy. The district court rendered judgment in favor of Catal-die and Blue Cross appealed. The court of appeal amended in part and affirmed, 433 So.2d 367 (1983), holding that after Catal-die's daughter contracted a continuing illness causing the incurrence of expenses covered by the health insurance policy, public policy would not permit Blue Cross to exercise its contractual rights to cancel or drastically modify the policy. We affirm.
Sam V. Cataldie, Jr. and Blue Cross entered a non-group contract of health and accident insurance with endorsements effective September 1, 1978, insuring the payment of hospital and major medical services for Cataldie's family. At its inception, the policy provided for $250,000 major medical coverage, a $100 deductible, and a $244.67 quarterly premium. During succeeding years Blue Cross exercised its right under the contract to "change the fees for or the benefits of the contract . at any time" on several occasions. As of March 1, 1980, Blue Cross increased the quarterly premium to $256.56. As of March 15, 1981, Blue Cross raised the major medical deductible to $300.000, the hospital deductible to $50.00, the quarterly premium to $330.96.
Cataldie's three year old daughter, Amie, was diagnosed as having brain cancer in April of 1981, and treatment of the cancer was commenced. Deposition testimony shows that this treatment consisted of surgery to remove a malignancy. During the operation water collected in the child's brain forcing the surgeons to insert a shunt for drainage. Only a portion of the tumor was excised, and the child was left partially paralyzed. Radiation therapy, necessary to destroy the remainder of the malignancy, resulted in a brief remission, but subsequent spinal taps showed reactivation. Amie continued to require brain scans, spinal taps and chemotherapy as her condition deteriorated. As of May 15, 1982, Blue Cross had paid $41,266.21 for expenses in connection with Amie's illness.
As of January 1, 1982, Blue Cross increased the quarterly premium to $346.02; as of May 15, 1982, Blue Cross reduced the major medical coverage to a total of $20,-000 (limited to a maximum of $10,000 in one year); increased the deductible to $5,000, and increased the quarterly premium to $614.64. Thus, since the policy's inception Blue Cross decreased major medical coverage 92%, while increasing the deductible 5000% and the quarterly premium over 250%.
Cataldie was forced by Blue Cross's last increase in premiums to agree to a cancellation of his policy because he could not afford to insure his family at those rates. Instead, he entered a contract with Blue Cross to insure only his daughter, Amie Cataldie, under a single coverage policy with a $236.46 quarterly premium and with the drastically reduced coverage described.
This suit for declaratory judgment that coverage for health and major medical services necessitated by Amie's cancer be continued after cancellation was filed on May 19, 1982. Also, on May 25, 1982, Cataldie's attorney addressed a letter to Blue Cross stating that Cataldie had filed a petition for declaratory judgment of their contractual relationship, that his acceptance of the terms and payment of the premiums of the new policy was under protest, and that he reserved all his rights and remedies against Blue Cross. A new non-group comprehensive major medical contract dated August 5, 1982 was issued covering Amie Cataldie effective June 1, 1982.
Pursuant to a stipulation of facts the case was submitted to the trial court which subsequently rendered judgment in favor of Cataldie reinstating the terms and conditions of the policy as it existed at its inception covering his whole family. The court of appeal amended the judgment ordering that the policy benefits provided under the contract as it existed prior to May 15, 1982 be reinstated as to Amie Cataldie only, with corresponding adjustment in premiums.
Amie Cataldie died October 3, 1982.
Insurance is a business affected with the public interest and it is the purpose of the insurance code to regulate it in all its phases. La.R.S. 22:2. No person shall transact a business of insurance in this state without complying with the insurance code. La.R.S. 22:3.
Blue Cross' action in drastically increasing premiums while decreasing and altering coverage obviously caused the cancellation of the policy. Under these circumstances the insurer must bear legal responsibility for the cancellation, although the parties have stipulated that the plaintiff cancelled the policy. Furthermore, the legal principles which we conclude govern this case are applicable to a cancellation by either the insured or insurer. La.R.S. 22:213(B)(7).
The insurance code gives the health insurance policyholder very substantial protection in the area of cancellations and related matters. If the insurer wishes to insert a clause respecting the matter of cancellation, it must be "not less favorable" to the insured than the following:
"Cancellation: The insurer may cancel this policy at anytime by written notice delivered to the insured, or mailed to his last address as shown on the records of the insurer, and shall refund the pro rata unearned portion of any premium paid. Such cancellation shall be without prejudice to any claim originating prior thereto. The insured may likewise cancel this policy on the above terms." La.R.S. 22:213(B)(7). (Emphasis Added)
This clause was adopted with only minor deviations from the Uniform Individual Accident and Sickness Policy Provisions Law. Meyer, Life and Health Insurance Law, § 13.1 (1972). It was recommended by the National Association of Insurance Commissioners apparently because cancellation of health insurance is a source of dissatisfaction with a not inconsiderable segment of the public. See, R.D. Young, "Insurance Contracts: The Discontinuance Question," 30 Ins.Coun.J. 146 (1963).
Blue Cross attempted to insert in its policy cancellation rights less favorable to the insured than the statutory provisions. The major medical endorsement affords post cancellation coverage for a continuing illness or injury but only for a minimal amount or duration: "If a Member is incurring Major Medical Expenses for an illness or injury when this Endorsement is terminated, the Plan agrees to continue coverage under this Endorsement for that condition up to a maximum of $100.00 or for a 45-day period, whichever of these circumstances should be realized first."
Any provision of a policy which is in conflict with the statutes is amended by law to conform with statutory requirements. La.R.S. 22:213(B)(8). Accordingly, we must analyze Blue Cross's cancellation clause to determine precisely which, if any, of its provisions conflicts with the statutes and therefore must be considered as having been amended by law.
The provision of the cancellation clause which provides for continuing coverage for a continuing illness or injury is not in conflict with or less favorable than the statutory requirement. However, the special limitation of that coverage to $100 or 45 days, whichever occurs first, is a provision that conflicts with and is less favorable than that required by law. The statutory safeguard against the prejudice of any claim originating prior to cancellation contains no limitation as to time or amount. La.R.S. 22:213(B)(8).
Accordingly, the Blue Cross cancellation clause is amended by law and understood to provide that if any member is incurring major medical expenses for an injury when the policy and endorsement are terminated, coverage for that condition shall not be prejudiced by cancellation. When we apply this clause, as amended, to the facts of this case, we conclude that the correct result has been achieved by the trial court judgment, as amended by the court of appeal.
Although our decision is based on both La.R.S. 22:213(B)(7) and the particular wording of the Blue Cross cancellation clause, it would be no different if the cancellation clause contained a statement identical to the minimum safeguard required by law: "Such cancellation shall be without prejudice to any claim originating prior thereto." Perhaps in a narrow sense of esoteric legal doctrine Cataldie's claim originating before cancellation could be said to be restricted to medical bills rendered on or before this date. We do not believe the statute should be given such a confined interpretation. The words of a law are generally to be understood in their most usual signification, attending mostly to the general and popular use of words. La.C.C. art. 14. In this sense, in the popular use and usual meaning of words, Cataldie had a claim for major medical services related to his daughter's cancer of which the insurer was notified and which originated before it cancelled the policy.
Furthermore, the history of the measure indicates it was formulated by the National Association of Insurance Commissioners to serve as a safeguard against an unconscionable cancellation of health insurance policies by an insurer after the occurrence of illness or injury but before the loss had fully accrued. 30 Ins.Coun.J. at 154. Ca-taldie bargained for and reasonably expected to obtain $250,000 in major medical insurance in the event a catastrophic disease should attack his family. Blue Cross bargained for and reasonably should have expected to be exposed to this risk. By waiting .until the risk had been realized before bringing about cancellation of the policies, Blue Cross made it impossible for Cataldie to obtain insurance for his daughter Amie from any other carrier. The insurer's action in this case is equally as unconscionable as any which the legislature aimed to prevent by the legislation; the parties' expectations are as reasonable as any the statute is designed to enforce; and Catal-die's reliance to his detriment has produced as desperate a set of circumstances as any contemplated by the lawmakers. There is no valid reason to suppose that the legislature intended to exclude Cataldie's case from the ambit of the statute's protection.
When confronted with this type of situation all modern authorities we have found conclude that the policy cannot be terminated as to illness, injury or condition arising before the insurer's cancellation. They differ only as to the theory of the decision: Ambiguity—Sparks v. Republic National Life Insurance Co., 132 Ariz. 529, 647 P.2d 1127 (1982), cert. den. 459 U.S. 1070, 103 S.Ct. 490, 74 L.Ed.2d 632 (1982) (Cancellation of medical benefits policy); Public Policy—Brown v. Blue Cross & Blue Shield of Mississippi, 427 So.2d 139 (Miss.1983) (cancellation of medical benefits); Gulf Guaranty Life Insurance Co. v. Kelley, 389 So.2d 920 (Miss.1980) (attempted cancellation of credit life policy following insured's heart attack); Detrimental Reliance—Mutual Ben. Life Ins. Co. v. Robison, 54 F. 580 (C.A.Iowa) aff'd 58 F. 723 (7th Cir.1893); Implied Covenant of Good Faith—Spindle v. Travelers Insurance Co., 136 Cal.Rptr. 404, 66 Cal.App.3d 951 (2d Dist.1977) (cancellation of medical malpractice policy). Reasonable Expectations of Insured Honored —See, Keeton Insurance Law Rights at Variance with Policy Provisions, 83 Harv.L.Rev. 1961 (1970).
See also, Blue Cross—Blue Shield of Alabama v. Turner, 43 Ala.App. 542, 195 So.2d 807 (1966) (pregnancy benefits payable despite prior cancellation of group hospital and medical expenses policy); National Life & Accident Ins. Co. v. Dove, 167 S.W.2d 257 (Tex.Civ.App.1942) (cancellation of health benefits not operative as to benefits for continuing illness). Dossey v. Life & Casualty Ins. Co. of Tenn., 177 So. 427 (La.App. 2d Cir.1937) (right to cancel life, health, and accident policy suspended as per insurance contract for disability existing at notice of cancellation); National Life Ins. Co. v. Jackson, 18 Ga.App. 494 (Ga.App.1916).
These theories involve many of the considerations which we would employ in deciding such a case as this under the abuse of rights doctrine. See e.g., Cueto-Rua, "Abuse of Rights" 35 La.L.Rev. 965 (1975); Comment, 42 La.L.Rev. 210 (1981). Since we have concluded that our decision is governed by the contract and statutory law, there is no need for us to consider that doctrine in this ease.
Out of an abundance of caution, we add that our application of La.R.S. 22:213(B)(7) to the insurance contract does not make Cataldie's policy uneancellable for any purpose other than to prevent prejudice to a claim which originated before cancellation. Otherwise, the policy in this case was fully cancellable, in contrast with a non-cancella-ble or guaranteed renewable policy, which may not be altered by the insurer except to adjust rates by classes. La.R.S. 22:214. This observation is obvious from a casual reading of the statutes but is added to correct a misguided impression of the defendant as relfected in the brief of its counsel.
AFFIRMED.
DIXON, C.J., dissents.
MARCUS and BLANCHE, JJ., dissent and assign reasons.
. Under the terms of the preamble of the major medical endorsement, the major medical endorsement provisions supersede any conflicting terms of the basic policy. The basic policy permits the insurer to cancel without affording any protection of an insured's existing claim. Therefore, as between the basic contract and the major medical endorsement, the endorsement governs cancellation.