Opinion ID: 1777244
Heading Depth: 1
Heading Rank: 2

Heading: Application of the Contract

Text: The defendants claim that, under a proper construction of the contract, they had every right to reach agreement with Farm Bureau on a new program to supplant the existing Com-Pac program. They point to such provisions as the following: G. If the Group Sponsor terminates its enrollment agreement with BCHS, or makes available to the group another group hospital care program, or indemnity therefor, this Certificate shall terminate with the termination of the enrollment agreement or on the effective date of such other program, without regular conversion privileges. (From Exhibit A) A. The plans reserve the right to change the benefits provisions, terms or conditions of the Contract or change the applicable dues at the end of any contract year by giving written notice to the Employer thirty (30) days prior to such date. Mailing of such notice to the Employer shall constitute notice to the Member. (From Exhibit C). The defendants next argue that, following the adoption of the Comprehensive plan to replace the Com-Pac plan, the only benefits payable are those provided in the new plan. They cite provisions such as the following: MEMBERSHIP BENEFITS. Those benefits described in this Certificate, which become applicable to a participant, as evidenced by his membership card and by the records of BCHS. The membership benefits shall, in any case, be the ones for which dues are being charged and remitted at the time hospital care is provided hereunder. ALL OF THE BENEFITS PROVIDED UNDER THIS CERTIFICATE WHERE THE TOTAL CHARGE IS $50.00 OR MORE ARE SUBJECT TO COORDINATION OF BENEFITS AS DEFINED IN ARTICLE IX. (From Exhibit A).       E. Cancellation or termination of this Agreement for any reason will automatically terminate the rights and privileges herein specified for all participants EXCEPT that upon the death of the member, membership for the surviving participants may be obtained by the first dependent filing an application within 30 days after such death and paying the dues or all hospitals furnishing services to the participant under this Agreement are authorized and directed to furnish MMS any and all information and records, or copies of records, relating to the history, diagnosis, treatment and care of the participant in such form as MMS shall prescribe. (From Exhibit B). It is widely held that insurance contracts are to be construed strictly against the insurer and that any ambiguity is to be resolved in favor of the persons insured. [2] The defendants observe that they are not, strictly speaking, insurance companies, but rather Health Services Corporations (Ch. 354, RSMo). Contracts between such companies and the beneficiaries under their plans, however, are construed in the same manner as insurance contracts. [3] Numerous cases, over the years, have dealt with the problem of medical expense occasioned by accident or illness commencing while insurance coverage is in force and continuing after the governing policy terminates through expiration, lapse, program modification, or otherwise. When the event insured against is accident or illness there is a tendency to hold that benefits payable to the insured for an existing condition continue in accordance with policy terms in force at the onset, even though the governing policy is terminated or modified while hospitalization or treatment is still necessary. [4] The defendants point out, however, that their contracts provide hospital and medical care rather than insuring against events of illness or accident, that payment is made directly to the provider rather than to an insured, and that the contractual documents state very clearly that the benefits payable are only such as are provided by the contracts in effect at the time the expenses are incurred. Substantial and respectable authority holds that contracts such as the defendants describe are valid and enforceable in accordance with their terms. [5] If the defendants are correct, then the provision for $1,000,000 lifetime benefits per person is illusory to the point of being positively deceptive. This provision might lead members to believe that they would be protected against catastrophic and prolonged illness which strikes all too often without warning, whereas, by the defendants contentions, the protection would continue only so long as the insurer and the sponsor did not change the coverage. By the defendants' argument, indeed, modifications could be made in order to forestall further payments on account of an existing disability. [6] Such a state of affairs, at the very least, is occasion for a raising of the judicial eyebrow. We conclude that the contractual force of Exhibits D and E is such that a limit below $1,000,000 may not be imposed on the hospital or medical benefits available for an illness or injury requiring hospitalization and having its inception while the $1,000,000 limitation is in effect. The attempt to impose a $5,000 annual and a $25,000 lifetime limit on benefits payable for mental illness, then, is ineffective as to Loren's illness. Any other reading would render the manifestation of coverage up to $1,000,000 of no value to the beneficiaries. We are not impressed by the defendants' argument that the $1,000,000 figure is merely a cap. The language used is indicative of mutuality of benefit. By reason of our conclusion just stated, any provision of the contract documents which, standing alone, might support the defendants' contentions, is ineffective to impose the enacted ceiling on mental illness benefits. If a contract promises something at one point and takes it away at another, there is an ambiguity. [7] Such an ambiguity is patent, rather than latent, and may be resolved within the four corners rather than by means of extrinsic aids. [8] Because the ambiguity is in an insurance contract it is to be resolved in favor of the insured and against the insurer. Robin, supra at 698. Under our reading of the contract the trial court reached the proper conclusion. The contract provisions relied on by the defendants, moreover, are not so clear and certain as they represent. Paragraph IV.A of Exhibit A provides as follows: Hospital care under this Certificate will be provided only upon the authorization and request of their attending physician, who must be acceptable to the selected hospital. Nothing herein shall be construed as altering the participant's free choice of a physician or surgeon. Hospital care, subject to all other provisions of this Certificate, shall continue only while the participant is under the treatment or care of his physician, and shall end when such participant is discharged as a hospital patient by the attending physician. (Emphasis supplied) This provision would surely suggest to the casual reader that an entire hospital stay which commences while coverage is in force is to be covered, and is not to be affected by later modification or termination of the contracts. The conversion privileges provide that membership ... shall be continuous from the time of the original service date of the terminated coverage. The new comprehensive program did not purport to abrogate benefits for conditions having their origin prior to the date of inception of the new program, except for mental illness. Careful reading of all of the contract provisions discloses no express sanction for imposing a limitation on benefits for a particular medical condition. Our conclusion is consistent with Danzig v. Dikman, (1980), 78 A.D.2d 303, 434 N.Y. S.2d 217, affirmed 53 N.Y.2d 926, 440 N.Y. S.2d 925, 423 N.E.2d 402 (N.Y.1981). There a subscriber suffered a disabling stroke requiring full time nursing care. The coverage in effect at the time of the disability contained no limitation on reimbursement for private duty nursing, but a subsequent modification limited such reimbursement to $5,000 annually. The court held that the limitation was not effective to limit the benefits payable to the plaintiff. Likewise consistent is Myers v. Kitsip Physicians Service, supra , in which a person covered by a health care provider contract suffered kidney failure, requiring hemodialysis. The plan was then modified to exclude coverage for this kind of treatment. The court held that the attempted exclusion was ineffective as to the plaintiff. The defendant argued that each year's coverage constituted a separate contract, but the opinion pointed to provisions indicating continuity of coverage and held that these gave rise to an ambiguity. The defendants seek to distinguish Danzig and Myers , asserting that they are based on a reasonable expectation theory assertedly rejected by this Court in Robin . They misread Robin , the essential holding of which is that group health services contracts in which the sponsor is a substantial business corporation are not contracts of adhesion. In so holding we cut off at the pass the claim that we should not give effect to plain and unambiguous contract terms, simply because a disadvantaged insured might reasonably expect something different. Our present conclusion is based on the rejection of the defendants' claim that the contract language is clearly in their favor. If the language does not clearly support the plaintiffs' position, it is at least ambiguous. We do not need to discuss additional authorities from other states. There are other cases supportive of our conclusion. [9] Of those adduced in support of a contrary provision, none involved an attempt to impose a limitation on benefits of a particular type, while substantially maintaining the health services program in effect at the inception of the disability. Cases involving termination of the entire program [10] or termination of the insured's membership [11] are not fully in point. We would reject, furthermore, a defense based on the hypothesis of the complete cancellation of the existing program and the substitution of a brand new one. The Com-Pac program has provisions, detailed earlier, consistent only with continuity. The very specification of a program maximum benefit figure is inconsistent with the proposition that the old program has been completely superseded by a new one offered by the same providers. Robin v. Blue Cross Hospital Service, Inc., supra , does not compel a contrary conclusion. The plaintiff sustained an injury while employed and covered by a group health plan. She was unable to return to work and her employment was terminated. Her employer understandably paid no more dues for her following termination of her employment, and she did not avail herself of the privilege of converting to individual coverage even though advised of her right to do so. We held that the provisions of the contract providing that continued membership was necessary to maintain coverage were clear, unambiguous and enforceable. The case is fully distinguishable. The defendants cannot improve their position by pointing to the reference in Exhibit E to the Master Group Membership Certificate. The master agreements, as earlier pointed out, contain no figures for maximum coverage, and so do not contradict Exhibit E. The defendants argue that there is no showing that the plaintiffs ever relied on, or even read, the provisions of Exhibits D and E. By the position we adopt no such showing is necessary. Exhibits D and E are parts of the governing contract. The parties are often held to contract provisions which they have not read. There is no reason why these provisions should not be applied in favor of a non-reader, as well as against.