Opinion ID: 159881
Heading Depth: 3
Heading Rank: 2

Heading: Monumental

Text: We first address Monumental’s argument the Utah disclosure regulation does not apply to its accidental death policy. The regulation at issue is found in the portion of the Utah Administrative Code dealing with insurance administration, and entitled “Individual and Franchise Disability Insurance, Minimum Standards.” Utah Admin. Code R590-126. The disclosure regulation provides: Accident-Only Disclosure. All accident-only policies shall contain a prominent statement on the first page of the policy, or attached thereto, in either contrasting color or in boldface type at least equal to the size of type used for policy captions, as follows: “This is an accident-only policy, and it does not pay benefits for loss from sickness.” Utah Admin. Code R590-126-6G. The scope of Rule 590 is described as follows: -8- This rule shall apply to all individual and franchise disability insurance policies .... The rule shall apply only to coverage issued after the effective date of the rule. Utah Admin. Code R590-126-2B (emphasis added). Rule 590 provides a list of definitions “[i]n addition to the definitions of Sections 31A-1-301 and 31A-22605(2), U.C.A. [the general provisions of the Utah Insurance Code],” which are to “apply for the purposes of this rule.” Utah Admin. Code R590-126-3A. The term “disability insurance” is defined in the general provisions of the Utah Insurance Code as: insurance written to indemnify for losses and expenses resulting from accident or sickness, to provide payments to replace income lost from accident or sickness, and to pay for services resulting directly from accident or sickness, including medical, surgical, hospital, and other ancillary expenses. Utah Code Ann. § 31A-1-301(26) (Supp. 1996) (emphasis added). Monumental contends the term “disability insurance” as defined above, is too narrow to encompass an accidental death policy, and thereby argues the disclosure requirement contained in the regulation section entitled “disability insurance,” does not apply to its policy. The Utah courts have never determined whether the rules set forth in the “Individual and Franchise Disability Insurance” section of the insurance code apply only to disability insurance policies or to other types of insurance policies -9- such as those addressing accidental death insurance. However, the general provisions of the Utah Insurance Code define “disability insurance” broadly to include insurance policies covering “losses” resulting from accident or sickness. See Utah Code Ann. § 31A-1-301(26). Nothing in the regulations indicates that “losses” resulting from accident or sickness do not include death. Moreover, as the district court noted, the regulations dealing with “disability insurance” specifically mention policies providing for accidental death benefits in several subsections. 3 Thus, it is clear Utah implemented the “disability insurance” regulations with the intent to cover accidental death policies. Even though these 3 For example, the subsection entitled “Disability, Minimum Standards for Benefits,” defines and sets the minimum standards for “Accident-Only Coverage” as follows: a policy of accident insurance which provides coverage, singly or in combination, for death, dismemberment, disability, or hospital and medical care caused by accident. Accidental death and double dismemberment amounts under such a policy shall be at least $1,000 and a single dismemberment amount shall be at least $500. Utah Admin. Code R590-126-7H (emphasis added). Likewise, “Specified Accident Coverage” is defined as: an accident insurance policy which provides coverage for a specifically identified kind of accident (or accidents) for each person insured under the policy for accidental death or accidental death and dismemberment, combined with a benefit amount not less than $1,000 for accidental death, $1,000 for double dismemberment and $500 for single dismemberment. Utah Admin. Code R590-126-7I(1) (emphasis added). -10- regulations are not codified, in Utah, insurance regulations “passed pursuant to a statutory grant of authority have the full force and effect of law.” Horton v. Utah State Retirement Bd., 842 P.2d 928, 932 n. 2 (Utah Ct. App. 1992) (citations omitted); see also V-1 Oil Co. v. Department of Envtl. Quality, 904 P.2d 214, 218-19 (Utah Ct. App. 1995). Consequently, we conclude the mandatory disclosure provision contained in section R590-126-6G of the Utah Administrative Code applies to Monumental’s accidental death policy. Because Monumental’s policy did not comply with the disclosure regulation when issued, we also conclude the district court applied the appropriate remedy by striking the exclusionary language of the policy. See General Motors Acceptance Corp. v. Martinez, 668 P.2d 498, 502 (Utah 1983) (holding the insurance company was estopped as a matter of law from denying coverage under its policy due to its failure to comply with Utah insurance law). 4 See also Cullum 4 We reject Monumental’s argument Martinez cannot apply because it involved an insurance company’s failure to comply with Utah codified law as opposed to mere insurance regulations. In support of its argument, Monumental also contends estoppel cannot apply to violation of an agency rule which it claims prohibits private relief. Contrary to these contentions, nothing in Utah’s insurance regulations prohibits private relief. Given Utah’s insurance regulations maintain the full force and effect of law, Horton, 842 P.2d at 932 n.2, we see no difference in whether Monumental violated codified or regulatory provisions. As a consequence, it follows that if the private remedy of estoppel is available for one, it is also available for the other. -11- v. Farmers Ins. Exch., 857 P.2d 922, 926-27 (Utah 1993) (concluding failure to comply with Utah insurance law rendered an exclusion provision in the insurance contract unenforceable). 5 As a result, under the circumstances presented, Monumental’s claim Mr. Johnson’s myotonic dystrophy caused or contributed to the fall which led to his death is irrelevant to our determination. 6 Because no 5 Monumental argues the district court erred by striking the language defining “injury” in its policy. Monumental argues the district court acted overzealously by striking this language as a consequence of its violating the disclosure regulation. Monumental also contends even if the district court correctly determined its definition was more restrictive than allowed by Utah insurance regulations, the proper remedy would have been to substitute the statutory definition of “injury” provided in Utah Admin. Code R590-126-3A(1)(a). Monumental further argues even if the district court substituted the less restrictive language to define injury under the contract, it still would not have been required to pay death benefits to the Johnsons. We disagree. The purpose of the disclosure regulation is to alert the insured to the sickness exclusion. See Utah Admin. Code R590-126-2A. It is nonsensical to assert the insurer may violate the disclosure regulation and be estopped from relying on the sickness exclusion, but then allow the insurer to nevertheless deny coverage based on other language in the policy which effectively excludes injuries allegedly resulting, in part, from sickness. Thus, we reject Monumental’s argument it is entitled to summary judgment because myotonic dystrophy contributed to Mr. Johnson’s death. 6 Despite Monumental’s contentions, the district court’s ruling did not turn the policy into a “disability” or “life insurance” policy. Rather, the district court recognized the policy extended only accidental death insurance, but under the circumstances, extended such coverage without determining if an underlying illness caused the “accident,” given the policy’s failure to follow Utah’s disclosure requirements. While Monumental argues the district court should have applied the exclusion and denied benefits under our holding in Winchester v. Prudential Life Ins. Co. of America, 975 F.2d 1479 (10th Cir. 1992), it misses the point. First, the district court never reached the issue on whether Winchester applied to this case given Monumental’s failure to comply with Utah’s disclosure requirements. Consequently, even if we determined the exclusion adequately discloses that coverage does not extend to accidents resulting from pre- -12- material, controverted facts are left for a jury to decide in Monumental’s case, the district court properly granted summary judgment in favor of the Johnsons. D. Life Investors Life Investors asserts the disclosure regulation does not apply to its policy because AMEX issued the original policy before the disclosure regulation became effective. 7 The district court concluded Life Investors/AMEX subjected itself to the provisions of the regulation by accepting additional premiums for increased benefits after the effective date of the disclosure rule. 8 Life Investors argues the existing conditions, Monumental nevertheless violated Utah’s disclosure regulations by burying the disclosure in the policy and not setting it out in bold or colored type. 7 As stated previously, Mr. Johnson bought the accidental death policy from AMEX in February 1989. Utah enacted the Regulations at issue on June 20, 1989. Mr. Johnson increased his benefits in December 1989. In February 1993, Life Investors assumed responsibility for the AMEX insurance policy. 8 Life Investors points out the district court relied on the wrong certificate when rendering its decision. This mistake arose from the confusion generated when, during discovery, Life Investors mistakenly produced a copy of a specimen certificate which it did not send to the Johnsons. However, Life Investors drew the court’s attention to this error in a motion to file a supplemental memorandum in support of its motion for summary judgment. The district court granted Life Investors’ motion, and Life Investors subsequently filed a supplemental memorandum in support of its motion for summary judgment and attached the correct certificate. Although Life Investors maintains the district court committed plain error by relying on the incorrect certificate in rendering its decision, it contends the court would have reached the same decision even if it relied on the correct certificate, and asks us to review the district court’s decision as if it relied on the correct certificate. The district court reasoned the definition of a “covered injury” -13- district court made this determination in error, and suggests the subsequent agreement did not constitute the formation of a wholly new contract that brought it under the auspices of the mandatory disclosure regulation. Under Utah law, substantive statutes affecting vested rights do not apply retroactively. See Olsen v. Samuel McIntyre Inv. Co., 956 P.2d 257, 260 (Utah 1998). However, because the Utah courts have never addressed whether an agreement to increase benefits in a life insurance contract creates a new policy, subject to statutes and regulations enacted after issuance of the original policy, we look to “other state court decisions, federal decisions, and the general weight and trend of authority” to determine how the Utah courts would resolve this issue. May, 84 F.3d at 1345 (quotation marks and citations omitted). Other courts, analyzing similar issues, have held an increase in premiums, benefits, or coverage, does not constitute the creation of a new certificate of insurance subject to regulations enacted after the original date the policy became effective. See, contained on page five of the wrong certificate acted as an exclusion for sickness and struck the provision because it lacked bold-faced or colored type as required by the disclosure regulation. We agree the reasoning of the district court concerning the applicability of the disclosure regulation to Life Investors’ policy would have been the same whether it relied on the correct or incorrect certificate, and thus, in the interest of resolving this dispute, we review the district court’s decision as if based on the correct certificate. -14- e.g., Gahn v. Allstate Life Ins. Co., 926 F.2d 1449, 1456 (5th Cir. 1991) (applying Louisiana law and holding the modification of the terms of an insurance policy does not create a new policy); Metropolitan Property and Liability Ins. Co. v. Gray, 446 So.2d 216, 219-20 (Fla. Dist. Ct. App. 1984) (holding the mere addition of another person on a policy does not amount to a reissuance of the policy and thus, does not make the policy subject to statutes effective after the issuance of the original policy); Crow v. Capitol Bankers Life Ins. Co., 891 P.2d 1206, 1211 (N.M. 1995) (construing the insurance policy and rider as part of same contract for insurance); Massachusetts Mut. Life Ins. Co. v. Thacher, 222 N.Y.S.2d 339, 343 (N.Y. App. Div. 1961) (determining a rider attached to the face of a policy containing an option for extended benefits on the payment of additional premium merely amounts to an extended privilege and does not create a new policy); Hidary v. Maccabees Life Ins. Co., 591 N.Y.S.2d 706, 710 (N.Y. Sup. Ct. 1992) (finding increases in face amount of coverage for payment of additional premiums did not constitute separate new policies); French v. Insurance Co. of N. Am., 591 S.W.2d 620, 621-22 (Tex. Civ. App. 1979) (reasoning the addition of a car to insurance policy did not create a new policy subject to a statute which became effective after the issuance of the original policy). We can see no reason why Utah would depart from the majority view on this point of law. Nevertheless, we turn to the Johnsons’ argument the increase in -15- benefits amounted to new “coverage” and thus, became subject to the disclosure regulation. In support of their argument Life Investors became subject to the disclosure regulation when it accepted the Johnsons’ additional premium payment after the disclosure regulation became effective, the Johnsons focus on the word “coverage” and point out the disability insurance rules “apply only to coverage issued after the effective date of the rule.” Utah Admin. Code R590-126-2B (emphasis added). In applying this provision to their policy, the Johnsons point out AMEX sent them a letter after it received the additional premium payment stating: I have enclosed your revised Data Page for your Certificate APG1000984 which reflects your increase in coverage. Please replace the original Data Page with this new one. Your new quarterly premium will be $82.32. A charge of $56.95 has been placed on your American Express Card account. This represents the difference in premium due for your additional coverage. (Emphasis added.) Based on this language, the Johnsons maintain that by increasing the benefits under the policy, AMEX issued new “coverage” after the effective date of the disclosure regulation, making Life Investors subject to the disclosure regulation. We disagree. -16- The term “coverage” when used in the context of an insurance contract is widely held to mean “[i]nclusion of a risk under an insurance policy; the risks within the scope of an insurance policy.” Black’s Law Dictionary 372 (7th ed. 1999). See Traders State Bank v. Continental Ins. Co., 448 F.2d 280, 283 (10th Cir. 1971) (“The word coverage is, indeed, a term of art in the insurance industry, meaning the sum of all the risks assumed under the policy.”) (quotation marks and citation omitted); see also In re Joint E. and S. Dist. Asbestos Litig., 993 F.2d 313, 315 (2d Cir. 1993); Guaranty Nat’l Ins. Co. v. Bayside Resort, Inc., 635 F. Supp. 1456, 1458 (V.I. 1986); Illinois Farmers Ins. Co. v. Tabor, 642 N.E.2d 159, 163 (Ill. App. Ct. 1994); Delcampo v. New Jersey Auto. Full Ins. Underwriting Ass’n, 630 A.2d 415, 422 (N.J. Super. Ct. Law Div. 1993); Farmers Ins. Co. of Washington v. Frederickson, 914 P.2d 138, 140 (Wash. Ct. App. 1996). On the other hand, the term “benefit” is defined in Black’s Law Dictionary as: “Financial assistance that is received from an employer, insurance, or a public program (such as social security) in time of sickness, disability, or unemployment.” Black’s Law Dictionary 151 (7th. ed. 1999). See Vogel v. Wells, 566 N.E.2d 154, 161 (Ohio 1991) (quoting Black’s Law Dictionary to define “benefit”); Kratz v. Kratz, 905 P.2d 753, 755 (Okla. 1995) (relying on Black’s Law Dictionary to define “benefit” in the context of an insurance contract). -17- Hence, neither definition persuades us an increase in “benefits” alone increases the “coverage” or assumed risks of an insurance contract, thereby creating a new or different contract or policy. Under the circumstances presented we conclude the increase in premiums and benefits did not change the nature of the coverage or create a new policy subject to the disclosure regulation because it did not alter the type of risk Life Investors assumed under the policy – it only altered the amount of the benefits Life Investors was obligated to pay in the event a legitimate claim arose under the policy. For these reasons, the district court erred by determining Life Investors was estopped as a matter of law from refusing to honor the Johnson’s claim. We therefore remand to the district court for further proceedings in accordance with this opinion on the Johnsons’ claims against Life Investors, including their breach of contract claim. 9 9 The Johnsons contend they are entitled to summary judgment even if the district court erred by determining Life Investors was estopped from relying on the sickness exclusion to deny coverage. In support, the Johnsons argue the majority of jurisdictions, examining language in insurance contracts similar to the exclusionary language contained in their policy, refused to allow the insurance companies to rely on such language to deny coverage unless the preexisting illness constituted the “predominant cause” of the injury, or the preexisting illness “substantially contributed to the loss.” In response, Life Investors argues the Utah Supreme Court would interpret the definition of “injury” in its policy to preclude coverage. Relying on Winchester v. Prudential Life Ins. Co. of America, 975 F.2d 1479 (10th Cir. 1992), Life Investors urges us to reverse the district court’s denial of its cross-motion for summary judgment and rule the Johnsons are not entitled to coverage under the policy as a matter of law because they cannot prove Mr. Johnson’s death resulted directly from an accident, independent of all other causes. We leave the determination of this issue to the district court on remand. -18-