Opinion ID: 2040221
Heading Depth: 1
Heading Rank: 4

Heading: unconscionable/contract of adhesion

Text: This Court now takes the position that this insurance policy and the certificate is a contract of adhesion. I agree with its rationale. However, I disagree with the application of the rule wherein the majority opinion states that [i]n case of doubt as to meaning, it will be interpreted against the insurer who furnished or prepared the policy; for, indeed, in this case, the majority interprets this contract and the certificate against the insured rather than the insurer. I fully appreciate that the majority takes the position that it is adopting this rule in favor of the insurer because the majority believes there is no doubt as to the meaning in these insurance instruments. I must respectfully disagree that there is no doubt as to their meaning. Writing for the majority of this Court in Rozeboom v. Northwestern Bell Telephone Co., 358 N.W.2d 241, 244-45 (S.D.1984), I expressed: North Dakota, our sister state, has not been timorous in recognizing contracts of adhesion. In applying the concept to grain purchase contracts, that state's highest court in Farmers Union Grain Terminal Ass'n v. Nelson, 223 N.W.2d 494, 497 (N.D.1974), stated: (1) A contract is construed most strongly against the party who prepared it    (2) An agreement which is essentially a contract of adhesion should be examined with special scrutiny by the courts to assure that it is not applied in an unfair or unconscionable manner against the party who did not participate in its drafting. Bell prepared the contract in question. This State should examine this contract with an impartial but critical eye in determining whether it is unconscionable against Rozy, who did not participate in its drafting. In Bekken v. Equitable Life Assur. Soc., 70 N.D. 122, 143, 293 N.W. 200, 212 (1940), the North Dakota Supreme Court applied the term contract of adhesion to insurance contracts. Neither Julian Cheney nor the thousands of state employees, past or present, prepared the Master Policy or the Certificate. Rather, both were prepared by Metropolitan Life Insurance Company. Special rules of construction are applicable to insurance policies for they are contracts of adhesion. 43 Am.Jur.2d Insurance § 282 (1982). Here, we have an insurance policy called a group insurance policy. It was the insurance company which drew the group insurance policy and the certificate in such fashion that it has triggered this litigation. In case of doubt as to meaning, the group insurance policy should be interpreted against Metropolitan who prepared the policy and the certificate. This Court should not adopt a construction or interpretation which will defeat recovery if the policy is susceptible to a meaning which will permit recovery. Julian Cheney never saw the Master Policy; neither did his wife. Julian Cheney never saw the Certificate; neither did his wife. A state law, SDCL 58-16-38, absolutely mandated that Metropolitan Life Insurance Company furnish unto Cheney an individual Certificate. [7] Stipulation of Facts XL provides: The System although the decedent, Mr. Cheney completed his enrollment and joined the group plan on January 3, 1983, when eligible, failed to issue a Group Insurance Certificate to Mr. Cheney. It is unconscionable for Metropolitan to have bargained to insure all employees, that Cheney paid his premium, that Metropolitan had constructive possession of the premium, that Metropolitan violated a mandatory state law, and that Metropolitan end up prevailing in this case. It is unconscionable to hold Julian Cheney and his heirs to a document which was never issued or delivered to hima document he never saw. Cheney had no bargaining power; he had to adhere to the Master Policy and the language in the Certificate. Language, if you will, which contained additional conditions totally outside of the Master Policy. Yes, the bargaining was long over and the System and Metropolitan had carved up hisand all state employees'rights. Metropolitan cannot escape its responsibilities, imposed by state law, by contracting with the System. To enforce an invalid provision in the Certificate, which provision exceeds the Master Policy language and deprives Cheney of insurance, is unconscionable. Halverson, 286 N.W.2d 531, is distinguishable in its facts. In Halverson, Mrs. Halverson received a certificate and then elected to convert a group policy to an individual policy. She was a payroll clerk responsible for insurance matters and received her own certificate. Here, there was no certificate issued. In each case cited by this Court in Halverson, the insured had received the certificate. We do not have such a factual scenario here. Cheney's hands, and those of his heirs, are clean. Reason recoils against holding Cheney to a Certificate which never came into existence. Furthermore, Halverson perpetrated a deception. Again, there is no such suggestion here.