Opinion ID: 2585528
Heading Depth: 1
Heading Rank: 2

Heading: Freedom to Contract

Text: Kansas recognizes the freedom to contract as a qualified and not an absolute right that is protected by the Fifth and Fourteenth Amendments to the United States Constitution. Manhattan Buildings, Inc. v. Hurley, 231 Kan. 20, 28, 643 P.2d 87 (1982). Freedom to contract, however, is limited by other public policy and legislation. 231 Kan. at 28. Nevertheless, the paramount public policy is that freedom to contract is not to be interfered with lightly. [Citation omitted.] Foltz v. Struxness, 168 Kan. 714, 721-22, 215 P.2d 133 (1950). Dr. Marshall and the Weisses argue that Dr. Marshall did not freely contract with KaMMCO for the excess liability insurance because no one from KaMMCO spoke with Dr. Marshall about the policy before he purchased it. This argument, however, overlooks Dr. Marshall's choice to delegate the purchase of the policy to his secretary. In fact, the record on appeal discloses that Dr. Marshall did not read all of the application for the excess limits liability coverage before signing his name to the application. As a result, Dr. Marshall did not notice that the retroactive date on the application was left blank. In the disclosure statement before the signature line, the application specifically states: As defined in the policy, claims made coverage provides coverage for claims occurring subsequent to the retroactive date and first made to the company during the policy period. Had Dr. Marshall read the excess limits application before signing it, perhaps he would have understood the need to specify a retroactive date on the application. The record also discloses that Dr. Marshall never read the Medical Professional Liability Excess Limits Insuring Agreement (endorsement) that was attached to the application until the initiation of this litigation. The endorsement clearly explains the limitations of the excess limits coverage being added to the policy. A party to a contract has a duty to learn the contents of a written contract before signing it. Rosenbaum v. Texas Energies, Inc., 241 Kan. 295, 299, 736 P.2d 888 (1987). This duty has been interpreted to include a duty to secure a reading and explanation of the contract. 241 Kan. at 299. A party's negligent failure to do so estops the party from avoiding the terms of the contract on the grounds of ignorance of its contents. 241 Kan. at 299. Accordingly, Dr. Marshall cannot avoid the terms of the excess limits coverage because he was ignorant about the limitations of the policy endorsement. Likewise, he cannot claim that the excess limits insurance violates his freedom to contract because he failed to adequately inform himself before entering into the contract. The statutorily required minimum limits of professional liability coverage, as is evident from the facts of this case, are not necessarily sufficient to cover all of a health care provider's liability. To provide additional protection for Kansas residents and health care professionals, insurance companies should be free to contract for additional coverage, with premiums determined in accordance with the parties' needs and consistent with the risk factors disclosed to the insurance companies. Public policy supports this freedom to contract without unduly burdening either party to the transaction. Without this freedom to contract, it is likely that insurance companies might refuse to assume additional risk on behalf of health care providers. The facts of this case are very similar to those in Merrill & Seeley, Inc. ; General Insur. Co. ; N.K.K. ; and Gereboff, where the courts upheld the limited retroactivity of claims made insurance polices. The key difference between those cases and the case here is that those cases involved the only insurance available to the insured. In this case, the only insurance at issue is the $1,000,000 excess limits coverage over and above the statutorily required $1,000,000 of coverage already available from KaMMCO and the Fund. This distinction further supports the affirmation of KaMMCO's excess limits insurance under the public policy of freedom to contract.