Opinion ID: 901809
Heading Depth: 1
Heading Rank: 3

Heading: Contract for interim coverage

Text: [¶ 13.] Coles argue that an implied contract for interim coverage existed between them and Wellmark. Coles argue that the language WELLMARK UNDERWRITES COVERAGE UP TO THE EFFECTIVE DATE OF THE POLICY REGARDLESS OF WHEN THE APPLICATION WAS APPROVED, along with the payment of the first month's premium created an implied contract for interim insurance between October 1, 2003, and the time Wellmark acted upon Coles' application. In order to arrive at this result, Coles ask this Court to read the following language, WELLMARK UNDERWRITES COVERAGE UP TO THE EFFECTIVE DATE OF THE POLICY REGARDLESS OF WHEN THE APPLICATION WAS APPROVED, contained in the application immediately above the signature lines in isolation and out of context with the rest of that paragraph, which provides: COVERAGE APPLIED FOR WILL NOT BE EFFECTIVE UNTIL WELLMARK OR USAL, AS THE UNDERWRITERS OF THE HEALTH AND LIFE COVERAGES, RESPECTIVELY, HAVE REVIEWED AND APPROVED THIS APPLICATION AND NOTIFIED ME IN WRITING OF THE APPROVAL OF SUCH INSURER'S COVERAGE. [¶ 14.] [T]he scope of coverage of an insurance policy is determined from the contractual intent and the objectives of the parties as expressed in the contract. St. Paul Fire and Marine Ins. Co. v. Schilling, 520 N.W.2d 884, 887 (S.D. 1994) (citing City of Fort Pierre v. United Fire & Cas. Co., 463 N.W.2d 845, 848 (S.D.1990); Black Hills Kennel Club, Inc. v. Fireman's Fund Indem. Co., 77 S.D. 503, 94 N.W.2d 90 (1959)). We construe a contract of insurance giving words their plain and ordinary meaning. Id. We will not resort to rules of construction, including the rule that requires language to be construed liberally in favor of the insured and strictly against an insurer, unless the language of the contract is ambiguous. Id. We will not create a forced construction or a new contract for the parties when the language is clear and we are able to ascertain the plain and ordinary meaning of the language used. Id. [¶ 15.] Furthermore, [a] proposed insured is deemed to have known the contents of the application and cannot disregard any limitations that are contained in the application. Worden v. Farmers State Co., Inc., 349 N.W.2d 37, 41 (S.D.1984) (citing Cavallo v. Met. Life Ins. Co., 34 A.D.2d 682, 312 N.Y.S.2d 438 (1970)). An insurance policy for which the application provides that liability will not attach until the application is approved and the first premium is paid cannot take effect until both events occur. Id. (citing Bowen v. Mut. Life Ins. Co., 20 S.D. 103, 104 N.W. 1040, 1044 (1905)). In addition, the limiting language in an application for insurance will supersede any statements made by an agent as to when coverage will become effective as such statements are mere expressions of an opinion. Id. [¶ 16.] In order to find a contract of interim coverage existed under these facts, Coles urge this Court to conclude that the language contained in the contract that WELLMARK UNDERWRITES COVERAGE UP TO THE EFFECTIVE DATE OF THE POLICY REGARDLESS OF WHEN THE APPLICATION WAS APPROVED, is ambiguous and created such a contract. Coles offer a definition of the word underwrites from the Merriam-Webster Dictionary: 2. to set one's name to (an insurance policy for the purpose of thereby becoming answerable for a designated loss or damage on consideration of receiving a premium percent): insure on life or property; also: to assume liability for (a sum or risk) as an insurer[.] Coles argue that the use of the term UNDERWRITES in the sentence above shows that Wellmark accepted liability on the policy for which the Coles applied on the effective date they selected. Acceptance, according to Coles, committed Wellmark to a contract for interim health coverage effective October 1, 2003, and until Wellmark either approved Coles' application and issued a regular policy, or it rejected their application. However, Wellmark argues the sentence contains a condition precedent that required Wellmark to approve the policy in writing before coverage would relate back to the effective date Coles selected. [¶ 17.] Coles testified that they did not read the contract thoroughly before signing it. Despite this statement, Dellas also testified he understood the language that appeared immediately above the signature line to mean that coverage would not be in effect until Wellmark approved the policy and notified Coles in writing. He then testified that he also understood the language in the contract that WELLMARK UNDERWRITES COVERAGE UP TO THE EFFECTIVE DATE OF THE POLICY REGARDLESS OF WHEN THE APPLICATION WAS APPROVED, meant Wellmark would provide interim coverage. [¶ 18.] However, there is no ambiguity in the policy application's language that coverage would be effective only when written approval from Wellmark was received by Coles. Coles' understanding that interim coverage was provided under the application cannot defeat the plain language of the provision that only written notification would suffice for coverage to be effective. Furthermore, Coles offered nothing in writing from Wellmark that indicated its approval of the alleged interim coverage was in effect as of the date Coles signed the application. [3] Regardless of how Coles internally interpreted the unambiguous terms of the application, they were bound to it based on their signatures indicating agreement with and acceptance of the terms. [¶ 19.] We will not engage in a tortured reading of the Wellmark application in order to create ambiguity and disregard the clear language that Wellmark would not provide any coverage until it or USAL had reviewed and approved [Coles] application and notified [Coles] in writing of the approval of [Wellmark's] coverage. Coles' attempt to rewrite the language of the application in order to obtain interim coverage fails. We will not rewrite clear and unambiguous terms in an application for insurance to find coverage where none existed. The triggering point for the policy to become effective and for coverage to relate back to October 1, 2003, was approval by Wellmark or USAL, and receipt of written notice of that approval by Coles. Neither condition was ever satisfied. [¶ 20.] The statutory prohibition on such interim coverage is also fatal to Coles' argument. The provisions of SDCL 58-11-32 preclude insurers from offering temporary or interim health insurance under the binder provisions found in SDCL 58-11-29 through 58-11-31. [4] SDCL 58-11-32 provides: Sections 58-11-29 to 58-11-31, inclusive, shall not apply to life or health insurances. (Emphasis added). SDCL 58-11-29 provides in relevant part: Binders or other contracts for temporary insurance may be made orally or in writing, and shall be deemed to include all the usual terms of the policy as to which the binder was given together with such applicable endorsements as are designated in the binder, except as superseded by the clear and express terms of the binder. [¶ 21.] As this Court has often noted, [s]tatutory interpretation is a question of law to be reviewed under the de novo standard of review. Discover Bank v. Stanley, 2008 SD 111, ¶ 15, 757 N.W.2d 756, 761 (citing Martinmaas v. Engelmann, 2000 SD 85, ¶ 49, 612 N.W.2d 600, 611). Furthermore, The purpose of statutory construction is to discover the true intention of the law which is to be ascertained primarily from the language expressed in the statute. The intent of a statute is determined from what the legislature said, rather than what the courts think it should have said, and the court must confine itself to the language used. Words and phrases in a statute must be given their plain meaning and effect. When the language in a statute is clear, certain and unambiguous, there is no reason for construction, and the Court's only function is to declare the meaning of the statute as clearly expressed. Id. [¶ 22.] SDCL 58-1-3.1 provides that the Insurance Code applies to all entities transacting the business of insurance within the State of South Dakota with some exceptions contained in SDCL 58-1-3, which are inapplicable to the facts of this case. The Insurance Code applies when the business transacted includes benefits for medical, surgical, or hospital care, whether the coverage is by direct payment, reimbursement, or otherwise. SDCL 58-1-3.1. SDCL 58-1-4 provides that: Provisions of this title relative to a particular kind of insurance or a particular type of insurer or to a particular matter shall prevail over provisions relating to insurance in general or insurers in general or to such matter in general. [¶ 23.] Reading SDCL 58-1-3.1 and SDCL 58-1-4 together with the provisions of SDCL 58-11-32 we can come to but one conclusion: The Insurance Code prohibits an insurer from offering interim health insurance within the state of South Dakota. Despite Coles' attempt to suggest otherwise, interim health insurance is not authorized under the Insurance Code. Furthermore, [i]t is the general rule that a contract [that] is contrary to statutory or constitutional law, is invalid and unenforceable. Willers v. Wettestad, 510 N.W.2d 676, 680 (S.D.1994) (citing Waara v. Kane, 269 N.W.2d 395 (S.D.1978); Hieb v. Opp, 458 N.W.2d 797 (S.D.1990)). As such, Coles' attempt to gain coverage under a theory that an implied contract for interim coverage existed fails under both arguments advanced by Coles. There was no contractual duty running from Wellmark to Coles under the argument that a contract for interim health coverage existed between the parties.