Opinion ID: 2635029
Heading Depth: 2
Heading Rank: 2

Heading: hayden had coverage under the wasatch crest plan on the date of his accident

Text: ¶ 11 The COBRA modifications to ERISA require that an employer who sponsors a group health plan ... give the plan's `qualified beneficiaries' the opportunity to elect `continuation coverage' under the plan when the beneficiaries might otherwise lose coverage upon the occurrence of certain `qualifying events,' including ... the termination of the covered employee's employment.... Geissal v. Moore Med. Corp., 524 U.S. 74, 79-80, 118 S.Ct. 1869, 141 L.Ed.2d 64 (1998) (quoting 29 U.S.C. § 1163). When Mr. Williams' employment with Mellor Engineering terminated, Mr. Williams elected continuation coverage for himself and his dependents, including Hayden, pursuant to this statute. No responsible party subsequently took any affirmative action to remove Hayden from the Wasatch Crest plan. Appellants nonetheless argue that, under the language of the plan, Hayden's coverage terminated on August 1, 2001 when Hayden became covered by Medicaid. We therefore must determine whether coverage was terminated by operation of law.
¶ 12 At issue is the interplay between two exclusions to coverage in the Wasatch Crest plan as outlined in Part 7-Exclusions of the plan: 4. Expenses covered by programs created by the laws of the United States, any state, or any political subdivision of a state. 17. Services, supplies, or treatment for which Benefits are provided under Medicare or any other government program, except Medicaid. We have previously held that an insurance contract must communicate its terms with sufficient clarity that it can be understood by a reasonable purchaser of insurance. Farmers Ins. Exch. v. Versaw, 2004 UT 73, ¶ 8, 99 P.3d 796. The test for clarity in an insurance contract is as follows: [W]ould the meaning be plain to a person of ordinary intelligence and understanding, viewing the matter fairly and reasonably, in accordance with the usual and natural meaning of the words, and in the light of existing circumstances, including the purpose of the policy[?] Auto Lease Co. v. Cent. Mut. Ins. Co., 7 Utah 2d 336, 325 P.2d 264, 266 (1958). Whether an ambiguity exists in [an insurance] contract is a question of law. Saleh v. Farmers Ins. Exch., 2006 UT 20, ¶ 14, 133 P.3d 428 (internal quotation marks omitted). We therefore review for correctness. Id. ¶ 13 We have observed that ambiguities typically appear in two forms: `An ambiguity in a contract may arise (1) because of vague or ambiguous language in a particular provision or (2) because two or more contract provisions, when read together, give rise to different or inconsistent meanings, even though each provision is clear when read alone.' Farmers Ins. Exch., 2004 UT 73, ¶ 9, 99 P.3d 796 (quoting U.S. Fid. & Guar. Co. v. Sandt, 854 P.2d 519, 523 (Utah 1993)). ¶ 14 The ambiguity in the present case is of the second variety. Medicaid is clearly a program created by the laws of the United States, any state, or any political subdivision of a state. See 42 U.S.C. §§ 1396-1396w-1 (2008). Therefore, exclusion 4 indicates that expenses covered by Medicaid, as are the disputed expenses in this case, are not covered by the Wasatch Crest plan. However, exclusion 17 indicates exactly the opposite that while services, supplies, or treatment covered by Medicare or any other government program will not also be covered by the Wasatch Crest plan, services, supplies, or treatment covered specifically by Medicaid are not excluded from plan coverage. ¶ 15 Appellees attempt to read these two provisions consistently by arguing that services, supplies, or treatment in exclusion 17 represent a small, covered exception carved out of the larger category of excluded expenses in exclusion 4. However, Appellees are unable to provide us with a single example of an expense that could not also be categorized as a service, supply, or treatment. Such a distinction is surely equally beyond the understanding of a reasonable purchaser of insurance. We therefore hold that the two provisions when read together give rise to inconsistent meanings and that the language of the Wasatch Crest plan is consequently ambiguous. ¶ 16 Insurance contracts are generally drafted by the insurance companies and allow no opportunity for negotiation of the terms by the insured. Farmers Ins. Exch., 2004 UT 73, ¶ 24, 99 P.3d 796. In light of this fact, and in order to assure that the purpose for which the policy was purchased and the premiums were paid is not defeated, we interpret insurance policies liberally in favor of the insured. U.S. Fid. & Guar. Co., 854 P.2d at 521. We have therefore held that when an ambiguity exists in an insurance contract, that ambiguity is interpreted in favor of coverage. Id. at 522-523. More specifically, [I]f an insurance contract has inconsistent provisions, one which can be construed against coverage and one which can be construed in favor of coverage, the contract should be construed in favor of coverage. Id. at 523 (internal citations omitted). Thus, we construe the ambiguities in the Wasatch Crest policy in favor of coverage and therefore reverse the decision of the district court.
¶ 17 Both federal and state law evidence a clear policy of prohibiting insurance companies from shifting their obligation for medical expenses to the taxpayer-funded Medicaid program. ERISA, as amended by COBRA, provides that COBRA coverage cannot be limited by a plan beneficiary's eligibility for or participation in Medicaid: A group health plan shall provide that, in enrolling an individual as a participant or beneficiary or in determining or making any payments for benefits of an individual as a participant or beneficiary, the fact that the individual is eligible for or is provided medical assistance under a State plan for medical assistance approved under title XIX of the Social Security Act[ [1] ] ... will not be taken into account. 29 U.S.C. § 1169(b)(2) (2008). ¶ 18 ERISA generally preempts state law. See 29 U.S.C. § 1144(a)(2008). An exception exists for state laws created to aid in recovering state Medicaid funds from employee welfare benefit plans. Id. § 1144(b)(8)(B). Therefore, Utah employee benefit plans must comply with Utah Code section 26-19-9 which prohibits employer sponsored health insurance plans from excluding from coverage health care expenses that are also eligible for coverage under Medicaid: As allowed pursuant to 29 U.S.C. Section 1144, an employee benefit plan may not include any provision that has the effect of limiting or excluding coverage or payment for any health care for an individual who would otherwise be covered or entitled to benefits or services under the terms of the employee benefit plan based on the fact that the individual is eligible for or is provided services under the state plan. Utah Code Ann. § 26-19-9 (2007). ¶ 19 Appellees argue that the Wasatch Crest plan complies with the Utah statute because it specifies in exclusion 17 that services covered by Medicaid are not excluded. However, this argument fails because regardless of whether the Wasatch Crest plan nominally complies, if exclusion 4 precludes coverage for any expenses covered by a government program, it has the effect of limiting or excluding coverage or payment for any health care for an individual who would otherwise be covered or entitled to benefits or services under the terms of the... plan. Id. ¶ 20 In order to interpret the Wasatch Crest plan in conformity with the relevant federal and state statutes, we read exclusions 4 and 17 to operate in such a manner that they do not preclude coverage for medical expenses which are also covered by Medicaid. Indeed, we find additional justification for this reading in the Wasatch Crest plan itself, which states, If any provision of this Policy is contrary to any law to which it is subject, such provision is hereby amended to conform thereto. Therefore, we hold that the terms of the Wasatch Crest plan did not operate to terminate Hayden's coverage as a matter of law when Hayden became eligible for Medicaid coverage.