Opinion ID: 1226544
Heading Depth: 1
Heading Rank: 7

Heading: the booklet and the master policy

Text: A critical issue in this case is the legal effect of the booklets which purported to synopsize the coverage of the NELSON TRUST policy. As stated earlier, MSB argues, and the trial court agreed, that the booklets clearly provided that benefits under the policy for expenses resulting from accidental injury involving a private motor vehicle were to be reduced to the extent such expenses were payable under any automobile insurance policy, and, that the master policy controlled in the event of an ambiguous provision in the booklet. This Court dealt with a conflict between a master policy and an explanatory handbook in Lewis v. Continental Life & Accident Co., 93 Idaho 348, 461 P.2d 243 (1969). In that case, the appellant, who was disabled, was covered by a group life insurance policy issued to his employer. The group master policy required yearly proof of an employee's disability as a condition for the extension of coverage to a disabled employee. The handbook, which the insurance company distributed to explain the insurance policy and to induce employees to subscribe to it, required only that the employee submit proof of his disability. After noting that proof of disability provisions may readily be waived, this Court held that the insurance company waived the provisions of the master policy which were directly contrary to its representation in the pamphlet: This handbook explained coverage under the program in clear, informal and easily read English. It was expected that employees would read and rely upon this booklet. And the company did or at least should have known that if an employee wished to determine what his coverage was he would turn to this pamphlet before the hard to decipher certificate of insurance or the master policy... . Under these conditions it would be inequitable for the respondent to have sold insurance based on a statement of this simple, less onerous duty and then to enforce a stricter provision later on. We hold, therefore, that respondent waived the provisions which were directly contrary to its representations in the pamphlet... . 93 Idaho at 354-55, 461 P.2d at 249-50. The court in Lecker v. General American Life Insurance Co., 55 Haw. 624, 525 P.2d 1114 (1974), was also confronted with the issue of the legal effect of the provisions contained in the booklet-certificate which ostensibly granted to the beneficiary a greater insurance coverage with respect to accidental death benefits than ... the printed policy of group insurance... . Id. 525 P.2d at 1115. The court, citing Lewis v. Continental Life & Accident Co., supra , held as follows: Because the booklet-certificate in describing the plan of insurance to each insured expressly states that benefits are subject to the applicable terms, conditions and limitations in the policy, the defendant claims that all employees covered by the group policy are put on notice that they must consult both of these documents, the booklet-certificate and the policy, to determine the full extent of their coverage. However, the defendant did not issue and deliver the master policy to the insured employees, other than to the policyholder. There was no explicit direction to the insured contained in the booklet-certificate that each insured should read the policy by obtaining it from the policyholder. All that the insured received from the defendant was a copy of the booklet-certificate. Under these circumstances, we think that the insured is entitled to rely on the booklet-certificate, which HRS § 431-518 requires the insurer to furnish to an insured so that the insured may be informed of the essential features of his insurance coverage. The defendant, having misinformed the insured of the limitations affecting such coverage, through use of the booklet-certificate is, therefore, estopped from asserting a policy exclusion not shown or otherwise indicated in the booklet-certificate as a basis for nonpayment of accidental death benefits. A contrary view would render nugatory the effectiveness of HRS § 431-518, insofar as it requires that the individual certificate contain a summary of the essential features of the insurance coverage... . From any reasonable point of view, the impact of the omission from the certificate prepared by the insurer and relied upon by the insured of an important condition or limitation which would effect insurance coverage would be just as misleading and deceiving to the insured as where positive statements in such certificate vary from those contained in the policy. We would not, therefore, treat these two situations differently by not applying to the former a principle which is applicable to the latter. It seems to us to be the better view, and which we adopt, that a significant policy exclusion which is not specified in the individual certificate should not be enforced. Bauer v. Insurance Company of North America, supra [351 F. Supp. 873 (E.D.Wis. 1972)]; Lewis v. Continental Life & Accident Co., 93 Idaho 348, 461 P.2d 243 (1969); Riske v. National Casualty Co., supra [268 Wis. 199, 67 N.W.2d 385 (1954)]. 525 P.2d at 1118-19. See also e.g., Sahlin v. American Casualty Co., 103 Ariz. 57, 436 P.2d 606 (Ariz. 1966); Bass v. John Hancock Mutual Life Insurance Co., 10 Cal.3d 792, 112 Cal. Rptr. 195, 518 P.2d 1147 (Cal. 1974); Riske v. National Casualty Co., 268 Wis. 199, 67 N.W.2d 385 (1954); Anno, 36 A.L.R.3d 541 (1971). Lecker is practically foursquare with this case and we agree with the reasoning set forth therein. All that Linn received was a copy of the booklet, which itself advised him that it described the coverages provided in general terms. The disclaimer language  to the effect that the master policy itself would control in the event any question arose as to benefits payable  cannot be said to have required Linn to demand a copy of the policy in order to compare it against the booklet in order to search out ambiguities between the two in regard to a claim which had not arisen. He was certainly not given an explicit directive to read a policy with which he had not been furnished. Under these circumstances, Linn was entitled to rely on the booklet. If the booklet misinformed him as to the benefits or exclusions of his coverage, MSB is estopped from asserting an exclusion appearing only in the master contract. This conclusion is buttressed by I.C. § 41-2203 and I.C. § 41-3417. Section 41-2203, which under I.C. § 41-2211 applies to policies such as the present one, provides that each group disability insurance policy shall contain a provision that the insurer will furnish to the policy holder for delivery to each employee or member of the insured group, a statement in summary form of the essential features of the insurance coverage of such employee or member and to whom benefits thereunder are payable. Similarly, § 41-3417(5) provides that service corporations can issue contracts to groups under a master contract, but in that event each subscriber covered under the master contract shall be issued an individual certificate which shall set forth in adequate detail the provisions itemized in subsection (2) above. Among the provisions itemized in subsection (2) are the following: (2) Each such subscriber's contract or certificate shall in adequate detail set forth provisions from which can be readily determined: (a) The services to which the subscriber is entitled from participant licensees and/or participant hospitals, as the case may be; . . . . (e) All other terms and conditions of the agreement between the parties consistent with the provisions of this chapter; ... To effectuate the purposes of these statutes, the insured must be entitled to rely upon the booklet with which he is furnished. MSB cannot in its compliance with the statutory requirements at the same time render that compliance nugatory by inserting a disclaimer which has the effect of settling a controversy as to coverage in its favor by declaring contrary policy provisions paramount over the statements of coverage set forth in the issued booklet. The question then becomes whether the provision of the booklet in the present case clearly provided that benefits under the MSB policy for expenses resulting from accidental injury involving a private motor vehicle were to be reduced to the extent such expenses were payable under any automobile insurance policy. In answering this question, it must be remembered that all ambiguities in insurance policies are to be resolved in favor of the insured, Dunford v. United of Omaha, 95 Idaho 282, 506 P.2d 1355 (1973), and that [w]here language may be given two meanings, one of which permits recovery and the other does not, it is to be given the construction most favorable to the insured. Erikson v. Nationwide Mutual Insurance Co., 97 Idaho 288, 292, 543 P.2d 841, 845 (1975). The disputed third-party responsibility clause in the booklet in question is composed of three sentences. The first sentence clearly states that if Linn or his dependents are injured and a third party is at fault, that other party or his insurance company should pay the doctor and hospital bills. This sentence is not restricted to situations in which injuries are caused in vehicle collisions, but could include cases in which a child is injured at a cross walk or while playing in a neighbor's yard, and a variety of situations. The second sentence of the clause, however, purports to deal with situations in which the insured cannot recover enough to take care of his bills. Taken in context with the preceding sentence, this sentence rather apparently is aimed at a recovery which has been made from any third party or his insurance company for expenses arising as a result of the negligence of any third party. These first two sentences pose no problem in this case. The third sentence of the clause, however, provides that benefits under the MSB policy arising out of vehicular collision shall be reduced to the extent such expenses are payable without regard to liability under an automobile insurance policy issued in the state of Oregon. Oregon has adopted no-fault automobile insurance. A reasonable reading of the third-party responsibility clause in its entirety would be that benefits under the NELSON TRUST, arising out of injuries suffered at the hands of another driver, are to be reduced by amounts recoverable from third parties or their insurance carriers, or by amounts recoverable under the Oregon compulsory no-fault plan without regard to liability. While I.C. § 41-2502 requires that all automobile insurance policies delivered or issued for delivery in Idaho contain uninsured motorist coverage such as Linn had under his Farmer's policy, the authors of the NELSON TRUST policy did not choose to deal with other insurance provisions beyond the no-fault scheme in Oregon. If they had desired to expand the third party responsibility exclusion, they had ample opportunity to do so since the booklets were prepared and issued twice since 1970 when MSB joined in servicing the master policy for employees situated in Idaho. Moreover, if the authors of the booklet had desired to include some other insurance provision to cover all other insurance policies, they could easily have done so. Such a provision was clearly set forth in the policy in Medical-Dental Service, Inc. v. Boroo, 92 Idaho 328, 442 P.2d 738 (1968). That policy provided as follows: If a subscriber is entitled to benefits under any other insurance agreement, specifically including but not limited to automobile insurance, school insurance, or liability policy coverage, for expenses and services provided for in this certificate, then the benefits afforded hereunder for such services and expenses shall be over and above such other benefits. 92 Idaho at 329, 442 P.2d at 739 (emphasis added). The drafters of the MSB policy involved in this case chose not to place such a clear provision in the booklet furnished Linn. Instead, they apparently chose to limit the extent of the exclusion. Anyone with an insurance policy issued outside of Oregon could reasonably believe that if he provided for the same coverage regardless of liability under another policy, he could have a full recovery under both policies. [7] At the least, the provision furnished Linn is ambiguous, and it is not the function of the courts to remake insurance transactions in a manner the insurance company may have intended; it is the duty of the courts to construe language as written, with all ambiguities being resolved against the insurer. The booklet furnished Linn did not inform him that any medical claims under his MSB policy were to be reduced by payments he might receive from another insurance policy he carried. Since he was not informed of this exclusion, MSB is estopped from relying on it, Lewis v. Continental Life & Accident Co., supra , and Linn is entitled to recover his medical expenses under his policy with MSB. The judgment of the district court is reversed with directions to enter a judgment as of the same date for Linn, including interest and attorney's fees both in the district court and on this appeal. DONALDSON and SHEPARD, JJ., concur. McFADDEN, J., concurs in the judgment of the Court other than Part V in which he does not concur.