Opinion ID: 2123847
Heading Depth: 1
Heading Rank: 2

Heading: Termination of the Group Contract According to its Terms.

Text: Lifeline Ambulance has challenged whether the group contract was properly terminated by the HMO pursuant to its terms. The agency and the district court concluded that it was. On this issue, the controversy centers on the legal consequences of a tender of certain checks by Lifeline Ambulance and the HMO's refusal to accept those checks. The group contract between Lifeline Ambulance and the HMO provides that it may be canceled by the latter if Lifeline Ambulance fails to prepay the applicable premium for a period of thirty days. It further provides that [o]n the occasion of the second default of premium [the HMO] retains the right to refuse acceptance of premium for the period charged and retains the right to cancel group coverage for that reason. The record reveals that there had been several defaults of premium prior to the HMO's refusal of Lifeline Ambulance's checks. This refusal and return of checks was accompanied by a written notice purporting to terminate the contract. Unless otherwise regulated by statute, the parties to an agreement may specify therein circumstances or conditions that empower a party to terminate the contract. Artificial Ice Co. v. Reciprocal Exch., 192 Iowa 1133, 1140, 184 N.W. 756, 759 (1921); Medford v. Pacific Nat'l Fire Ins. Co., 189 Or. 617, 624, 219 P.2d 142, 147 (1950) (absent controlling statute, parties may make such contract as they desire concerning method of cancellation); 43 Am.Jur.2d Insurance § 383 (1982). The parties to the present agreement did that. The evidence clearly established that one of the conditions for termination, i.e., repeated default of premium, occurred. Lifeline Ambulance has suggested no statute that would preclude the inclusion of this ground of termination in the contract. We agree with the agency and the district court that the group contract was properly terminated by the HMO in accordance with its terms. For reasons that are set forth in the following division, however, termination of the group contract, although a ground for termination of the rights of the individual employee-enrollees, may not automatically work a termination of those rights. We must also consider the applicability of statutory notice requirements to the employee-enrollees.