Opinion ID: 2635029
Heading Depth: 3
Heading Rank: 1

Heading: Exclusion 4 and Exclusion 17 Create an Inconsistency in the Wasatch Crest Plan and Are Therefore Ambiguous

Text: ¶ 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.