Court Opinion

ID: 9739128
Source: CourtListenerOpinion
Date Created: 2023-08-26 20:09:15.959172+00
Date Added: 2024-06-11T07:24:10.201246
License: Public Domain

White, J.,
dissenting.
The majority states that when “read in its entirety,” the insurance policy at issue, including the provisions that strip Kathryn Howard of care benefits, is “unambiguous.” However, the majority does not acknowledge that based on its reading, the policy is utterly misleading — intimating “lifetime” coverage while binding BCBS to an illusory coverage obligation. I believe that a genuine issue of material fact exists regarding the reasonableness and effect of BCBS’ premium increase and that summary judgment was inappropriate. I therefore dissent.
I agree with the majority that the policy language makes clear that only “services” are covered by the contract. The contract is ambiguous, however, as to when those services are covered. Throughout the policy there are frequent references to “termination” and “cancellation.” The policy gives both parties the power to cancel the contract and refers to the instances giving rise to termination. In its brief, BCBS even cites authority distinguishing the two terms.
However, when the policy refers to exclusions, cancellation is not mentioned: “A. EXCLUSIONS: No payments shall be made under this Contract, except as expressly stated herein, for . . . Services provided [to a]ny Covered Person before their effective date of coverage, or after their termination.” (Emphasis supplied.)
If the policy is given a literal reading, as is demanded by the majority, only a termination would absolve BCBS from *162fulfilling its policy obligations to Kathryn Howard. The question then becomes: Did the Howards’ coverage cease because of a termination or because of a cancellation? Based on the authority cited by BCBS, cancellation relates to the insurer’s taking action to end coverage before coverage would otherwise end under the terms of the contract. Termination, on the other hand, refers to coverage ceasing pursuant to the terms of the contract. See Mezzacappo v. Travelers Ins. Co., 523 So. 2d 291 (La. App. 1988). The policy itself does not draw such a fine distinction; part V(C) gives the insured, as well as BCBS, the power to “cancel” the policy.
Although coverage ceased when the city of Kimball failed to renew the yearly contract, I do not believe this is dispositive on the question of whether the contract ended by termination or by cancellation. I believe there is a genuine issue of material fact as to whether the 32-percent premium increase by BCBS constituted a constructive cancellation of the contract and effectively forced the city of Kimball to find another carrier.
Neither am I convinced that the 1-year renewable nature of the contract freed BCBS to raise premium rates to any level it chose, regardless of the effect on the city of Kimball and its employees. Faced with a similar policy, the court in Danzig v Dikman, 78 A.D.2d 303, 309, 434 N.Y.S.2d 217, 220-21 (1980), noted:
[T]he existence of a lifetime maximum [benefit provision] (whether limited or unlimited) discloses an awareness on the part of the insurer and all interested parties that an illness or condition might well continue indefinitely beyond any one contract term and, indeed, persist for the lifetime of an individual subscriber or his or her beneficiary.
See, also, Myers v. Kitsap Physicians Serv., 78 Wash. 2d 286, 474 P.2d 109 (1970) (holding that the phrase “life of the contract” could mislead the average purchaser of insurance as to the extent of coverage under a 1-year renewable policy).
I agree with the Danzig court and find that the $1,000,000 “Total Lifetime Maximum” provision in the BCBS policy indicates an expectation by the parties that the contract would extend more than one policy term. As such, I believe that BCBS *163should not be able to constructively cancel the contract through exorbitant premium increases. See Cataldie v. Louisiana Health Service & Indent., 456 So. 2d 1373 (La. 1984) (holding that an insurer could not limit incurred liability by constructively canceling the policy).
BCBS may argue that under the contract it had a right to raise rates at the end of each year. While it would be ludicrous to suggest that an insurance company can never raise premiums, when the language of the contract indicates that the parties expect extended coverage, the insurer should not be able to grossly inflate its rates to escape an unfavorable contract. In Lutsky v. Blue Cross Hosp. Service, Inc., 695 S.W.2d 870 (Mo. 1985), the Supreme Court of Missouri examined the implications of policy provisions similar to those now relied on by BCBS. The court stated:
The defendants [insurers] point out . . . that the contractual documents state very clearly that the benefits payable are only such as are provided by the contracts in effect at the time the expenses are incurred....
If the defendants are correct, then the provision for $1,000,000 lifetime benefits per person is illusory to the point of being positively deceptive. This provision might lead members to believe that they would be protected against catastrophic and prolonged illness which strikes all too often without warning, whereas, by the defendants!’] contentions, the protection would continue only so long as the insurer and the sponsor did not change the coverage. By the defendants’ argument, indeed, modifications could be made in order to forestall further payments on account of an existing disability. Such a state of affairs, at the very least, is occasion for a raising of the judicial eyebrow.
Id. at 874-75.
An additional factor indicates that BCBS should not be free to constructively cancel the contract — the Howards’ detrimental reliance on the policy. Several courts, usually dealing with pregnancy expenses, have cited a public policy against revoking the insurance coverage of an individual who, after incurring expenses in reliance on the coverage, has become *164effectively “uninsurable.” See, e.g., Providence Hosp v Morrell, 431 Mich. 194, 427 N.W.2d 531 (1988); Brown v. Blue Cross & Blue Shield of Miss., 427 So. 2d 139 (Miss. 1983).
To a greater extent than in most sickness or injury cases, the Howards relied on this policy. While no one drives recklessly because they have accident insurance, the Howards actually planned the conception of their child based on the BCBS policy. They waited the requisite 270-day period before conceiving, obviously intending to have maternity expenses covered.
Although pregnancy expenses were probably foremost in the Howards’ plans, it is not unreasonable to presume that they also relied on the policy for the unfortunate possibility that something could be wrong with their child. They took the steps necessary to qualify for the plan, and the record does not indicate that they purchased any supplemental insurance to cover this contingency. Why would they, when they were supposedly covered by a million-dollar policy?
This reliance, no doubt engendered by the misleading “lifetime maximum” provision, should estop BCBS from constructive cancellation through unreasonable premium increases. As noted before, BCBS increased premiums 32 percent in one policy period. A fact question exists as to the propriety of this increase, and summary judgment was therefore improper. A letter from BCBS explaining the increase is part of our record. However, the reasonableness of the increase was never resolved because the trial court erroneously granted summary judgment.
In spite of the many cases that have extended coverage to posttermination expenses, there are at least an equal number that have not. Most of these cases note that the parties to the contract are free to set the terms as they wish, and if those provisions allow the coverage to be cut off, even on the mere whim of the employer and insurer, then those parties should be free to do so. I posit that these cases refuse to acknowledge the parties who matter — the insured workers and their families. Contrary to the position of the majority, “fairness” is not a four-letter word. It is said that hard facts make bad law, but if unconscionable facts find no remedy in the law as it stands, then the law must change.
*165It is ironic that as courts stretch the limits of policy language to determine whether the insured’s rights are vested, the insurers make certain that the policy language becomes tighter, more complex, and ultimately, more difficult for the nonlawyer to understand. The process forgets just who it is that relies on these policies: not the insurer, not the city, not the lawyers or the judges. The ones who rely are people like Lloyd and Joy Howard.
Insurance is based on the spread of risk. BCBS simply spreads the risk of premium payment over the insured group, here, over the employees of the city of Kimball. As payments go out, rates go up; the smaller the group, the higher the individual premium. Lloyd Howard’s only fault was working for a governmental subdivision too small to absorb the increased premiums, and the only risk that the BCBS policy effectively guarded against was that the company would lose money on the contract.
The irony is that the risk will be spread anyway — to the general populace. When the new insurance policy’s limit is reached, the Howards will inevitably be forced to deplete their income and savings until they qualify for Medicaid, whereupon the taxpayers will have to cover the cost.
While I believe that the language of the policy should prevent BCBS from exorbitantly raising its premiums, I also feel that the city of Kimball is the true villain in this tragedy. BCBS points out that when shopping for substitute coverage, the city of Kimball received a proposal from another insurance company that would have covered Kathryn Howard’s disabilities up to $1,000,000, an amount equal to the BCBS coverage. The city of Kimball rejected that proposal and instead purchased a policy reducing Kathryn Howard’s coverage by $900,000. In my view, however, this fact does not automatically legitimize BCBS’ actions. I still believe that summary judgment was improper.
A majority of this court holds that coverage will not be extended to Kathryn Howard’s future medical needs. For the reasons I have set out above, I dissent. I note, however, that if this court cannot provide relief for those in the unfortunate situation encountered by the Howards, perhaps the Legislature *166will. Faced with a similar dilemma, the Supreme Court of Louisiana stated:
If relief is to be made available to persons like [the insured] who suffer unfortunate and debilitating injury or illness which leads to ... termination of their insurance, it must come from the legislature. As a matter of public policy, the legislature might require continued coverage of all risks which materialize prior to the cessation of an insured’s membership in a group.
Massachusetts Mut. Life Ins. v. Nails, 549 So. 2d 826, 832 (La. 1989).
Another possibility would be to place stricter limits on the ability of state subdivisions to modify, without consent, employee insurance coverage. Even rules requiring better disclosure would help, for I am sure that if Lloyd and Joy Howard had been made aware that the city of Kimball and BCBS could unilaterally strip them of their “insurance,” the Howards would have considered supplemental coverage. I do not pretend to have the solution to this problem. I do know, however, that it needs to be addressed, or others will face the same misfortune.
Shanahan , J., j oins in this dissent.