Ahrenholtz v. Time Ins. Co., 98-10
| Decision Date | 11 December 1998 |
| Docket Number | No. 98-10,98-10 |
| Citation | 968 P.2d 946 |
| Parties | John D. AHRENHOLTZ and Pam D. Ahrenholtz, Appellants (Plaintiffs), v. TIME INSURANCE COMPANY, a Wisconsin Corporation, Appellee (Defendant). |
| Court | Wyoming Supreme Court |
John E. Stanfield of Stanfield & Summerfield Law Office, Laramie, Wyoming, for Appellants.
John A. Sundahl and John A. Coppede of Sundahl, Powers, Kapp & Martin, Cheyenne, Wyoming, for Appellee.
Before LEHMAN, C.J., and THOMAS, MACY, GOLDEN and TAYLOR, * JJ.
John and Pam Ahrenholtz (Ahrenholtz) purchased a health insurance policy from Time Insurance Company (Time) with an effective date of May 1, 1994. By its terms the policy excluded coverage for treatment or removal of tonsils or adenoids during the first six months of coverage, except on an emergency basis. In June or July, 1994, Ahrenholtz' daughter began experiencing medical problems related to her tonsils and adenoids. Ahrenholtz' doctor recommended surgery in August, 1994, on a non-emergency basis. Ahrenholtz sought health benefits for the surgery, but Time rejected the claims because of the policy's above-referenced exclusion. Ahrenholtz sued Time, alleging breach of contract, fraud, bad faith, and violation of reasonable expectations. They also sought attorneys' fees and interest because of alleged violations of WYO. STAT. § 25-14-124, which addresses a forty-five day period in which an insurer is to accept and pay or reject claims. The district court granted Time's motion for summary judgment against Ahrenholtz. We affirm that judgment.
Appellant Ahrenholtz submits the following statement of issues presented for review: 1
1. Did Time Insurance prove--when the evidence is construed against it and in favor of its policyholder--that all reasonable persons would conclude that Time exercised good faith and dealt fairly in all respects with John and Pam Ahrenholtz in the drafting and sale of its insurance coverage and in the investigation, handling and refusal to pay all claims under it?
2. Did Time prove that no reasonable person would find any merit in any of the causes of action asserted by John and Pam Ahrenholtz?
3. Do the Insurance Department regulations constitute standards of fair insurance practice so as to allow the jury to be instructed that they may consider violations as acts of bad faith?
4. Could a jury determine that Time violated § 26-15-124 (WSA, 1977) in the manner in which it handled the claims of John and Pam Ahrenholtz and could it conclude that Time acted in an unreasonable fashion?
Appellee Time Insurance Company (Time) responds with the following statement of issues:
1. Whether the district court properly granted summary judgment against the insureds' claim for policy benefits for a tonsillectomy/adenoidectomy that occurred within six months of the policy's coverage date where the policy contained an exclusion for such surgeries occurring within the first six months of the policy's coverage.
2. Whether the exclusion provided a reasonable basis for the insurer's decision to deny the insureds' claim for these benefits, entitling the insurer to summary judgment as a matter of law against the insureds on their claim for "bad faith."
3. Whether the district court properly granted summary judgment against the insureds on their "fraud" claim where the insureds failed to show that the insurer made any misrepresentation upon which the insureds relied to their detriment.
4. Whether the insurer's decision to deny the insureds' claim was with cause and reasonable where in denying the claim the insurer relied on an applicable policy exclusion, and thus foreclosing as a matter of law the insureds' statutory claim for attorneys fees.
Ahrenholtz purchased a health insurance policy from Time through an agent, Richard Williams. The policy was issued with an effective date of May 1, 1994. In June or July of that same year, Ahrenholtz' infant daughter began experiencing obstructive symptoms at night, sleep apnea, snoring, and failure to gain weight.
Ahrenholtz contacted Dr. Conlon, who recommended surgery to correct the problem. The surgery was scheduled and performed on August 23, 1994. The policy excluded coverage for:
18. Charges for treatment or removal of tonsils or adenoids during the first six months of coverage, except on an Emergency basis.
The policy defined "Emergency" as:
A condition that arises suddenly and unexpectedly and requires immediate treatment to prevent permanent bodily impairment or jeopardy to life.
The surgery was performed within the six month exclusionary period in the policy, and there was no indication that the surgery was an emergency.
The policy also required pre-authorization of medical treatment and surgery and contained the following disclaimer:
THE AUTHORIZATION PROCESS, AS DESCRIBED ABOVE, DOES NOT GUARANTEE THAT BENEFITS WILL BE PAID. PAYMENT OF BENEFITS WILL BE DETERMINED BY THE TERMS AND LIMITS OF THE PLAN, INCLUDING, BUT NOT LIMITED TO, MEDICAL NECESSITY, THE PREEXISTING CONDITIONS LIMITATION AND THE GENERAL EXCLUSIONS PROVISIONS.
Dr. Conlon's nurse obtained the necessary pre-authorization for the surgery on August 1, 1994, by calling ReviewTime, an independent company on contract with Time for the purpose of conducting medical reviews. However, the nurse's conversations with ReviewTime contained reminders that the review for pre-authorization was not a guarantee of coverage and was subject to the terms of the policy. A telegram from Time followed, confirming the conversations between ReviewTime and the nurse. The telegram indicated that the tonsillectomy/adenoidectomy had been recommended for approval as a non-emergency admission by Dr. Conlon. The last paragraph of the telegram contained the following ReviewTime recommendations are independent of your specific plan terms and limitations. Plan terms and limitations, including eligibility, pre-existing conditions, exclusions, deductible and co-insurance shall govern. Coverage isn't guaranteed. Direct questions regarding plan terms and limitations to Time Insurance Company Member Services Department.
After the surgery was performed, Ahrenholtz submitted claims related to the surgery to Time. Time rejected each claim and provided notice of that rejection within forty-five days of the date the claim was submitted. Time based its rejection of the claims on the policy's clause excluding tonsillectomies and adenoidectomies within six months of policy coverage.
After several months of contacts between Time and Ahrenholtz, during which time Ahrenholtz continued to pay premiums on the policy, Ahrenholtz was unsuccessful in recovering on the claims for the surgery. Ahrenholtz filed suit in the state district court on May 6, 1996. After briefing and argument on summary judgment motions filed by Time, the district court granted summary judgment. Ahrenholtz timely appealed after post-judgment motions were denied.
Summary judgment is proper when no genuine issues of material fact exist, and the prevailing party is entitled to judgment as a matter of law. Eiselein v. K-Mart, Inc., 868 P.2d 893, 894 (Wyo.1994). When this Court reviews the propriety of a grant of summary judgment, the record is reviewed in the light most favorable to the party opposing the motion, giving that party all favorable inferences that can be drawn from the facts. Id. * * * No deference is accorded to the district court's decisions on issues of law. Halpern v. Wheeldon, 890 P.2d 562, 564 (Wyo.1995).
Keller v. Merrick, 955 P.2d 876, 878 (Wyo.1998). A material fact is one which, if proved, would have the effect of establishing or refuting an essential element of the claim or defense asserted by the parties. Commercial Union Ins. Co. v. Stamper, 732 P.2d 534, 535 (Wyo.1987) (citations omitted).
When interpreting an insurance contract, we follow general tenets of contract construction. Squillace v. Wyo. State. Employees' and Officials' Group Ins. Bd., 933 P.2d 488, 491 (Wyo.1997). We delineated our rules of insurance contract construction in St. Paul Fire and Marine Ins. Co. v. Albany County Sch. Dist. No. 1, 763 P.2d 1255, 1258 (Wyo.1988) (citations omitted):
The interpretation of a written contract is done by the court as a matter of law. An exception to construing insurance policies as other contracts has been observed by this Court where the language of the policy is ambiguous, in which case the policy must be strictly construed against the insurer. Ambiguity, however, is not generated by a subsequent disagreement between the parties as to the meaning of the policy. Further, the language of an insurance policy will not be "tortured" in order to create an ambiguity.
If the policy language is clear and unambiguous, the rule of strict construction against the insurer does not apply, and the policy must be interpreted in accordance with the ordinary and usual meaning of its terms. The parties to an insurance contract are free to incorporate within the policy whatever lawful terms they desire, and the courts are not at liberty, under the guise of judicial construction, to rewrite the policy.
Ahrenholtz asks this Court to overturn its long-standing precedent concerning insurance contract interpretation in favor of what is termed the Darner 2 or Restatement approach, which considers the reasonable expectations of the person applying for the insurance. The policy in the case at bar clearly and unambiguously excludes coverage "for treatment or removal of tonsils or adenoids during the first six months of coverage, except on an Emergency basis." It is undisputed that the surgery took place during the exclusionary period and that the surgery was not performed "on an Emergency basis." In light of the clear and unambiguous language found in the policy, we decline to consider the approach proffered by Ahrenholtz.
This is not the first time we declined to apply the...
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