Aul v. Golden Rule Ins. Co.

• Decision Date: 13 June 2007
• Docket Number: No. 2006AP1035.,2006AP1035.
• Citation: 737 N.W.2d 24,2007 WI App 165
• Parties: Thomas E. AUL and Mary Patricia Aul, Plaintiffs-Appellants,<SMALL><SUP>&#x2020;</SUP></SMALL> v. GOLDEN RULE INSURANCE COMPANY and Federation of American Consumers & Travelers, Defendants-Respondents.
• Court: Wisconsin Court of Appeals

737 N.W.2d 24

2007 WI App 165

Thomas E. AUL and Mary Patricia Aul, Plaintiffs-Appellants,^† v. GOLDEN RULE INSURANCE COMPANY and Federation of American Consumers & Travelers, Defendants-Respondents.

No. 2006AP1035.

Court of Appeals of Wisconsin.

Submitted on Briefs April 17, 2007.

Opinion Filed June 13, 2007.

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Thomas E. Aul, of Law Offices of Thomas E. Aul, of Delafield.

On behalf of the defendants-respondents, the cause was submitted on the brief of Thomas A. Cabush, of Kasdorf, Lewis & Swietlik, S.C., of Milwaukee, and David A. Anderson, of Anderson & Associates, P.C., of Carmel, IN.

Before BROWN, NETTESHEIM and ANDERSON, JJ.

¶ 1 NETTESHEIM, J

Thomas and Mary Patricia Aul are engaged in a dual battle: against Patricia's breast cancer and against Golden Rule Insurance Company for coverage of her treatment. They appeal the summary judgment granted in favor of Golden Rule, which had issued them a group health policy when Patricia was being medically followed for a breast cyst. The policy included a rider, to which the Auls had reluctantly acquiesced, excluding coverage for loss Patricia might incur from "any disease or disorder of the breasts." When Patricia developed breast cancer nearly two years later and Golden Rule denied their claims, the Auls filed suit alleging breach of contract, bad faith and misrepresentation. They contend that the rider was based on a preexisting condition, and the policy's preexisting condition limitation does not apply to losses incurred over twelve months after the policy's effective date. They also contend the rider is unconscionable.

¶ 2 We agree with the circuit court that the rider was not for a preexisting condition and that it is not unconscionable. We hold that, despite the Auls' strenuous objection to it, the rider is an enforceable part of the contract they negotiated and accepted. We affirm the judgment and the award of fees and costs.

FACTS AND PROCEDURAL BACKGROUND

¶ 3 The essential facts are not in dispute. Thomas, an attorney since 1969, has been a self-employed solo practitioner since 1993. The Auls had a series of health plans over the years, the changes usually prompted by rising premium costs. When they considered getting new health insurance, Patricia, who has a master's degree, generally investigated potential plans which they both then discussed.

¶ 4 In 2000, when the Auls were insured by Blue Cross & Blue Shield United of Wisconsin through the State Bar of Wisconsin, the premiums "increased dramatically." Looking to find a less costly plan, the Auls contacted Luann Columb of the Columb Insurance Agency. Columb sells health insurance policies for various companies, including Golden Rule. The Auls applied for health coverage through Golden Rule. The Golden Rule coverage appealed to the Auls because it offered a medical savings account (MSA) feature and lower premiums. To be eligible for Golden Rule coverage, the Auls had to join the Federation of Consumers and Travelers, or FACT, an association which offers its members insurance and other benefits.

¶ 5 Patricia advised Columb that she had breast cysts and abnormal mammograms about which her physician was not concerned. She also disclosed on the Golden Rule application that about three weeks earlier she had had a "recheck" mammogram with ultrasound to be followed up in six months. A Golden Rule underwriter telephoned Patricia for more information and documented that the tests were done to keep track of any changes in a small noncancerous cyst. Shortly thereafter, Golden Rule sent the Auls an amendment to the application reading: "Patricia has a breast cyst which is being followed. The results of all exams were normal." Thomas signed and returned the amendment, and it became part of the application.

¶ 6 Golden Rule issued the Auls a group insurance policy effective August 1, 2000. Before the Auls actually received the policy, Columb notified Patricia that it contained a rider regarding her breasts "for life or some indefinite period." The rider provided:

By the attachment of this Rider it is understood and agreed that the insurance under this Policy/Certificate is amended as follows:

This policy/certificate does not cover any loss incurred by Patricia Aul resulting from any disease or disorder of the breasts, including treatment or operation therefor and complications therefrom. This rider also excludes reconstructive surgery and complications therefrom. (Emphasis added.)

The Golden Rule underwriting manual requires the breast disorders rider whenever an applicant has a breast cyst of any kind that is under observation.

¶ 7 The Auls considered the rider too far-reaching and not warranted by Patricia's medical history. Patricia told Golden Rule that she and Thomas would weigh everything to decide whether they wanted the policy. They opted to accept it and then to try to have the rider removed. About this same time, the Auls' Blue Cross/Blue Shield coverage ended.

¶ 8 Patricia called Golden Rule about the rider and was told that her cyst prompted the rider. The Golden Rule representative also said that, should Patricia submit medical records demonstrating that the cyst disappeared, "we can review to see if we can remove the rider," but removal was not guaranteed. Columb also telephoned Golden Rule on the Auls' behalf. Patricia's physician, Dr. Gloria Halverson, through her nurse, wrote to Golden Rule explaining that Patricia had regular breast examinations because "her breasts are extremely dense," but "[f]ibrocystic changes . . . without atypia do not predispose to breast cancer." The letter described Patricia's two most recent ultrasound reports as revealing "benign findings" and "no visible worrisome masses." The reports, included with the letter, stated that the ultrasounds were done for "benign-appearing densities" and "follow-up of hypoechoic mass and cyst." The "Fibrocystic Breast Disease" category in Golden Rule's underwriting manual would have permitted a less stringent rider than the one issued, or no rider at all.

¶ 9 Golden Rule declined to remove the rider "[d]ue to [Patricia's] medical history" but said it was "willing to reconsider the rider after Patricia has her next recommended follow-up in December." Patricia had the follow-up mammogram, with favorable results, but the Auls did not ask Golden Rule to reconsider at that time because they assumed Columb or Golden Rule would take care of it.

¶ 10 The Auls continued to pay the premiums and Golden Rule coverage remained in effect. Twenty-two months later, in June 2002, Patricia was diagnosed with breast cancer. The Auls submitted approximately $123,000 in claims to Golden Rule. Golden Rule denied coverage based upon the language of the rider.

¶ 11 Between August 18, 2000, and Patricia's cancer diagnosis, Thomas and Patricia took no affirmative measures to have the exclusionary rider removed. On July 8, 2002, however, Thomas filed a grievance with the state Office of the Commissioner of Insurance alleging that the rider represented improper underwriting. In August, Thomas wrote twice to Golden Rule asking them again to reconsider the rider. Patricia's surgeon and oncologist also wrote letters to Golden Rule, both stating that the rider should not have been placed because no known link exists between fibrocystic disease and breast cancer. The surgeon went so far as to say that the rider was "unethically placed." He opined that Patricia's cancer was "strictly related to the breast density and factors unrelated to fibrocystic disease." Golden Rule stood firm.

¶ 12 The Auls commenced this litigation in March 2004 against Golden Rule, Columb and Columb Insurance Agency, later amending their complaint to include FACT as a defendant. The Auls alleged breach of contract; a violation of WIS. STAT. § 632.746 (2005-06)¹ regarding preexisting condition exclusions; bad faith; negligence; misrepresentation; and conspiracy. All parties moved for summary judgment.² Golden Rule and the Auls stipulated to the dismissal of the Auls' statutory claim, and the circuit court granted summary judgment to Golden Rule and FACT on the remaining issues. The Auls appeal. Additional facts may be supplied where necessary.

DISCUSSION

¶ 13 The circuit court granted summary judgment to Golden Rule and FACT and dismissed the Auls' breach of contract, bad faith, conspiracy and misrepresentation claims. We first address a procedural issue.³ The only allegation against FACT in the Auls' amended complaint was that FACT and Golden Rule conspired to misrepresent the type of coverage being sold. The circuit court dismissed the conspiracy claim against FACT and the conspiracy and misrepresentation claims against Golden Rule. Since the Auls do not challenge those rulings on appeal, we summarily affirm the grant of summary judgment in favor of Golden Rule and FACT as to those claims. See A.O. Smith Corp. v. Allstate Ins. Cos., 222 Wis.2d 475, 491, 588 N.W.2d 285 (Ct.App.1998). We address the remaining claims against Golden Rule on the merits.

Standard of Review

¶ 14 We review a decision on summary judgment using the same methodology as the circuit court. See Green Spring Farms v. Kersten, 136 Wis.2d 304, 314-15, 401 N.W.2d 816 (1987). Summary judgment is appropriate where the record demonstrates that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. WIS. STAT. § 802.08(2). Where the facts are not in dispute, there remain only questions of law, which we review de novo. Teschendorf v. State Farm Ins. Cos., 2006 WI 89, ¶ 9, 293 Wis.2d 123, 717 N.W.2d 258.

Breach of Contract

¶ 15 The Auls contend that the rider was placed because of Patricia's preexisting cystic breast condition. They argue, therefore, that Golden Rule breached the contract by enforcing the rider when the preexisting conditions limitation plainly expired...