Bushnell v. Medico Ins. Co.

• Court: Washington Court of Appeals
• Writing for the Court: SCHINDLER, J.
• Citation: Bushnell v. Medico Ins. Co., 159 Wash.App. 874, 246 P.3d 856 (Wash. App. 2011)
• Decision Date: 07 February 2011
• Docket Number: No. 63916–1–I.
• Parties: Leroy BUSHNELL, as personal representative of the Estate of Evelyn Bushnell, Appellant,v.MEDICO INSURANCE COMPANY, a Nebraska Corporation, and Medico Life Insurance Company, a Nebraska Corporation, Respondents.

159 Wash.App. 874

246 P.3d 856

Leroy BUSHNELL, as personal representative of the Estate of Evelyn Bushnell, Appellant,

v.MEDICO INSURANCE COMPANY, a Nebraska Corporation, and Medico Life Insurance Company, a Nebraska Corporation, Respondents.

No. 63916–1–I.

Court of Appeals of Washington, Division 1.

Feb. 7, 2011.

Randall C. Johnson Jr., Badgley Mullins Law Group PLLC, Seattle, WA, for Appellant.Steven Turner Russell, Keolker & Swerk, Edmonds, WA, Celeste Tyrrell Stokes, Bellevue, WA, for Respondents.SCHINDLER, J.

[159 Wash.App. 876] ¶ 1 Leroy Bushnell, as the personal representative of the Estate of Evelyn Bushnell (Bushnell), appeals summary judgment dismissal of the lawsuit against Medico Insurance Company of Nebraska (Medico) for denial of coverage under a nursing care insurance policy issued to Evelyn Bushnell in 1987. Medico denied Bushnell's claim for nursing care benefits on the grounds that the three-day prior hospitalization requirement was not met, and coverage lapsed for nonpayment. On cross motions for summary judgment, the trial court ruled that as a matter of law, the three-day hospital stay requirement is valid and Bushnell is not entitled to coverage. The court also ruled Medico's denial of coverage was reasonable and not in bad faith, and dismissed Bushnell's lawsuit with prejudice. We reverse and remand.

FACTS

¶ 2 The facts are not in dispute.¹ In October 1986, Leroy Bushnell, as the attorney in fact and on behalf of his mother Evelyn Bushnell, submitted an application to Medico for a nursing care insurance policy. In January 1987, Medico issued a “Skilled and Intermediate Nursing Policy” to Evelyn Bushnell effective October 9, 1986.

¶ 3 The policy provides benefits for medically required skilled and intermediate nursing care for an unstable health condition. The “Schedule” sets forth the skilled and intermediate nursing care benefits with a lifetime maximum of $190,000. As a condition of receiving nursing benefits, the policy requires confinement in a qualified nursing facility that is recommended by a physician “within 14 days after required hospital confinement of at least three days in a row” for the “continued treatment of the condition(s) for which you were in the hospital.”

¶ 4 The policy states that “[a]s long as you pay the renewal premium ... on the date it is due or during the 31–day grace period,” Medico “cannot refuse to renew your policy unless we do the same to all policies of this form issued to persons of your class ... in your state.” The policy also states that the “provisions of the policy must conform with the laws of the state in which you reside on the Policy Date. If any do not, this clause amends them so that they do conform.”

¶ 5 In November 1986, the legislature enacted the Long–Term Care Insurance Act, chapter 48.84 RCW (the Act). The Act governs the sale and content of long-term insurance policies. Effective January 1, 1988, the regulations implementing the Act prohibit insurance companies from requiring prior hospitalization as a condition of receiving nursing care benefits.²

¶ 6 Bushnell timely paid renewal premiums for more than 20 years. In December 2006, when Evelyn was no longer able to care for herself, she went to live with her son Leroy. On February 1, Leroy paid the renewal premium for the 60–day period from January 1, 2007 through February 28, 2007.

¶ 7 On February 21, 2007, Evelyn's doctor concluded that she had suffered a stroke the previous December and needed full-time skilled nursing care. On February 24, Evelyn was admitted to a skilled nursing care facility, Lake Vue Gardens Convalescent Center. On February 24, Leroy submitted a “Claimant's Proof of Loss” for nursing care benefits to Medico.

¶ 8 On June 20, Medico denied Bushnell's claim for nursing care benefits because Evelyn did not comply with the three-day prior hospitalization requirement and coverage under the policy lapsed for nonpayment. The letter states, in pertinent part:

Per policy terms, benefits for skilled or intermediate care will be payable as long as the insured meets that [sic] following conditions:

1.) Be in a nursing facility;

2.) Be recommended by a physician;

3.) Start within 14 days after required hospital confinement of at least 3 days in a row;

4.) Be for the continued treatment of the conditions for which they were in the hospital.

Based on the documentation received from Lake Vue Gardens, you were admitted directly in the nursing facility from your home. Since you did not have a prior hospitalization for at least 3 days before your admit into Lake Vue Gardens, the policy requirements have not been met and benefits cannot be provided at this time.

Also, please be advised that your long term care policy lapsed on 03–01–07 as we did not receive a renewal premium from you.

¶ 9 On October 12, Bushnell's attorney wrote a letter asking Medico to reconsider the decision to deny coverage for nursing care benefits. The letter cites the regulation prohibiting an insurer from requiring hospitalization as a condition to receiving benefits. The letter also cites the provision in the policy that automatically amends the terms of the policy to conform with the laws of the state of Washington.

¶ 10 Relying on the language of the Act that states, “[T]his chapter shall apply to policies and contracts issued on or after January 1, 1988,” Medico denied Bushnell's claim for nursing care benefits.

Because the policy was issued prior to the effective date of either the statute or regulation, it did conform with the laws of the state of Washington on the policy date.

¶ 11 On November 9, Bushnell filed a notice of violation of the Insurance Fair Conduct Act, chapter 48.30 RCW, with the Insurance Commissioner. On November 28, the commissioner issued notice of closure.

¶ 12 As the attorney in fact and on behalf of his mother, Leroy Bushnell sued Medico for denial of coverage. Bushnell sought a declaratory judgment that the prior three-day hospitalization provision in the policy was invalid under the Act and contrary to public policy. Bushnell alleged causes of action for breach of contract, violation of the Consumer Protection Act,³ violation of the Insurance Fair Conduct Act, and bad faith denial of coverage. ⁴

[159 Wash.App. 880] ¶ 13 Bushnell filed a motion for partial summary judgment. Bushnell argued that as a matter of law, the three-day hospital stay requirement was invalid, and Medico acted in bad faith in denying coverage. Bushnell asserted that when Evelyn renewed the policy after January 1, 1988, the effective date of the regulations implementing the Act, the three-day hospital stay condition no longer applied.

¶ 14 Medico filed a cross motion for summary judgment. Medico argued that the policy was not subject to the Act because the three-day hospital stay requirement was val id when the policy was issued. Medico also argued that the terms of the policy did not change because “this policy was simply a continuation of the policy originally issued on October 9, 1986, and thus never became a policy ‘issued on or after January 1, 1988’ [under] RCW 48.84.910.” Without regard to the validity of the three-day hospital stay requirement, Medico argued that coverage was properly denied because the policy lapsed for nonpayment.

¶ 15 Before the hearing on the cross motions for summary judgment, the court asked the parties to address a Washington State Supreme Court case that addresses the effect of a later enacted law on coverage under an insurance policy.⁵

¶ 16 Following the hearing, the court granted Medico's motion for summary judgment and dismissed Bushnell's lawsuit with prejudice. The court ruled that “[t]he hospital stay requirement found in Ms. Bushnell's policy is valid and Ms. Bushnell is not entitled to coverage as a matter of law.” The court also ruled that “Medico's denial of coverage was reasonable and not in bad faith.” The court denied Bushnell's motion for reconsideration.

¶ 17 Bushnell appeals the order granting summary judgment and the order denying the motion for reconsideration.

ANALYSIS

¶ 18 Bushnell contends the trial court erred in ruling the three-day hospital stay is valid and Medico did not act in bad faith in denying coverage. Bushnell argues that when Bushnell renewed the policy after the effective date of the regulations implementing the Act in January 1988, the three-day hospital stay requirement was eliminated and no longer applied. Medico asserts that neither the Act or the regulations apply retroactively, the Act does not apply to renewals under the terms of the policy, and the three-day prior hospitalization requirement remained in effect.⁶

¶ 19 We review summary judgment de novo. Woo v. Fireman's Fund Ins. Co., 161 Wash.2d 43, 52, 164 P.3d 454 (2007). Summary judgment is proper when the pleadings and affidavits show there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c).

¶ 20 Interpretation of an insurance contract is a question of law that we review de novo. Woo, 161 Wash.2d at 52, 164 P.3d 454. We construe an insurance policy as a whole, and give a fair, reasonable, and sensible construction as would be given by the average person purchasing insurance. Kitsap County v. Allstate Ins. Co., 136 Wash.2d 567, 575, 964 P.2d 1173 (1998). Courts determine coverage under the plain meaning of the policy. Capelouto v. Valley Forge Ins. Co., 98 Wash.App. 7, 13–14, 990 P.2d 414 (1999). We interpret the agreement to give effect to each provision. Smith v. Cont'l Cas. Co., 128 Wash.2d 73, 78–79, 904 P.2d 749 (1995). Undefined terms are given their plain, ordinary, and popular meaning. Kitsap County, 136 Wash.2d at 576, 964 P.2d 1173. Insurance policies are liberally construed to provide coverage wherever possible. Bordeaux, Inc. v. Am. Safety Ins., 145 Wash.App. 687, 694, 186 P.3d 1188 (2008).

¶ 21 If a policy is clear and unambiguous, the court must enforce it as written and not...