Cary v. United of Omaha Life Ins. Co., No. 00CA0681.

Citation91 P.3d 425
Decision Date20 November 2003
Docket NumberNo. 00CA0681.
PartiesThomas A. CARY and Beth Hanna, individually and on behalf of their minor daughter, Dena Cary, Plaintiffs-Appellants and Cross-Appellees, v. UNITED OF OMAHA LIFE INSURANCE COMPANY and Mutual of Omaha of Colorado, Inc., d/b/a Antero Health Plans, Defendants-Appellees and Cross-Appellants.
CourtCourt of Appeals of Colorado

Wilcox & Ogden, P.C., M. Anne Wilcox, Ralph Ogden, Denver, Colorado, for Plaintiffs-Appellants and Cross-Appellees.

Kutak Rock, LLP, Melvin B. Sabey, Gerard V. Reardon, Denver, Colorado, for Defendant-Appellee and Cross-Appellant United of Omaha Life Insurance Company.

Kennedy & Christopher, P.C., John R. Mann, Christopher K. Miller, Denver, Colorado, for Defendant-Appellee and Cross-Appellant Mutual of Omaha of Colorado, Inc.

Opinion by Judge ROY.

Defendants, United of Omaha Life Insurance Company and Mutual of Omaha of Colorado, Inc., d/b/a Antero Health Plans (administrators), appeal the summary judgment which concluded that a group health plan managed by them covered medical and hospital expenses incurred by plaintiffs, Thomas A. Cary (father) and Beth Hanna (collectively insureds). We reverse the summary judgment and remand the case for further proceedings consistent with the views expressed in this opinion.

This matter is before us on remand from the supreme court. The trial court had granted the administrators' motion for summary judgment on the issue of duty, concluding that as third-party administrators of a self-insured municipal health plan, they did not owe insureds a contractual duty amenable to a claim of bad faith breach of an insurance contract. At the same time, the trial court granted insureds' motion for summary judgment on the issue of coverage. The insureds appealed the summary judgment in favor of administrators, and the administrators cross-appealed the summary judgment on the coverage issue.

We affirmed the judgment on insureds' appeal and did not address the administrators' cross-appeal. Cary v. United of Omaha Life Ins. Co., 43 P.3d 655 (Colo.App.2001). The supreme court reversed and remanded for consideration of any remaining issues on appeal. Cary v. United of Omaha Life Ins. Co., 68 P.3d 462 (Colo.2003). We now address the cross-appeal.

Father was an employee of the City of Arvada and was a member of a group health plan (Plan) the city provided to its employees and their families. The Plan was designed and funded by the Arvada Medical and Disability Program Trust Fund (Trust) and was administered by administrators, who processed all claims and determined coverage, subject to appeal to the Trust.

Insureds' child was a beneficiary of the Plan and had a history of Bipolar I Disorder, a biologically based mental illness characterized by both manic and major depressive episodes, the treatment of which was covered by the Plan. On June 7, 1997, the child put a rifle under her chin and shot herself in an apparent suicide attempt. As a result, she required extensive treatment, hospitalization, and multiple surgeries. Insureds applied for benefits under the Plan, but administrators denied benefits, citing, as justification, the exclusion for self-inflicted injuries.

Insureds sued the city, the Trust, and administrators, seeking both a declaratory judgment that the Plan covered the child's injuries and damages for bad faith breach of an insurance contract. On cross-motions for summary judgment, the trial court granted partial summary judgment for insureds, concluding that the self-inflicted injury exclusion of the Plan was ambiguous and, even if the Plan were not ambiguous, a 1994 Summary Plan Description (1994 SPD) rendered the exclusion ambiguous. The trial court then resolved the ambiguity in favor of coverage. The city and the Trust settled with insureds and are not parties to this appeal or cross-appeal.

I.

At the outset, insureds contend that administrators lack standing to challenge the trial court's ruling on coverage because administrators were not parties to the Plan which formed a contract between father and the City of Arvada. We disagree.

To have standing to appeal, a person must either be a party to the action or be substantially aggrieved by the disposition of the case in the lower court. Kornfeld v. Perl Mack Liquors, Inc., 193 Colo. 442, 567 P.2d 383 (1977); see Bush v. Winker, 907 P.2d 79 (Colo.1995)

; see also § 13-51-106, C.R.S. 2003 ("Any person interested under a ... written contract ... or whose rights, status, or other legal relations are affected by a ... contract ... may have determined any question of construction or validity arising under the ... contract ... and obtain a declaration of rights, status, or other legal relations thereunder.").

Here, administrators were substantially aggrieved by the trial court's declaratory judgment concluding that the Plan covered the child's injuries because that determination directly affects insureds' claims against them.

The supreme court concluded that the administrators owed insureds a duty amenable to a claim of bad faith breach of an insurance contract. The supreme court reasoned that a "sufficient special relationship existed between the [a]dministrators and [insureds] to impose a duty of good faith and fair dealing on the [a]dministrators, in light of their central role in claims administration and their financial liability for claims." Cary v. United of Omaha Life Ins. Co., supra, 68 P.3d at 468. The court also stated that "administrators had primary control over benefit determinations, assumed some of the insurance risk of loss, undertook many of the obligations and risks of an insurer, and had the power, motive, and opportunity to act unscrupulously in the investigation and servicing of the insurance claims." Cary v. United of Omaha Life Ins. Co., supra, 68 P.3d at 465.

Because the supreme court concluded that administrators had a duty to act in good faith in administering the Plan, it follows that they have standing to challenge the trial court's conclusion that the Plan covers the cost of treating the child's injuries. The issue of coverage is a central predicate to any claim of bad faith breach of the insurance contract.

II.

In their cross-appeal, administrators assert that the trial court erred when it concluded that the Plan was ambiguous as to coverage for self-inflicted injuries and then resolved that ambiguity in favor of coverage for the child's self-inflicted injury. We agree.

Insurance policies are contracts. If they are clear and unambiguous, then they require no construction or interpretation and are to be enforced as written. Cruz v. Farmers Ins. Exch., 12 P.3d 307 (Colo.App. 2000); Wieprzkowski v. State Farm Mut. Auto Ins. Co., 976 P.2d 891 (Colo.App.1999).

In determining whether a policy is ambiguous, the courts must read the entire policy as a whole and give the words used their plain meaning according to common usage. In re Estate of Heckman, 39 P.3d 1228 (Colo.App.2001). When words are not defined in the policy, they are to be given their plain, ordinary, customary, and accepted meaning. An insurance policy is ambiguous if it is reasonably susceptible of more than one interpretation, but it is not rendered ambiguous merely because the parties disagree on its interpretation. Safeco Ins. Co. v. Robertson, 994 P.2d 488 (Colo.App. 1999).

When, as here, the evidence is limited to the documents, the issues of a contract's ambiguity and correct interpretation are matters of law to be determined by the court. Kaiser v. Mkt. Square Disc. Liquors, Inc., 992 P.2d 636 (Colo.App.1999).

The Plan defines "illness" as "a physical or mental disorder, including pregnancy." "Injury" is defined as: "[A]ccidental bodily injury which occurs independently of Illness. Injury does not include self-inflicted bodily Injury either while sane or insane, or disease or infection (except pyogenic infection occurring through an accidental cut or wound)."

The term "Covered Expenses" is defined as "a Reasonable and Customary medical expense ... which expense is Medically Necessary for the treatment of an Injury or an Illness not specifically excluded or otherwise limited under this Plan." The Plan contains a specific exclusion from benefits for "[c]harges in connection with a self-inflicted injury, whether sane or insane."

Therefore, self-inflicted injury, incurred whether the claimant is sane or insane, is a limitation on coverage under the definition of "Injury" and is a separately provided plan exclusion.

The trial court initially concluded, and we agree, that the second sentence of the definition of "Injury," which excludes self-inflicted injuries whether the claimant is sane or insane, is not in and of itself ambiguous. See Bigelow v. Berkshire Life Ins. Co., 93 U.S. 284, 287, 23 L.Ed. 918 (1876)

(when used to exclude intended self-destruction in a life insurance policy, the words "sane or insane" have a "precise, definite, and well-understood meaning").

However, the trial court went on to conclude that the Plan was ambiguous based on the phrase in the first sentence of the definition of "Injury": "accidental bodily injury which occurs independently of Illness." The court reasoned that the child was suffering from a treatable and covered mental illness, the self-inflicted injury was not independent of the covered mental illness, and, therefore, the Plan covered treatment of the injuries.

In our view, the trial court's interpretation strains the definition of "Injury." We read the phrase "which occurs independently of Illness" in the definition of "Injury" as modifying "accidental bodily injury," not "Injury." The self-inflicted injury limitation is contained in a separate, independent, and immediately subsequent sentence and, in our view, modifies "Injury." That is, no intentionally self-inflicted injuries are covered. The language in the Plan limiting the definition of "Injury" by excluding from that...

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