Cole v. Wellmark of South Dakota, Inc.

• Decision Date: 09 December 2009
• Docket Number: No. 25162.,25162.
• Parties: Dellas COLE and Margie Cole, Plaintiffs and Appellants, v. WELLMARK OF SOUTH DAKOTA, INC. and Della Tschetter Insurance, Defendants and Appellees.
• Court: South Dakota Supreme Court

776 N.W.2d 240

2009 SD 108

Dellas COLE and Margie Cole, Plaintiffs and Appellants, v. WELLMARK OF SOUTH DAKOTA, INC. and Della Tschetter Insurance, Defendants and Appellees.

No. 25162.

Supreme Court of South Dakota.

Argued October 7, 2009.

Decided December 9, 2009.

N. Dean Nasser, Jr. of Nasser Law Offices, PC, Sioux Falls, South Dakota, Attorney for plaintiffs and appellants.

Justin G. Smith, Kristine L. Kreiter O'Connell of Woods, Fuller, Shultz and Smith, PC, Sioux Falls, South Dakota, Attorneys for defendant and appellee Wellmark.

Timothy M. Gebhart, Thomas M. Frankman of Davenport, Evans, Hurwitz and Smith, LLP, Sioux Falls, South Dakota, Attorneys for defendant and appellee Della Tschetter Insurance.

GILBERTSON, Chief Justice.

[¶ 1.] Dellas Cole (Dellas) and Margie Cole (Margie) submitted an application for health insurance coverage to Wellmark of South Dakota, Inc. (Wellmark). Della Tschetter (Tschetter), an independent insurance agent, assisted Coles with the application process. Wellmark claimed it mailed riders for exclusions to Coles at their home address. It further claimed it denied Coles' application when they failed to return signed riders as requested by Wellmark. Coles claimed they did not receive the riders, rejection notice, or the premium refund. After their daughter was injured, Coles discovered they had not been approved and sued Wellmark and Tschetter claiming each had a duty under tort or contract to provide the coverage. The trial court dismissed the matter on Defendants' motions for summary judgment. Coles appeal. We affirm.

FACTS

[¶ 2.] In September 2003, Dellas and Margie Cole contacted Della Tschetter Insurance to obtain quotes for health insurance for their family. Margie's employment change in August required the family to purchase a new policy or enroll for COBRA coverage with her previous employer by September 31, 2003, in order to avoid a lapse in coverage. Tschetter's agency was one of three the Coles contacted. Tschetter dropped off information at the Coles' home the same day she spoke over the telephone with Margie. Due to Tschetter's prompt service, the Coles decided to work with her on obtaining health insurance coverage.

[¶ 3.] The Coles decided to apply to Wellmark.¹ They were motivated to select Wellmark because of their ability under "Option 1" of its individual plan to select the effective date of the policy in exchange for paying the first month's premium at the time the application was submitted. Coles determined that "Option 2," wherein Wellmark would assign an effective date, was not something that would suit their timeline.

[¶ 4.] On September 10, 2003, Tschetter met with the Coles who had completed most of their application form prior to the meeting. Tschetter helped them finalize their application and answered their questions. Tschetter informed the Coles that their youngest son's allergies would probably be considered a preexisting condition for which a rider (exclusion) would be issued. The application stated immediately above the signature line:

COVERAGE APPLIED FOR WILL NOT BE EFFECTIVE UNTIL WELLMARK OR USAL, AS THE UNDERWRITERS OF THE HEALTH AND LIFE COVERAGES, RESPECTIVELY, HAVE REVIEWED AND APPROVED THIS APPLICATION AND NOTIFIED ME IN WRITING OF THE APPROVAL OF SUCH INSURER'S COVERAGE. WELLMARK UNDERWRITES COVERAGE UP TO THE EFFECTIVE DATE OF THE POLICY REGARDLESS OF WHEN THE APPLICATION WAS APPROVED. Any payment will be deposited immediately upon Wellmark's receipt of this application. Should my application not be approved, my payment will be refunded in full.

(Bolding, underlining, and all capitals in original). The Coles both signed and dated the form on the signature lines immediately below these statements.

[¶ 5.] Coles selected October 1, 2003, as the effective date for coverage and noted this on their application. As the meeting wrapped up, Tschetter said that the Coles were "all set," and "good to go." The application, a check for $567.00 for the first month's premium, and an authorization form for Wellmark to electronically deduct premiums from Coles' checking account for subsequent monthly premiums were mailed by Tschetter to Wellmark.

[¶ 6.] Wellmark received the application on September 15, 2003, and immediately cashed the Coles' check. Wellmark claimed it attempted to contact the Coles by letter dated September 18, 2003, to advise them that two riders would be issued on their proposed policy. In that letter, Wellmark claimed it requested their signatures on the riders before the policy would issue. When Wellmark did not receive the signed riders, it claimed it sent a letter dated October 24, 2003, advising Coles that their application had been rejected. The Coles claimed they never received either letter.

[¶ 7.] Tschetter claimed she also attempted to contact the Coles by telephone to inquire as to why they had not signed and returned the riders. Tschetter later testified that she left two messages on Coles' answering machine. Coles testified they never received the messages. Tschetter further testified she assumed the Coles had decided to use one of the other local agents Coles had been in contact with before electing to work with Tschetter, and had procured coverage with another insurer.

[¶ 8.] On November 4, 2003, Wellmark issued a refund check to the Coles for the $567.00 premium payment. Coles claimed they did not receive the refund check.² Coles also testified they never received an approval letter, insurance cards, or any notice they were insured. They further testified premiums for November and December were not deducted from their checking account.

[¶ 9.] On November 9, 2003, Coles' daughter suffered a knee injury. On December 2, 2003, medical care was sought. It was then that Margie contacted Tschetter to inquire about the insurance policy. Tschetter informed Margie that the policy was never issued due to the Coles' failure to sign and return the riders. Coles incurred $20,000.00 in medical expenses for their daughter's knee surgery. A suit was filed against Wellmark and Tschetter for breach of contract, negligent misrepresentation, estoppel, reformation, waiver, and breach of fiduciary duty in an effort to obtain the coverage with an effective date of October 1, 2003.

[¶ 10.] During his deposition, Dellas testified as to what he understood the language, as reprinted in paragraph four above, meant regarding when coverage would be in effect:

Q. As you sit here today, what does that sentence mean?

A. It means that what is discussed in this application form, that the insurance we applied for with this application does not kick in, is not effective, until they notify us, until we receive something in the mail, they notify us in writing.

Q. So the approval of your application and the issuance of coverage, according to this sentence, is subject to review by Wellmark, is that how you read it?

A. Yes.

Q. What did you think that meant when you were filling out the application and when you signed it?

A. It would mean that they would review our application and then act upon it.

Q. And how would they act upon it?

A. Approve or whatever, whatever they do.

...

Q. At the time you were meeting with Della Tschetter to discuss this application and fill it out, and when you signed the application, did you understand the application was subject to approval by Wellmark?

A. Yes.

[¶ 11.] Wellmark and Tschetter each filed separate motions for summary judgment in which they both argued no duty existed under tort or contract to provide the coverage. The trial court granted Wellmark and Tschetter's respective motions for summary judgment and the case was dismissed. The Coles appeal raising the following issue:

Whether Wellmark or Tschetter had a duty under tort or contract law to provide the requested coverage.

STANDARD OF REVIEW

Our standard of review on summary judgment requires this Court to determine whether the moving party has demonstrated the absence of any genuine issue of material fact and entitlement to judgment on the merits as a matter of law. The circuit court's conclusions of law are reviewed de novo. However, all facts and favorable inferences from those facts must be viewed in a light most favorable to the nonmoving party. We will affirm the circuit court's ruling on a motion for summary judgment when any basis exists to support its ruling.

Dakota Plains AG Ctr., L.L.C. v. Smithey, 2009 SD 78, ¶ 14, 772 N.W.2d 170, 178 (quoting Weitzel v. Sioux Valley Heart Partners, 2006 SD 45, ¶ 16, 714 N.W.2d 884, 891) (internal citations omitted). "Questions of legal duty are issues of law reviewed de novo." A.M. Farms v. County of Codington, 2009 SD 28, ¶ 6, 765 N.W.2d 550, 553 (citing Bordeaux v. Shannon County Sch., 2005 SD 117, ¶ 11, 707 N.W.2d 123, 126). Generally, negligence claims are not suited for disposition under a motion for summary judgment. Kuehl v Horner Lumber Co., 2004 SD 48, ¶ 10, 678 N.W.2d 809, 812. However, if the duty question can be resolved in the defendant's favor then a motion for summary judgment may be properly granted. Id.

1. Claims against Wellmark

[¶ 12.] Coles argue that the application form created a contract for interim health coverage effective October 1, 2003, that continued until either Wellmark approved Coles' application and issued a policy or Wellmark rejected Coles' application. Coles also argue Tschetter, as an agent of Wellmark cloaked with authority to approve applications gave verbal approval for coverage effective October 1, 2003.

a. Contract for interim coverage

[¶ 13.] Coles argue that an implied contract for interim coverage existed between them and Wellmark. Coles argue that the language "WELLMARK UNDERWRITES COVERAGE UP TO THE EFFECTIVE DATE OF THE POLICY REGARDLESS OF WHEN THE APPLICATION WAS APPROVED," along with the payment of the first month's premium created an implied contract for interim insurance between October 1, 2003, and the time Wellmark acted upon Coles'...