Golden Rule Ins. Co. v. R.S.

• Decision Date: 19 June 2012
• Docket Number: No. WD 72578.,WD 72578.
• Citation: 368 S.W.3d 327
• Parties: GOLDEN RULE INSURANCE COMPANY, et al., Appellants, v. R.S., et al., Respondents.
• Court: Missouri Court of Appeals

368 S.W.3d 327

GOLDEN RULE INSURANCE COMPANY, et al., Appellants,

v.R.S., et al., Respondents.

No. WD 72578.

Missouri Court of Appeals, Western District.

June 19, 2012.

Louis A. Cohn, Overland Park, KS, Andrew G. Jubinsky, (pro hac vice), Timothy A. Daniels, (pro hac vice), Dallas, TX, for Appellants.

Mark Roberts, Blue Springs, MO, for Respondents.

Before Division Three: KAREN KING MITCHELL, Presiding Judge, and JAMES M. SMART, JR., and GARY D. WITT, Judges.

KAREN KING MITCHELL, Presiding Judge.

This is an insurance case addressing the applicability of two policies of health insurance. The primary issue as to the Golden Rule Insurance Company policy is whether a policy application's automatic termination clause was rendered ambiguous, and thus unenforceable, by other language in the policy. We hold that the automatic termination clause was ambiguous in that it prohibited the policyholders from having any “other coverage,” while another provision of the policy expressly provided that policyholders could have certain other types of coverage—namely other group and group-type policies. This ambiguity, however, affords no relief to the insureds, as it is unrelated to their specific circumstances in that they had no other group or group-type policies. Accordingly, we reverse the trial court's judgment in favor of the insureds as to the Golden Rule policy.

As to the PacifiCare Life and Health Insurance Company policy, the issue is whether the insureds' policies should have been rescinded based on alleged material misrepresentations regarding residency. The policy required applicants to provide their “home address.” “Home address” was not a term defined in the policy application and could mean both residence and domicile. As the insureds were residents of both Missouri and California, their identification of an address in California as their “home address” was not a material misrepresentation. Therefore, we affirm the trial court's judgment as to the PacifiCare policy.

Facts and Procedural Background¹

Appellant Golden Rule Insurance Company (“Golden Rule”) sought a judgment declaring that (1) the medical insurance policies it issued to Respondents R.S. and R.C.H.² were void as of ninety days after the effective date of the Golden Rule policy in that both R.S. and R.C.H. had other medical insurance policies in effect on the date the Golden Rule policy went into effect; or (2) the policies could be terminated and rescinded back to the date upon which R.S. and R.C.H. allegedly made false statements regarding other insurance coverage. Appellant PacifiCare Life and Health Insurance Company (“PacifiCare”) also sought a judgment rescinding medical insurance policies issued to R.S. and R.C.H. PacifiCare alleged that R.S. and R.C.H. misrepresented that they were residents of California at the time they applied for PacifiCare coverage.

R.S. and R.C.H. were full-time residents of California until 2003. They were domestic partners whose relationship was registered with both Los Angeles County and the State of California. Both men were HIV-positive or had AIDS and were receiving needed intravenous immunoglobulin therapy(“IVIG”) from Dr. Wiesner, and later, from Dr. Honzel, in California. Both men were too ill to continue their past employment and were receiving disability benefits from private disability insurance policies. The men continued their health insurance through COBRA ³ with their past employers until early 2004.

In May of 2003, R.S. purchased a home in Kansas City, Missouri, to be nearer to his ailing mother. R.C.H. moved into the Kansas City home in late May of 2003, and R.S. followed in June of 2003. At the time of the moves, no Missouri healthcare providers were providing IVIG therapy, so R.S. and R.C.H. understood that, periodically, they would need to return to California to continue their treatments. A close friend of the couple, Victoria Christie, who also worked for Dr. Honzel's office, allowed them to stay at her home when they traveled to California for their treatments.⁴

On February 2, 2004, facing the termination of their COBRA health insurance, R.S. and R.C.H. completed applications for replacement health insurance with three different insurance companies.⁵ On an application for insurance with Golden Rule, which issued insurance to Missouri residents, the couple listed their Kansas City address as their home address. They stated that they did not have any other insurance.

R.S. and R.C.H. also completed applications for health insurance with two companies doing business with California residents: PacifiCare and Blue Shield of California (“Blue Shield”). On these applications, R.S. and R.C.H. represented that their “home address” was Christie's California address. Neither R.S. nor R.C.H. owned this property, nor did they lease it. R.S. and R.C.H. received all of their mail relating to the PacifiCare and Blue Shield policies at this California address.

All three insurance companies issued health insurance policies to R.S. and R.C.H.

The relevant portions of the Golden Rule application and policy are as follows.⁶ There are two provisions in the Golden Rule policy that purport to terminate coverage in the event that the insured has or obtains other coverage. The first is in the insurance application, which states that “continuation of other coverage existing on the [effective date of this policy] for more than 90 days after [the effective date of this policy] will void this coverage” (the existing insurance prohibition).⁷ The policy itself states that “insurance will automatically stop on ... the date the covered person becomes covered under an individual plan of insurance” (the after-acquired insurance prohibition). It states further: “TERMINATION FOR FRAUD: We may terminate coverage of a covered person who is knowingly involved in or has knowledge of fraud or material misrepresentation in filing a claim for policy benefits.” Finally, under the heading “COORDINATION OF BENEFITS” (“COB”) the policy also states:

Some people have health care coverage through more than one plan at the same time. COB allows these plans to work together so that the total amount of all benefits will never be more than 100 percent of the allowable expenses during any calendar year. This helps to hold down the costs of health coverage....

This Coordination of Benefits (“COB”) provision applies to this plan when a covered person has health care coverage under more than one plan.

(Emphasis in original) (“COB provision”).

The PacifiCare policies provide that:

The company may rescind coverage if the insured person or any dependent knowingly provides false information (or misrepresents a material fact) on the enrollment application form or intentionally does not inform the company of changes to material information before coverage becomes effective. Rescinding coverage means that this policy is void and that no coverage existed at any time.

The PacifiCare application required applicants to provide their “home address.”

None of the insurance companies knew that R.S. and R.C.H. had applied for insurance with the other two companies. PacifiCare paid Dr. Honzel directly for the couple's IVIG treatments. Blue Shield also apparently paid Dr. Honzel for portions of the IVIG treatment cost and paid a California pharmacy for R.S.'s and R.C.H.'s medications. Golden Rule did not pay any healthcare provider directly. Instead, R.S. would send Golden Rule copies of his statements for healthcare, which the other insurance companies had already paid, and he would affix stickers on them that read, “The physician [or the pharmacy] has been paid for these services. Please reimburse insured directly.” R.S. testified that, in requesting “reimbursement,” he may have chosen “incorrect wording” in that he and R.C.H. had not made payments themselves. He testified, however, that he understood the Golden Rule policy to be “a reimbursement policy” and that, by using that term, he had meant that the healthcare providers had been paid, though not by him, and that, therefore, payment was due under the Golden Rule policy.

R.S. and R.C.H. used the payments they received from Golden Rule to pay the premiums on their various insurance policies and to help with costs for their travel to California to receive their treatments. The amount they received from Golden Rule, however, exceeded the cost of premiums and identified travel expenses; it is unclear what R.S. and R.C.H. did with the balance of the money they received from Golden Rule.

At some point, United Health Care (“United”), the parent company of both Golden Rule and PacifiCare, began investigating R.S. and R.C.H. As part of the investigation, at various times, Golden Rule sent R.S. and R.C.H. several additional forms requesting information. One question asked, “Do you or any family members have other coverage (medical, indemnity, or liability) which might help cover hospital and medical expenses?” In responding to this question in 2004, R.S., on behalf of himself and R.C.H., checked the “no” box. In response to this same question, R.S., on at least one occasion in 2008, included a handwritten note on the questionnaires. The note read “no other plan.” “Plan” was a defined term in the COB clause of the Golden Rule policy includinggroup and group-type insurance, and R.S. understood the term “plan” as used in the COB provision to exclude individual insurance policies. R.S. claims that he believed his answers to have been accurate because R.S.'s and R.C.H.'s PacifiCare and Blue Shield policies were both individual insurance policies, and thus they were not “plans” as defined by the Golden Rule policy. However, in September of 2004, on behalf of himself and R.C.H., R.S. checked the “no” box on the questionnaires' “other insurance” provision without qualifying his answers with the “no other plan” caveat.

Subsequent to the investigation, PacifiCare filed a petition, alleging that R.S. and R.C.H. had...