Mercycare Ins. Co. v. Wis. Comm'r Of Ins., 2008AP2937.

• Decision Date: 16 July 2010
• Docket Number: No. 2008AP2937.,2008AP2937.
• Citation: 2010 WI 87,786 N.W.2d 785
• Parties: MERCYCARE INSURANCE COMPANY and MercyCare HMO, Inc., Petitioners-Respondents,v.WISCONSIN COMMISSIONER OF INSURANCE, Respondent-Appellant.
• Court: Wisconsin Supreme Court

786 N.W.2d 785

2010 WI 87

MERCYCARE INSURANCE COMPANY and MercyCare HMO, Inc., Petitioners-Respondents,v.WISCONSIN COMMISSIONER OF INSURANCE, Respondent-Appellant.

No. 2008AP2937.

Supreme Court of Wisconsin.

July 16, 2010.

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For the respondent-appellant the cause was argued by Bruce A. Olsen, assistant attorney general, with whom on the brief was J.B. Van Hollen, attorney general.

For the petitioners-respondents there was a brief by Matthew J. Duchemin, William J. Toman, and Quarles & Brady LLP, Madison, and oral argument by Matthew J. Duchemin.

An amicus curiae brief was filed by Andrew C. Cook and the Wisconsin Civil Justice Council, Inc., Madison, and James A. Friedman and Godfrey & Kahn, S.C., Madison, on behalf of the Wisconsin Civil Justice Council, Inc.

ON CERTIFICATION FROM THE COURT OF APPEALS

¶ 1 ANN WALSH BRADLEY, J.

This case is before the court on certification from the court of appeals, pursuant to Wis. Stat. § (Rule) 809.61.¹ The certification states: “We certify this appeal to the Wisconsin Supreme Court to determine whether Wis. Stat. § 632.895(7) permits an insurer to exclude maternity coverage for an insured acting as a surrogate mother. The answer to this question is determined, in part, by what level of deference, if any, should be accorded the Commissioner's decision.”

¶ 2 The Commissioner concluded that Wis. Stat. § 632.895(7) does not permit an insurer to exclude generally covered maternity services for surrogate mothers. Thus, the Commissioner determined that MercyCare's 2002 Contract was ambiguous, and MercyCare's attempt to exclude generally covered maternity services for surrogate mothers under its 2002 Contract contravened the requirements of Wis. Stat. § 632.895(7). For the same reason, he determined that the 2005 Contract contravened Wis. Stat. § 632.895(7). Finally, the Commissioner also disapproved the 2005 Contract under Wis. Stat. § 631.20(2)(a)1., determining that it is misleading because the benefits are too restricted to serve the purposes for which the policy is sold. On review, the circuit court accorded no deference to the Commissioner's interpretation of Wis. Stat. § 632.895(7) and reversed the Commissioner's legal conclusions.²

¶ 3 Applying due weight deference, we conclude that an insurer may not make routine maternity services that are generally covered under the policy unavailable to a specific subgroup of insureds, surrogate mothers, based solely on the insured's reasons for becoming pregnant or the method used to achieve pregnancy. Accordingly, we determine that MercyCare's application of the 2002 Contract to exclude from coverage all maternity services for surrogate mothers contravenes Wis. Stat. § 632.895(7).

¶ 4 We also conclude that the Commissioner appropriately disapproved the surrogacy provision in MercyCare's 2005 Contract because it is contrary to Wis. Stat. § 632.895(7). In addition, the definition of “surrogate mother” set forth in the 2005 Contract is misleading because the benefits are too restricted to serve the purposes for which the policy is sold. Accordingly, we reverse the decision of the circuit court.

I

¶ 5 MercyCare Insurance Company and MercyCare HMO, Inc. (collectively “MercyCare”) are insurance companies authorized to do business in Wisconsin and subject to the jurisdiction and control of the Wisconsin Commissioner of Insurance. In 2002, MercyCare offered a group disability insurance policy that provided maternity coverage for eligible persons covered under the policies.

¶ 6 J.M. and C.S. were eligible persons insured by MercyCare under MercyCare's 2002 Certificate of Coverage (“the 2002 Contract”).³ C.S. was insured as a dependent, and J.M. was insured as an employee.

¶ 7 While insured under the 2002 Contract, J.M. and C.S. each agreed to act as a gestational carrier by carrying a child for other parents. The children carried by J.M. and C.S. are not genetically related to J.M. or C.S. respectively.

¶ 8 Both women received health care services in connection with their pregnancies. J.M. received medical care including laboratory tests, ultrasounds, maternity care, physician visits, inpatient hospital care, anesthesia and delivery. The total costs incurred amounted to $16,774.63. C.S. received comparable pre- and post-partum medical services, with costs totaling $18,510.84.

¶ 9 During the course of their pregnancies, MercyCare denied coverage for the maternity services received by both J.M. and C.S. It notified J.M. that benefits for lab work were being denied because the contract did not cover “surrogate mother services.” ⁴ Subsequently, MercyCare informed J.M. by letter:

MercyCare is unable to authorize coverage for all services related to this pregnancy. Services provided from 5-10-04 through 1-7-05 are not eligible for reproductive services benefits or pregnancy benefits. Any benefits paid for the services will be recouped.

C.S. was similarly denied coverage based on the 2002 Contract's identification of “surrogate mother services” as a “non- covered service” under the Contract's “Pregnancy Benefits coverage.” ⁵

¶ 10 The 2002 Contract provides that “surrogate mother services” are a “non-covered service” in two separate places-under the section titled “Pregnancy Benefits” and under the section titled “Reproductive Services.” However, the term “surrogate mother services” is not defined anywhere within the 2002 Contract.⁶

¶ 11 The “Pregnancy Benefits” section provides as follows:

Covered Services:

Treatment of pregnancy is covered for an employee, an employee's covered dependent spouse, or an employee's covered dependent child.

Pregnancy benefits include coverage for inpatient hospital care and pre- and post-natal care received from a participating provider.

....

Non-Covered Services:

• Surrogate mother services.

• Elective abortions.

• Maternity services received out of the service area in the last 30 days of pregnancy without prior authorization from the Plan except in an emergency. Prior authorization is based on medical necessity.

• Amniocentesis or chorionic villi sampling (CVS) solely for sex determination.

In addition, the “Reproductive Services” section of the 2002 Contract lists various covered services and provides that “surrogate mother services” are a “non-covered service.” ⁷

¶ 12 After denying coverage for J.M. and C.S.'s pregnancies, MercyCare sought to recoup the money it had already paid for claims related to the pregnancies. Ultimately, the services provided to both women were paid in full by third parties.

¶ 13 C.S. filed a complaint with the Office of the Commissioner of Insurance. Her complaint triggered the agency's review of MercyCare's denial of coverage to the two women. During this review, MercyCare filed its newest group disability policy insurance form (“the 2005 Contract”) ⁸ with OCI for approval.⁹

¶ 14 In many respects, the 2005 Contract is identical to the 2002 Contract. However, the 2005 Contract revises the language of the surrogate mother services exclusion and provides a definition for the term “surrogate mother.”

¶ 15 Rather than simply excluding “surrogate mother services,” the 2005 Contract provides that the following is a “Non-Covered Service”: “Treatment, services or supplies for a surrogate mother or any pregnancy resulting from your service as a surrogate mother.” Additionally, the 2005 Contract provides the following definition of the term “surrogate mother”:

Surrogate mother means a woman who, through in vitro fertilization or any other means of fertilization, gives birth to a child which she may or may not have a genetic relationship to, or an individual who provides a uterus for the gestation of a fertilized ovum obtained from a donor when the child will be parented by someone other than the woman who gives birth.

¶ 16 OCI disapproved the 2005 Contract by letter dated January 11, 2006. The letter explained that the exclusion for “[t]reatment, services or supplies for a surrogate mother or any pregnancy resulting from your service as a surrogate mother,” must be deleted because “[a] policy that provides maternity coverage may not limit the coverage based on method of conception, as such a limitation is unfairly restrictive and discriminatory.” ¹⁰ MercyCare requested a hearing.

¶ 17 On February 15, 2006, OCI issued a Notice of Hearing alleging that MercyCare violated Wis. Stat. § 632.895(7) when it denied coverage for J.M. and C.S.'s pregnancies under the 2002 Contract. The notice further alleged that the disapproval of the 2005 Contract was appropriate because the policy exclusions violated the mandated maternity benefits of Wis. Stat. § 632.895(7) and were misleading under Wis. Stat. § 631.20. The case ultimately went before the Commissioner of Insurance. The parties agreed to submit the case on the basis of briefs, a stipulation of facts, and other stipulated documentation.

¶ 18 The Commissioner issued a final decision on December 8, 2006. It concluded that: (1) under the mandate of Wis. Stat. § 632.895(7),¹¹ MercyCare may not exclude maternity coverage of otherwise covered persons based on their status as surrogate mothers; (2) even if the surrogacy services could be properly excluded, the language of the 2002 Contract is ambiguous; (3) OCI appropriately disapproved MercyCare's 2005 Contract because the surrogate mother exclusion is contrary to Wis. Stat. § 632.895(7) and the 2005 Contract is misleading because its benefits are too restricted to achieve the purposes for which the policy is sold.

¶ 19 The decision first addressed whether MercyCare was permitted under Wis. Stat. § 632.895(7) to exclude maternity coverage on the basis that the insured was acting as a surrogate mother. The Commissioner explained that the issue required the application of “exclusions or limitations” to a set of facts unanticipated by the legislature at the time the statute was passed. According to the Commissioner's interpretation, “the legislative history indicates that...