Moore v. Energy Mut. Ins. Co.

• Decision Date: 26 June 1991
• Docket Number: No. 910045-CA,910045-CA
• Citation: 814 P.2d 1141
• Parties: Sherie L. MOORE, Plaintiff and Appellant, v. ENERGY MUTUAL INSURANCE COMPANY, Defendant and Appellee.
• Court: Utah Court of Appeals

Page 1141

814 P.2d 1141

Sherie L. MOORE, Plaintiff and Appellant, v. ENERGY MUTUAL INSURANCE COMPANY, Defendant and Appellee.

No. 910045-CA.

Court of Appeals of Utah.

June 26, 1991.

Robert L. Jeffs (argued), Jeffs & Jeffs, Provo, for plaintiff and appellant.

Rinehart L. Peshell (argued), Fairbourn & Peshell, Midvale, for defendant and appellee.

Before BENCH, BILLINGS and GARFF, JJ.

OPINION

BILLINGS, Associate Presiding Judge:

Plaintiff/appellant Sherie Moore (Moore) appeals from the court's grant of summary judgment in favor of defendant Energy Mutual Insurance Co. (Energy Mutual) dismissing her complaint. We reverse and remand.

Energy Mutual issued a legal fees insurance plan to Utah Power and Light for the benefit of its employees. As an insured employee, Moore's husband received a certificate or summary of the legal fees insurance plan, while the master plan was given only to Utah Power and Light. In the section labeled "Charges Excluded from Coverage" the summary plan excluded: "All charges which do not meet the criteria for eligible charges, as defined in the Group Legal Expense Insurance Policy and in addition, any charges for: ..." (setting out fifteen different excluded charges). The summary plan contained no reference to contingent fees or any exclusion thereof.

In the section labeled "excluded charges," the master group policy given to Utah Power and Light set forth nearly verbatim, the same fifteen excluded charges as the summary plan. The master policy, however, also included two additional exclusions, one for charges in excess of $2,000 in a divorce action, and one for "[a]ny legal proceeding in which fees are charged contingent upon the outcome of the proceeding or in which fees would normally be charged on a contingent basis in the absence of this or any other legal expense policy or plan."

In October 1988, Moore retained an attorney under a contingency fee contract to represent her in a suit against her automobile insurer resulting from an accident with an uninsured motorist. In February 1989, Moore's attorney contacted Energy Mutual and was orally notified that the legal expense policy did not cover contingent attorney fee arrangements. At this time, her attorney had begun, but not completed, his work which ultimately ended in a favorable settlement for plaintiff. Energy Mutual sent a letter denying coverage and confirming the contingency fee exclusion to plaintiff's husband and her attorney on March 8, 1989 stating: "I do understand the confusion as the exclusion for contingency fee cases was not included on some plan summaries distributed to employees.... However, the statement on the first page of the summary provides: 'IN CASE OF ANY CONFLICT BETWEEN THE SUMMARY PLAN AND THE PLAN DOCUMENT, THE PLAN DOCUMENT WILL GOVERN.' " Plaintiff finally received a copy of the master plan pursuant to a discovery request in April 1990.

After discovery, both parties moved the trial court for summary judgment. The trial court denied plaintiff's motion and granted summary judgment in favor of defendant.

Summary judgment is proper only where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Pixton v. State Farm Mut. Automobile Ins. Co., 809 P.2d 746, 748 (Utah App.1991) (citing Ehlers & Ehlers Architects v. Carbon County, 805 P.2d 789, 791 (Utah App.1991) and Shire Dev. v. Frontier Invs., 799 P.2d 221, 222-23 (Utah App.1990)). We view the facts and inferences therefrom in a light favorable to the losing party and affirm the summary judgment only where there is no genuine dispute regarding material facts and where viewing the facts as contended by the losing party, the moving party is entitled to judgment as a matter of law. Id. Because summary judgment is granted as a matter of law, and not of fact, we review the trial court's legal conclusions for correctness according no deference. Id.; see also Palmer v. Davis, 808 P.2d 128, 130 (Utah App.1991) (citing CECO Corp. v. Concrete Specialists, Inc., 772 P.2d 967, 969 (Utah 1989)).

I. INSURANCE CONTRACT

Moore claims Energy Mutual is precluded from relying on the exclusion of coverage for contingent attorney fees included in the master policy because this policy was not provided to Moore. Moore claims the controlling terms of the policy are those included in the certificate or summary plan which was provided to her husband and other employees. Moore acknowledges that Energy Mutual ultimately notified her of the contingency fee exclusion, but she contends this belated notification occurred after she had retained counsel, and was thus inapplicable. Energy Mutual responds that the terms of the insurance contract provide that the master policy will control and contingency fees were clearly excluded from coverage in the master policy.

Insurance policies are contracts and thus should generally be interpreted under the rules governing ordinary contracts. Village Inn Apts. v. State Farm Fire and Cas. Co., 790 P.2d 581, 582 (Utah App.1990). However, as a matter of public policy, ambiguities or inconsistent provisions in insurance contracts are construed against the insurer and in favor of coverage. See LDS Hosp. v. Capitol Life Ins. Co., 765 P.2d 857, 858 (Utah 1988); Wagner v. Farmers Ins. Exch., 786 P.2d 763, 765 (Utah App.1990); Wilburn v. Interstate Elec., 748 P.2d 582, 585 n. 2 (Utah App.1988), cert. dismissed, 774 P.2d 1149 (Utah 1989). This rule is based on the premise that insurance contracts are "generally contracts of adhesion which are not negotiated at arms length and which usually contain various provisions for protection of the interests of the insurance company." General Motors Acceptance Corp. v. Martinez, 668 P.2d 498, 501 (Utah 1983).

This construction in favor of coverage is particularly strong in policies containing ambiguous or conflicting provisions purporting to exclude coverage. See, e.g., LDS Hosp., 765 P.2d at 859; Phillips v. Utah Local Gov't Trusts, 660 P.2d 249, 250 (Utah 1983); Valley Bank & Trust Co. v. U.S. Life Title Ins. Co. of Dallas, 776 P.2d 933, 936 (Utah App.1989). Although the parties to an insurance agreement "are free to define the exact scope of the policy's coverage and may specify the losses or encumbrances the policy is intended to encompass," Village Inn Apts., 790 P.2d at 583 (quoting Valley Bank & Trust Co., 776 P.2d at 936), exclusions from coverage must use "language which clearly and unmistakably communicates to the insured the specific circumstances under which the expected coverage will not be provided." Village Inn Apts., 790 P.2d at 583; Wagner, 786 P.2d at 765. ¹

Utah appellate courts have consistently held that exclusions from coverage under an insurance policy, even if clear, are ineffective unless they are communicated to the insured in writing. See Farmers Ins. Exch. v. Call, 712 P.2d 231, 236 (Utah 1985); Martinez, 668 P.2d at 501. In Farmers, the supreme court concluded that an automobile insurance policy provision excluding insurance coverage for injuries sustained by household members of the insured was invalid where a copy of the policy was never provided to the insured. The court noted that, "public policy requires that persons purchasing such policies are entitled to be informed, in writing, of the essential terms of insurance contracts, especially exclusionary terms." Farmers Ins. Exch., 712 P.2d at 236. In Martinez, an insured debtor was unable to make his car payments due to disability and filed a claim on his credit insurance policy. The policy contained an exclusion for pre-existing conditions. The court concluded the exclusion was invalid where the insured was unaware of it and was not provided with a copy of the policy stating, "the insured is entitled to be informed in writing of the essential terms of the insurance contract, especially the exclusionary terms." Martinez, 668 P.2d at 500-01. ²

In Martinez, the Utah Supreme Court also recognized the majority position that, "a certificate of insurance or other literature given an insured describing the coverage controls over a master policy not delivered to the insured." Id. at 502. ³

In summary, Utah case law is consistent with the majority rule that insurance companies are permitted to limit their liability through specific exclusions, but these exclusions are invalid unless clearly communicated to the insured in writing. Thus, if there are inconsistencies in the scope of coverage between the master policy and the certificate or summary plan provided to the individual insured under a group insurance plan, the broader coverage outlined in the certificate is controlling.

Utah's common law position is also in harmony with Utah statutory provisions governing the insurance industry. ⁴ Utah Code Ann. § 31A-21-311 applies to insurance contracts in general and provides in part: "an insurer issuing a group insurance policy other than blanket shall, as soon as practicable after the coverage is effective, provide a certificate for each member of the insured group.... The certificate shall contain a summary of the essential features of the insurance coverage ...." (Emphasis added.) Utah Code Ann. § 31A-22-1102(3)(c) specifically addresses legal expense insurance policies and mandates that, "[c]ertificates issued under group policies shall contain a full statement of the benefits provided, but may summarize the other terms of the master policy." (Emphasis added.) Under this statutory mandate, specific exclusions from coverage must be included in the certificate as such exclusions are both an "essential feature" and part of a "full statement of the benefits" of the insurance policy.

In the instant case, the certificate provided to Moore's husband carefully set out, nearly verbatim, fifteen of the seventeen exclusions contained in the master policy. ⁵ The certificate did not contain an exclusion for legal fees incurred in a contingency fee arrangement. In addition to the fifteen...