Mote v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 13 March 1990
• Docket Number: No. 34A02-8903-CV-118,34A02-8903-CV-118
• Citation: 550 N.E.2d 1354
• Parties: Joan MOTE, Administratrix of the Estate of Dennis A. Mote, deceased; and Joan Mote, Guardian of Dennis A. Mote, an incompetent adult, Appellant (Plaintiff), v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee (Defendant).
• Court: Indiana Appellate Court

Page 1354

550 N.E.2d 1354

29 Soc.Sec.Rep.Ser. 42

Joan MOTE, Administratrix of the Estate of Dennis A. Mote deceased; and Joan Mote, Guardian of Dennis A Mote, an incompetent adult, Appellant (Plaintiff), v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee (Defendant).

No. 34A02-8903-CV-118.

Court of Appeals of Indiana Second District.

March 13, 1990.

Floyd F. Cook, Kokomo, for appellant.

James R. Fleming, Simmons & Fleming, Kokomo, for appellee.

BUCHANAN, Judge.

CASE SUMMARY

Plaintiff-appellant Joan Mote (Mote), as the administratrix of Dennis Mote's (Dennis) estate, and as Dennis' guardian, appeals from the entry of summary judgment in favor of State Farm Mutual Automobile Insurance Company (State Farm) claiming the trial court erred when it determined State Farm's insurance contract with Dennis did not cover expenses incurred after the contract had terminated.

We reverse.

FACTS

The facts most favorable to the trial court's judgment reveal that Dennis purchased a health insurance policy from State Farm effective October 7, 1983. Dennis also purchased a catastrophic medical expense rider to supplement the policy's benefits. On November 11, 1983, while the policy was in force, Dennis was involved in an automobile accident in which he suffered severe injury. Dennis became comatose and remained in that condition until his death, almost five years later in August, 1988.

During Dennis' hospitalization, State Farm paid for all of the covered medical expenses Dennis incurred until May 1, 1986, the day Dennis became eligible for Medicare. The insurance policy provided that coverage would terminate the day before Dennis became eligible for Medicare.

Mote, as Dennis' guardian, brought suit in June, 1987, against State Farm seeking payment for the medical expenses incurred after the policy terminated. Both Mote and State Farm moved for summary judgment, and the trial court granted State Farm's motion on January 30, 1989.

ISSUES

1. Whether the insurance policy's termination clause violated state and federal law?

2. Whether State Farm was liable for the expenses incurred after the insurance policy had terminated?

DECISION

ISSUE ONE--Did the termination of the insurance policy because Dennis was eligible for Medicare violate state and federal law?

PARTIES' CONTENTIONS--Mote argues that State Farm could not terminate Dennis' insurance policy due to his eligibility for Medicare because state and federal law prohibits such termination. State Farm responds that the laws upon which Dennis relies are wholly inapplicable to the policy and the termination was proper.

CONCLUSION--The termination of the policy was proper.

Dennis' insurance policy with State Farm provided: "Coverage under this policy shall terminate with respect to any Covered Person on the day preceding the date such person becomes eligible for any benefit provided by Medicare and the premium will be adjusted accordingly on the billing date preceeding such eligibility." Record at 144.

Mote claims that Ind.Code 12-1-7-24.4 (1988) prohibits an insurance company from terminating an insurance policy because an individual is eligible for Medicare. IC 12-1-7-24.4 provides: "Any clause of an insurance contract, plan, or agreement administered by an insurer is void if it limits or excludes payments to an individual who is eligible for medical assistance."

This statute, however, relates to the administration of Medicaid, not Medicare. The "medical assistance" referred to in the statute is Medicaid. See State, Department of Public Welfare v. Bair (1984), Ind.App., 463 N.E.2d 1388, trans. denied; 470 IAC 5-1-1 (which provides "Medicaid" and "medical assistance" will be used interchangeably).

Medicaid is a jointly funded federal-state program established under Title XIX of the Social Security Act, Sec. 1901, et seq., 42 U.S.C. Sec. 1396, et seq., (1982) under which program health care providers are entitled to reimbursement for medical services rendered to eligible recipients. Bair, supra.

Medicare, on the other hand, is a federally funded health insurance program established under Title XVIII of the Social Security Act, 42 U.S.C. Sec. 1395 et seq. (1982) Daviess County Hosp. v. Bowen (7th Cir.1987), 811 F.2d 338.

The insurance policy clearly states that Medicare, as used in the policy, "means Federal Health Insurance for the Aged, as provided under Title XVIII of the Social Security Act as enacted by the Social Security Amendments of 1965 as now constituted or hereafter amended." Record at 139.

Therefore, IC 12-1-7-24.4 is inapplicable and irrelevant to the insurance policy provision which provided that coverage would terminate when the individual insured became eligible for Medicare.

Mote next asserts that 42 U.S.C. Sec. 1395y(b) prohibits State Farm from terminating coverage because Dennis became eligible for Medicare. However, Sec. 1395y(b) merely excludes from payment by Medicare those expenses that are already paid by other insurance. It in no way prohibits insurance companies from terminating policies due to the insured's eligibility for Medicare, and it cannot reasonably be considered as such a prohibition. Mote cites no authority for this proposition nor bolsters it with any cogent argument.

ISSUE TWO--Was State Farm liable for the expenses incurred after the termination of the policy?

PARTIES' CONTENTIONS--Mote contends that the policy insured Dennis against accidental injury and therefore State Farm is liable for all the expenses that arise from the accident which occurred while the policy was in force. Mote therefore asserts the trial court erred when it entered summary judgment for State Farm and that the trial court should have granted her motion for summary judgment. State Farm replies that the insurance policy insures Dennis against incurring expenses and therefore it is not liable for any expense that was not incurred prior to the termination of the policy. State Farm claims the trial court properly granted summary judgment in its favor.

CONCLUSION--The trial court erred when it entered summary judgment for State Farm.

The critical inquiry is what triggers State Farm's liability. Is it the accidental injury or the expenses arising from that injury? While there are no Indiana cases from which we can draw to reach our conclusion, numerous jurisdictions have pondered the same question, so we look to them.

It seems to be established that when an insurance policy insures against accidental injury, the insured's right to receive insurance benefits is considered "vested" and termination of the insurance policy does not affect the insurer's liability or its duty to pay benefits thereafter pursuant to the policy. Houghton v. American Guaranty Life Ins. Co. (3rd Cir.1982), 692 F.2d 289; Sparks v. Republic Nat'l Life Ins. Co. (1982), 132 Ariz. 529, 647 P.2d 1127; Intercoast Mutual Life Ins. Co. v. Andersen (1959), 75 Nev. 457, 345 P.2d 762; Erwin v. United Benefit Life Ins. Co. (1962), 70 N.M. 138, 371 P.2d 791; Myers v. Kitsap Physicians Service (1970), 78 Wash.2d 286, 474 P.2d 109; Annotation, Insurers Liability Under Accident Policy Terminated After Accidental Injury But Prior To Completion Of Medical Treatment, Hospitalization, and The Like, 75 A.L.R.2d 876 (1961).

Equally well-established is the rule that when a policy insures against the "incurrence of expenses," the benefits cease when the policy is terminated and the insurer is not responsible for expenses arising after the termination. Blue Cross v. Dysart (1976), Fla.App., 340 So.2d 970; Cohen v. Northwestern Nat'l Life Ins. Co. (1970), 124 Ill.App.2d 15, 259 N.E.2d 865; Daly v. Golden Rule Life Ins. Co. (1968), 95 Ill.App.2d 138, 237 N.E.2d 790; Bartulis v. Metropolitan Life Ins. Co. (1966), 72 Ill.App.2d 267, 218 N.E.2d 225; Auto-Owners Ins. Co. v. Blue Cross & Blue Shield (1984), 132 Mich.App. 800, 349 N.W.2d 238; Jefferson v. State Farm Ins. Co. (1988), 380 Pa.Super. 167, 551 A.2d 283; Wulffenstein v. Deseret Mutual Benefit Ass'n. (1980), Utah, 611 P.2d 360; Annotation, Elimination of Particular Coverage, or Termination of Health, Hospitalization, or Medical Care Insurance Policy as Affecting Insurer's Liability for Insured's Continuing Hospitalization or Medical Expenses Relating to Previously Covered Illness, 66 A.L.R.3rd 1205 (1975).

In all of these cases, attention is riveted on the construction of the language used in the policy. If the language used unambiguously hinges liability on incurring of expenses, then the courts have refused to extend the insurer's liability to expenses incurred after the policy terminated. Dysart, supra; Cohen, supra; Daly, supra; Bartulis, supra; Auto-Owners, supra; Jefferson, supra; Wulffenstein, supra.

If the courts have found the policy language to be ambiguous, the policy was determined to insure against accidents and the insurer was held liable for all expenses arising from an accident, including those incurred after the insurance policy had been terminated. Houghton, supra; Sparks, supra; Intercoast, supra; Erwin, supra. So the presence of ambiguity, or the lack of it, is crucial.

It has been said that ambiguity in an insurance contract exists only when it is susceptible to more than one interpretation and reasonably intelligent people would honestly differ as to its meaning; an ambiguity does not exist simply because the parties' interpretations of the contract differ. Eli Lily & Co. v. Home Insurance Co. (1985), Ind., 482 N.E.2d 467, cert. denied 479 U.S. 1060, 107 S.Ct. 940, 93 L.Ed.2d 990; Landis v. American Interinsurance Exchange (1989), Ind.App., 542 N.E.2d 1351. It is also said that the language of an insurance contract should be given its plain and ordinary meaning, and if it is ambiguous the policy's language will be strictly construed against the insurer and liberally construed in favor of the insured. Miller v. Dilts (1984), Ind., 463 N.E.2d 257; Meridian Mutual Insurance Co. v. Cox (1989), Ind.App., 541...