North Miami General Hosp. v. Central Nat. Life Ins. Co.

• Decision Date: 28 September 1982
• Docket Number: No. 81-1145,81-1145
• Citation: 419 So.2d 800
• Parties: NORTH MIAMI GENERAL HOSPITAL, Appellant, v. CENTRAL NATIONAL LIFE INSURANCE COMPANY, Appellee.
• Court: Florida District Court of Appeals

Page 800

419 So.2d 800

NORTH MIAMI GENERAL HOSPITAL, Appellant, v. CENTRAL NATIONAL LIFE INSURANCE COMPANY, Appellee.

No. 81-1145.

District Court of Appeal of Florida,

Third District.

Sept. 28, 1982.

Lawrence & Daniels and Adam Lawrence, Miami, for appellant.

Shutts & Bowen and Barbara E. Vicevich and Karen H. Curtis, Miami, for appellee.

Before HUBBART, C. J., and SCHWARTZ and NESBITT, JJ.

NESBITT, Judge.

North Miami General Hospital (Hospital) brought an action for the value of hospital services rendered to Clifford Teachman against Teachman and his major medical insurer, Central National Life Insurance Company (Insurer). The Hospital won a final judgment against Teachman, but the Insurer obtained a final summary judgment relieving it from liability. The Hospital appeals the final summary judgment entered in favor of the Insurer.

On March 1, 1976, the Insurer issued to Teachman a policy insuring against sickness when "such sickness ... first manifests itself while a covered person is insured ...." The policy also contained a statutorily-required ¹ "incontestability" provision as follows:

TIME LIMIT ON CERTAIN DEFENSES:

(a) After two years from the date a person becomes covered under this policy no misstatements, except fraudulent misstatements, made by the applicant in the application for such policy shall be used to void the policy or to deny a claim for loss incurred.

(b) No claim for loss incurred commencing after two years from the date a person becomes covered under this policy shall be reduced or denied on the ground that a disease or physical condition not excluded from coverage by name or specific description effective on the date of loss had existed prior to the effective date of coverage of this policy.

As early as 1972, Teachman was diagnosed as having a humpback condition known as kyphosis. However, Teachman did not reveal this fact on his application for insurance, allegedly because he had never been informed of the 1972 diagnosis. In March of 1977, Teachman entered the Hospital to undergo corrective surgery for his condition. The Hospital sought payment for the expenses in treating Teachman on this occasion. The Insurer denied it on the ground that the kyphosis had manifested itself prior to the issuance of the policy and therefore was excluded from coverage under the "first-manifest" clause quoted above.

The Hospital argues here that Teachman filed his claim after the two-year period for contesting coverage for pre-existing illness and thus that the Insurer cannot deny coverage in the face of the incontestability clause. We disagree.

The key language for determining whether an illness falls within the two-year contestability period or within the incontestability period arising thereafter is that "[n]o claim for loss incurred commencing after two years" from the date of coverage of the policy may be contested by the insurance company on the ground that the illness pre-existed that date. Presented with a nearly identical provision of a disability policy, the court, in Mutual Life Insurance Company of New York v. Hayden, 87 Misc.2d 1039, 386 N.Y.S.2d 978 (Sup.Ct.1976), aff'd, 60 A.D.2d 823, 401 N.Y.S.2d 992, motion for leave to appeal dismissed, 44 N.Y.2d 838, 406 N.Y.S.2d 758, 378 N.E.2d 121 (1978), held that the date a claim is filed is irrelevant to a determination of the applicability of the incontestability clause. ² The important date is when the loss is incurred. Here, the loss was incurred when Teachman began receiving the treatment for which benefits were sought. This occurred well within the two-year contestable period.

Were we to follow the Hospital's interpretation and place emphasis on the date the claim is filed, the insured could always avoid contestability merely by waiting until the two-year period had expired before filing a claim. We cannot adopt an interpretation which would render the legislatively-created two-year provision ineffective and purposeless. Dickinson v. Davis, 224 So.2d 262, 264 (Fla.1969); City of Indian Harbour Beach v. City of Melbourne, 265 So.2d 422, 424 (Fla. 4th DCA 1972); see Boalt v. City Commissioners, City of Miami, 408 So.2d 1080, 1083 (Fla. 3d DCA 1982).

Consequently, we hold that the incontestability clause by its own terms does not apply in this case because the loss resulting from a pre-existing condition commenced within two years of the date of the policy. Keaten v. Paul Revere Life Insurance Company, 648 F.2d 299, 304 (5th Cir. 1981), (Roney, J. concurring). ³ The Hospital does not argue that Teachman's illness did not manifest itself prior to issuance of his policy. On the contrary, it admits that Teachman's condition was diagnosed as kyphosis in 1972, four years previously. Thus, the policy's definition of sickness which excludes pre-manifesting conditions bars Teachman, and therefore, the Hospital, from recovering under the policy.

Alternatively, the Hospital maintains that the Insurer has waived or is estopped to assert the limitations on coverage in its policy and that the Insurer owed a duty to the Hospital to exercise due care in...