Reserve Life Ins. Co. v. La Follette

• Decision Date: 27 July 1982
• Docket Number: No. 81-1467,81-1467
• Citation: 108 Wis.2d 637,323 N.W.2d 173
• Parties: RESERVE LIFE INSURANCE COMPANY, Plaintiff-Appellant, v. Bronson LA FOLLETTE, as Attorney General, and Harold R. Wilde, as Insurance Commissioner, State of Wisconsin, Defendants-Respondents, Wisconsin Chiropractic Association, a Wisconsin non-profit, non-stock corporation, and Sigurd C. Syverud, Intervenors-Defendants-Respondents.
• Court: Wisconsin Court of Appeals

Page 173

323 N.W.2d 173

108 Wis.2d 637

RESERVE LIFE INSURANCE COMPANY, Plaintiff-Appellant, v. Bronson LA FOLLETTE, as Attorney General, and Harold R Wilde, as Insurance Commissioner, State of Wisconsin, Defendants-Respondents Wisconsin Chiropractic Association, a Wisconsin non-profit non-stock corporation, and Sigurd C. Syverud Intervenors-Defendants-Respondents.

No. 81-1467.

Court of Appeals of Wisconsin.

Submitted on Briefs March 2, 1982.

Opinion Released July 27, 1982.

Opinion Filed July 27, 1982.

Review Denied. ^*

Conrad H. Johnson and Schlotthauer & Johnson, Madison, for plaintiff-appellant.

Bronson C. La Follette, Atty. Gen., and Robert D. Repasky, Asst. Atty. Gen., for defendants-respondents.

Robert Horowitz and Gary M. Young and Stafford, Rosenbaum, Rieser & Hansen, Madison, for intervenor-defendant-respondent Wisconsin Chiropractic Ass'n.

Eugene O. Gehl and Barbara J. Swan and Brynelson, Herrick, Gehl & Bucaida, Madison, for intervenor-defendant-respondent Sigurd C. Syverud.

Before GARTZKE, P. J., and BABLITCH and DYKMAN, JJ.

GARTZKE, Presiding Judge.

The ultimate issue before us is whether sec. 207.04(1)(m), Stats.1973, unconstitutionally impairs health insurance policies issued by appellant Reserve Life Insurance Company. Our analysis of the secondary issues differs from the trial court's. We nevertheless agree that an unconstitutional impairment has not occurred. We therefore affirm the judgment dismissing the complaint.

Section 207.04(1)(m), Stats.1973, provides that the following is an unfair method of competition and an unfair or deceptive act or practice:

Refusing to offer inclusion of coverage for services of chiropractors or physicians lawfully rendered in this state when writing a policy providing accident and health benefits for treatment encompassing such services, if the policy provides payment for services performed by a physician or chiropractor, all at the option of the assured ....

Section 207.04(1)(m), Stats.1973, is applicable to all policies issued or renewed after June 16, 1974. Sec. 2, ch. 269, Laws of 1973. That date has been carried forward in subsequent versions of the statute. ¹ Section 628.33, Stats.1979-80, provides in material part:

[It is unfair] to refuse, with respect to all insurance policies issued or renewed after June 16, 1974, to offer inclusion of coverage for services of chiropractors or physicians ... when writing a policy providing accident and health benefits for treatment encompassing such services, if the policy provides payment for services performed by such a physician or chiropractor, all at the option of the assured ....

Certain uncontroverted facts have been established by motions of the parties for summary judgment. Reserve's health policies have a guaranteed renewable clause. ² After June 16, 1974 Reserve renewed over 800 policies it had issued in Wisconsin. It renewed the policies without offering coverage for services of chiropractors, even though its policies provided payment for services performed by a doctor of medicine or osteopathy. Reserve subsequently brought this action for judgment declaring sec. 207.04(1)(m), Stats.1973, unconstitutional as applied to its policies issued in Wisconsin before June 16, 1974. Reserve relies on the contract clauses of the United States Constitution and of the Wisconsin Constitution. ³

Before reviewing the constitutional matters, we examine the contention that this action is moot. ⁴ Respondents assert that no claims exist against Reserve for chiropractic services based on Reserve's policies issued before the effective date of sec. 207.04(1)(m), Stats.1973. A case is moot "when a determination is sought upon some matter which, when rendered, cannot have any practical legal effect upon a then existing controversy." Milwaukee Police Asso. v. Milwaukee, 92 Wis.2d 175, 183, 285 N.W.2d 133, 137 (1979). As a general rule, moot issues will not be considered. Milwaukee Professional Firefighters Local 215 v. Milwaukee, 78 Wis.2d 1, 15, 253 N.W.2d 481, 488 (1977). We conclude this action may be maintained whether or not claims are outstanding.

Potential defendants may test the constitutional validity of a statute by an action for declaratory judgment. State ex rel. Lynch v. Conta, 71 Wis.2d 662, 674, 239 N.W.2d 313, 325 (1976). The insurance commissioner is charged by sec. 601.41(1), Stats., with a duty to enforce chs. 600 to 646, Stats. Section 628.33, Stats.1979-80, is the successor to sec. 207.04(1)(m), Stats.1973. The commissioner is empowered to commence an action for forfeitures against an insurer who fails to comply with orders issued under sec. 601.41(4). Sec. 601.64(2) and (3). Reserve need not wait for the commissioner to proceed against it before seeking declaratory relief. Borden Co. v. McDowell, 8 Wis.2d 246, 255-56, 99 N.W.2d 146, 152 (1959). Compare Loy v. Bunderson, 107 Wis.2d 400, 415, 320 N.W.2d 175, 184 (1982) (declaratory judgment available to settle existing or incipient controversy).

In any event, exceptions exist as to the general rule on mootness, one of which is that the constitutionality of a statute will be decided in an action in which the other issues have become moot. Milwaukee Professional Firefighters, 78 Wis.2d at 15, 253 N.W.2d at 488; Doering v. Swoboda, 214 Wis. 481, 488, 253 N.W. 657, 659 (1934). The constitutionality of this statute has not previously been considered. We proceed to the merits of the constitutional issue.

The contract clause of the federal constitution, art. I, sec. 10, clause 1, provides that no state shall pass any "law impairing the obligation of contracts." Article I, sec. 12 of the Wisconsin Constitution prohibits the passage of "any law impairing the obligation of contracts."

A successful challenge to state action on grounds that it has impaired the obligation of a contract must meet the following criteria: the legislation must impair an existing contractual relationship; the impairment must be substantial; and if the impairment is substantial, the purpose of the state legislation must be examined to determine whether the impairment is justified. Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244-45, 98 S.Ct. 2716, 2722-23, 57 L.Ed.2d 727 (1978). The burden is on Reserve to show beyond a reasonable doubt that the challenged statute is unconstitutional. Wis. Bingo Supply & Equipment Co. v. Bingo Control Bd., 88 Wis.2d 293, 301, 276 N.W.2d 716, 719 (1979).

If the post-June 16, 1974 renewals resulted in continuation of Reserve's policies, rather than new or independent contracts, then Reserve has satisfied half of the first Allied Structural Steel criterion for an unconstitutional impairment: that sec. 207.04(1)(m), Stats.1973, applies to existing contractual relationships.

"Whether the renewal of a policy constitutes a new and independent contract or continuation of the original contract primarily depends upon the intention of the parties as ascertained from the instrument itself." 17 Couch on Insurance 2d sec. 68.39 at 681 (1967) (footnotes omitted). When construing an insurance contract to give effect to the intentions of the parties, an objective test is applied. Bertler v. Employers Insurance of Wausau, 86 Wis.2d 13, 17, 271 N.W.2d 603, 605 (1978). The objective test is described in Cieslewicz v. Mutual Service Casualty Ins. Co., 84 Wis.2d 91, 97-98, 267 N.W.2d 595, 598 (1978), as follows:

[A]n insurance policy should be construed as it would be understood by a reasonable person in the position of the insured. Garriguenc v. Love, 67 Wis.2d 130, [134-35], 226 N.W.2d 414, (1975). The language of the policy is to be given the common and ordinary meaning it would have in the mind of a lay person. Lawver v. Bolling, 71 Wis.2d 408, , 238 N.W.2d 514, (1976)....

Construction of a contract is ordinarily a question of law. Schlosser v. Allis-Chalmers Corp., 86 Wis.2d 226, 244, 271 N.W.2d 879, 887 (1978). Unless a contract is ambiguous, requiring reference to extrinsic facts, its construction is solely a question of law. Jones v. Jenkins, 88 Wis.2d 712, 722, 277 N.W.2d 815, 819 (1979); RTE Corp. v. Maryland Casualty Co., 74 Wis.2d 614, 621, 247 N.W.2d 171, 175 (1976). Because neither party offered extrinsic facts to aid the trial court in its construction of the policy provisions, a question of law is presented which may be redetermined independently by this court on appeal. Id.

The parties have provided numerous decisions by appellate courts in other states. We base our conclusion on the policy provisions before us. Accordingly, we need not review the welter of decisions from other jurisdictions determining whether renewals under other circumstances resulted in new insurance contracts.

We conclude that renewal of each health policy results in a continuation rather than a new and independent contract. This conclusion follows from the policy provision that the insured "shall have the right and option to continue this policy in force, subject to all provisions, conditions and limitations herein contained ... by the [premium] payment ...." (Emphasis added.) The common and ordinary meaning of "continuous" allows no other conclusion.

The trial court took a different approach. Taking the view that, regardless whether renewal of a policy constitutes a new contract for all purposes, the court concluded that renewal should constitute a new contract for the purpose of incorporating new statutes. The court found a new contract particularly appropriate because the original policy was expressly made subject to existing statutory provisions. The court found support for its holding in Illinois decisions, citing Dickirson v. Pacific Mutual Life Ins. Co., 319 Ill. 311, 150 N.E. 256 (1926); Thieme v. Union Labor Life Ins. Co., 12 Ill.App.2d 110, 138 N.E.2d 857 (1956).

According to the Thieme court, Illinois precedents have established "that a contract of annually renewable insurance forms a new contract at each renewal for the purpose of...