Robin v. Blue Cross Hosp. Service, Inc., 63671

• Court: United States State Supreme Court of Missouri
• Citation: 637 S.W.2d 695
• Docket Number: No. 63671,63671
• Parties: Linda K. ROBIN, Appellant, v. BLUE CROSS HOSPITAL SERVICE, INC., et al., Respondents.
• Decision Date: 31 August 1982

Page 695

637 S.W.2d 695 Linda K. ROBIN, Appellant,
v.
BLUE CROSS HOSPITAL SERVICE, INC., et al., Respondents. No. 63671. Supreme Court of Missouri,
En Banc. Aug. 31, 1982.

Page 696

Joseph F. Devereux, Jr., St. Louis, for appellant.

Martin J. Toft, Robert F. Schlafly, Ann E. Buckley, Henry J. Mohrman, St. Louis, for respondents.

HIGGINS, Judge.

This appeal was transferred by the Missouri Court of Appeals, Eastern District, by an opinion which affirmed summary judgment for respondents under the principle that the court had no power to rewrite an unambiguous insurance contract, because of recent Western District cases ¹ which have recognized the theory of reasonable expectation of the average insured and because of the general interest and importance of the case as applied to health service contracts. Mo. Const. art. V, § 10. In question is whether appellant's entitlement to benefits depends upon continued payment of required dues; and if so, whether such conditions may be overcome by a construction based upon a theory of reasonable expectations from a contract alleged to be a contract of adhesion. Affirmed.

Prior to October 31, 1977, Linda Robin was employed at Community Memorial Hospital in Farmington, Missouri, and was enrolled in group hospital service plans. The dues required in the plans were paid by the hospital. Ms. Robin was injured in an automobile accident in March, 1977. Because she was unable to return to work, her employment was terminated on October 31, 1977. The dues required by the health plan were discontinued the same day. Subsequently, Ms. Robin incurred additional medical expenses as a result of the same

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injuries. The insurer notified her of the option to convert to an individual membership by paying a specified premium in advance; she failed to pay this premium and her membership was terminated. Thereafter, the insurers, pursuant to the terms of the membership certificate, refused to pay expenses incurred after October 31, 1977.

Appellant contends the insurance contract involved is an adhesion contract and requests this court adopt the reasonable expectation rule of construction set out in Estrin Construction Co. v. Aetna Cas. & Surety Co., 612 S.W.2d at 413, and Spychalski v. MFA Life Ins. Co., 620 S.W.2d at 388. This rule provides the objective reasonable expectations of adherents and beneficiaries to insurance contracts will be honored even though a thorough study of the policy provisions would have negated these expectations. Spychalski, 620 S.W.2d at 396; Estrin, 612 S.W.2d at 420. The respondents contend construction of the contract based on an objective analysis of appellant's reasonable expectations is not appropriate in this case.

Appellant's argument is predicated upon the existence of an adhesion contract between herself and the insurers. An adhesion contract is a form contract created by the stronger of the contracting parties. It is offered on a "take this or nothing" basis. See Estrin, 612 S.W.2d at 418 n. 3. Consequently, the terms of the contract are imposed upon the weaker party who has no choice but to conform. 3 Corbin on Contracts, § 559 (1960). These terms unexpectedly or unconscionably limit the obligations and liability of the drafting party. See Corbin on Contracts, § 559 (Kaufman Supp. 1980). Because of these circumstances, some courts look past the wording of the contract and consider the entire transaction in order to effectuate the reasonable expectations of the parties. 3 Corbin on Contracts, §§ 534-542 (1960); Restatement (Second) of Contracts, §§ 226-227 (Tentative Draft 1973).

I.

The contract involved in this case resembles an adhesion contract only in that it was offered to the appellant, not by the insurer who drafted the contract, but by her employer, on a "take this or nothing" basis. It lacks the oppressive features of adhesion contracts. This contract was a product of negotiation between two parties, Community Memorial Hospital, the employer, and Blue Cross Hospital Services, Inc., its insurer. Neither party can be characterized as "the stronger party." Several different group health plans were offered by BCHS; Community Memorial was not faced with a "take this or nothing" situation. Nor is there evidence that Community Memorial was forced to deal with BCHS; Community Memorial and BCHS were on equal footing. Appellant's absence from the bargaining with BCHS does not justify application of the...