Sanders v. Oregon Pacific States Ins. Co.

• Decision Date: 29 October 1992
• Citation: 314 Or. 521,840 P.2d 87
• Parties: Randall E. SANDERS, Petitioner on Review, v. OREGON PACIFIC STATES INSURANCE COMPANY, Respondent on Review. CC 89-08-32835; CA A65627; SC S38847.
• Court: Oregon Supreme Court

Page 87

840 P.2d 87

314 Or. 521

Randall E. SANDERS, Petitioner on Review, v. OREGON PACIFIC STATES INSURANCE COMPANY, Respondent on Review.

CC 89-08-32835; CA A65627; SC S38847.

Supreme Court of Oregon,

In Banc.

Argued and Submitted Sept. 1, 1992.

Decided Oct. 29, 1992.

Roland W. Johnson, of Kirby, Johnson & Chrisman, Enterprise, argued the cause for petitioner on review and filed the petition.

I. Franklin Hunsaker, of Bullivant, Houser, Bailey, Pendergrass & Hoffman, Portland, argued the cause for respondent on review. With him on the response were Chrys A. Martin and Lori R. Metz.

GRABER, Justice.

ORS 743.333 provides for the conversion of an employee's group life insurance coverage to individual coverage after the termination of the qualifying employment:

"A group life insurance policy shall contain a provision that if the insurance, or any portion of it, on a person covered under the policy ceases because of termination of employment or of membership in the class or classes eligible for coverage under the policy, such person shall be entitled to have issued by the insurer, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits, provided application for the individual policy shall be made, and the first premium paid to the insurer, within 31 days after such termination * * *."

Plaintiff, the beneficiary of an insured decedent who died within 31 days after the termination of her employment, brought an action against defendant insurance company to compel payment of accidental death benefits. The trial court held that ORS 743.333 required payment of those benefits. The Court of Appeals reversed, holding that the right of conversion created by that statute does not include a right to convert accidental death benefits. Sanders v. Oregon Pacific States Ins. Co., 110 Or.App. 179, 821 P.2d 1119 (1991). We allowed review to answer the question of statutory interpretation raised by the parties. We affirm the decision of the Court of Appeals.

The material facts are stipulated. ¹ Plaintiff's daughter was a full-time employee of Albany General Hospital. She was insured under a group life insurance policy issued by defendant for employees of that hospital. The policy included a term life benefit of $10,000 and an additional benefit of $10,000, payable in the event of accidental death. As required by ORS 743.333, the insurance contract provided a right of conversion of the group policy to an individual life insurance policy within 31 days of termination of the insured's eligibility for group coverage.

Plaintiff's daughter left her full-time employment with Albany General Hospital on April 1, 1989. Twelve days later she was killed in an automobile accident. Plaintiff, her designated beneficiary, made a claim for benefits under the contract. ² Defendant paid the term life benefit of $10,000 but refused to pay the accidental death benefit. Plaintiff then brought this action to recover the accidental death benefit.

The trial court found that the clause in the group insurance contract, providing for the conversion of life insurance, was ambiguous. Relying on the broad definition of "life insurance" in ORS 731.170, ³ the court interpreted the contract to provide for the conversion of accidental death benefits. The court entered judgment for plaintiff, and defendant appealed. The Court of Appeals reversed, concluding that the insurance contract was not ambiguous and holding that neither the contract nor the relevant statutes required the payment of accidental death benefits. Sanders v. Oregon Pacific States Ins. Co., supra, 110 Or.App. at 183-84, 821 P.2d 1119.

We first consider plaintiff's argument that the insurance contract is ambiguous and that it should, therefore, be construed in favor of the insured to provide accidental death benefits. The contract of insurance includes these definitions:

" 'Conversion'--the insured may exchange his rights under this policy for an individual policy. This only applies to: 1) term life insurance; or 2) dependent's life insurance.

" 'Coverage'--all the terms and provisions appearing under one of the following captions of this policy, if provided: 1) Term Life Insurance; or 2) Accidental Death and Dismemberment; or 3) Dependents' Life Insurance; or 4) Short Term Disability Insurance; or 5) other benefit riders." (Emphasis added.)

The terms and provisions appearing under" the caption "COVERAGE 1--Term Life Insurance" (emphasis added) include the following:

"CONVERSION

"The insured may convert all or part of the insurance under this coverage to an individual life policy without evidence of insurability[.]

" * * * * *

"The new policy may be on any plan of life insurance * * * :

" * * * * *

"2. without disability or other supplemental benefits." (Emphasis added.)

The terms and provisions appearing under the separate caption "Coverage 2--Accidental Death, Dismemberment and Loss of Sight" do not contain any reference to conversion of that coverage to an individual policy.

The contract is clear. It does not permit conversion of Coverage 2, accidental death benefits, to an individual accidental death policy on termination of an insured employee's employment. It provides (as material here) for conversion only of Coverage 1, term life insurance. ⁴

Plaintiff next contends that the insurance contract is ambiguous because of an "AMENDATORY RIDER," which states:

"This policy is amended to comply with the statutes of the governing jurisdiction:

" * * * * *

"This policy is governed by the laws of the state where this policy is delivered." ⁵

Plaintiff argues that ORS 743.333, which the rider incorporates by reference, is ambiguous and that the incorporated ambiguity makes the contract--which otherwise is clear in not providing for conversion of accidental death benefits--ambiguous. We need not agree or disagree with plaintiff's argument with respect to the effect of incorporating by reference an ambiguous statute in an otherwise unambiguous contract, because we hold that ORS 743.333 itself is clear.

ORS 743.333 provides that an insured person whose coverage under a group life insurance policy ceases because of termination of employment is entitled for 31 days to have issued "an individual policy of life insurance without disability or other supplementary benefits." (Emphasis added.) The statute also states that "[t]he individual policy shall be in an amount not in excess of the amount of life insurance which ceases because of such termination." ORS 743.333(2). Plaintiff contends that the definition of "life insurance" found in ORS 731.170(1) applies to the use of that same phrase in ORS 743.333. Defendant counters that "life insurance" as used in ORS 743.333 has a narrower meaning than the one set out in ORS 731.170(1) and that accidental death benefits are "supplementary benefits" to which the conversion requirement of ORS 743.333 does not apply.

In interpreting a statute, our task is to discern the intent of the legislature. ORS 174.020; State ex rel Juv. Dept. v. Ashley, 312 Or. 169, 174, 818 P.2d 1270 (1991). We begin with the text and context of the statute. ORS 174.010; Porter v. Hill, 314 Or. 86, 91, 838 P.2d 45 (1992). Other provisions of the same statute are part of that context; where provisions of a statute appear to conflict, the court avoids such a conflict, whenever possible, by construing the provisions so as to give effect to each. ORS 174.010; see Porter v. Hill, supra, (illustrating principle); Kankkonen v. Hendrickson, 232 Or. 49, 67, 374 P.2d 393 (1962) (in construing a statute, effect should be given to every word, phrase, sentence, and section, if possible; where there is a conflict between provisions of the statute, it is the court's duty to try to harmonize them).

The definition section of the Insurance Code, ORS 731.052 to 731.194, defines, among other things, broad classes of insurance, such as home protection insurance, ORS 731.164, marine and transportation insurance, ORS 731.174, mortgage insurance, ORS 731.178, and property insurance, ORS 731.182. (ORS 731.150 notes that some insurance policies "may come within the definition of two or more classes of insurance.") Those definitions are intended primarily to designate and define classes of insurance for administrative purposes, such as the granting of certificates of authority to sell particular classes of insurance. See generally ORS 731.354 to 731.488 (establishing requirements and procedures for certification to sell specific classes of insurance). ORS 731.170, ⁶ the definition of "life insurance" on which plaintiff relies, acknowledges expressly that its broad terms do not apply to every other provision of the Insurance Code:

"For convenience, reference to 'life insurance' in the Insurance Code includes life insurance as defined in subsection (1) of this section * * *, except if * * * the context requires, or the Insurance Code provides, otherwise." ORS 731.170(2) (emphasis added).

For the reasons that follow, we conclude that "the context requires" that a definition of "life insurance" narrower than the one provided in ORS 731.170 apply to ORS 743.333. ORS 743.303 to 743.358 establish requirements and procedures for the issuance of "group life insurance." See, e.g., ORS 743.312 (providing a grace period for the payment of premiums for group life insurance); ORS 743.324 (providing for equitable adjustment of premiums or benefits where age of insured person has been misstated). Unlike the other provisions relating to the issuance of group life insurance found in ORS 743.303 to 743.358, the conversion provision differentiates expressly between the "life insurance" portion of the group policy, on the one hand, and "disability or other supplementary benefits," on the other hand. ORS 743.333. The privilege to convert is required only with respect to the former. The broad definition of "life insurance" found in ORS 731.170(...