Opinion
Case No. 3:02CV7245
February 12, 2003
ORDER
This is a claim for benefits under a long-term care insurance contract. Plaintiffs claim defendant insurance company violated Ohio Rev. Code § 3923.44 and Ohio Administrative Code § 3901-4-04. This court has jurisdiction pursuant to 28 U.S.C. § 1332. Pending are cross motions for summary judgment. For the following reasons, plaintiffs' motion shall be denied, and defendant's motion shall be granted.
BACKGROUND
On October 13, 1993, plaintiff Agnes Walker completed an application for long-term care insurance with an agent from American Travellers Life Insurance Company. American Travellers later changed its name to Conseco Senior Health Insurance Company ("Conseco"). At the time of the application, Walker was 79 years old and living in a retirement community. Walker did not designate on the application a person — apart from herself — who would receive notice of a lapse or termination of the policy as a result of nonpayment of the annual premiums. Defendant accepted the application, and the policy became effective October 13, 1993.
In an affidavit attached to Conseco's motion for summary judgment, Erin Franklin, a Senior Manager of Conseco Senior Health Insurance Company, states that Conseco Senior Health Insurance Company — not Conseco Services, LLC — issued the policy to Walker. She further states that Conseco Services, LLC, was incorrectly named as the defendant. Because the parties have not moved the court to change party names, I will use the term "Conseco" to refer the company that issued the policy to Ms. Walker.
Walker made annual premium payments on the policy from 1993 through 1998. Payment was due by October 13 of each year. The total premium paid was $17,471.84.
In 1999, Walker failed to make the annual payment. Defendant sent Walker a premium reminder notice on September 4, 1999. When no payment was received by October 13, 1999, defendant sent lapse notifications on October 18, 1999, and November 4, 1999. Policy reinstatement offers were sent on December 4, 1999, and January 11, 2000. Because Walker failed to remit a premium payment to defendant, the policy terminated on October 13, 1999.
On or about December 1, 1999, Walker moved within her retirement community from a retirement apartment to Assisted Living. In January, 2001, Walker moved to a nursing home. According to Walker's nieces, Alice Puppos and Elaine Tello, Walker's financial records were in total disarray.
Puppos and Tello brought this suit on behalf of Walker for reinstatement of the long-term care policy and for payment of long-term care benefits. Plaintiffs argue that the defendant cannot be excused of its obligations under the policy — which included benefits for assisted living and nursing home care — when the defendant knew plaintiff was eighty-six years old and living alone in a retirement home. This knowledge, according to plaintiffs, required defendant to contact the management of the retirement home or a relative before terminating plaintiff's policy. By not notifying family or the retirement home management, the defendant, plaintiffs argue, violated Ohio law.
Pending are cross motions for summary judgment. For the following reasons, plaintiffs' motion is denied, and defendant's motion is granted.
STANDARD OF REVIEW
Summary judgment must be entered against a party who fails to make a showing sufficient to establish the existence of an element essential to that party case, and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which demonstrate the absence of a genuine issue of material fact. Id. at 323. The burden then shifts to the nonmoving party who must set forth specific facts showing that there is no genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (quoting Fed.R.Civ.P. 56(e)).
Once the burden of production shifts, the party opposing summary judgment cannot rest on its pleadings or merely reassert its previous allegations. It is insufficient imply [to] show that there is some metaphysical doubt as to the material facts. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, Rule 56(e) requires the nonmoving party to go beyond the [unverified] pleadings and present some type of evidentiary material in support of its position.Celotex, 477 U.S. at 324.
In deciding the motion for summary judgment, the evidence of the non-moving party will be believed as true, all doubts will be resolved against the moving party, all evidence will be construed in the light most favorable to the non-moving party, and all reasonable inferences will be drawn in the non-moving party favor. Eastman Kodak Co. v. Technical Servs., Inc., 504 U.S. 451, 456 (1992). Summary judgment shall be rendered only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue to any material fact and that the moving party is entitled to judgment as a mater of law. FED. R. CIV. P. 56(c).
DISCUSSION
Plaintiffs argue that Walker deserves continuing and past due benefits under the long-term care policy because defendant violated O.R.C. § 3923.44(I) and O.A.C. § 3904-4-04 when issuing Walker's long-term care policy. Plaintiffs additionally argue that equity requires the policy be reinstated and benefits paid. Defendant contends that cancellation of the policy was proper due to Walker's failure to pay the premium on October 13, 1999.
I.O.R.C. § 3923.44(I)
Section 3923.44(I) of the Ohio Revised Code provides:
An outline of coverage and a notice that consumer information is available from the department of insurance under section 3923.49 of the Revised Code shall be delivered to a prospective applicant for long-term care insurance at the time of the initial solicitation through means that prominently direct the attention of the prospective applicant to the outline of coverage, the purpose of the outline of coverage, and the notice. In the case of agent solicitations, the agent shall deliver the outline of coverage and notice prior to the presentation of an application or enrollment form.
Plaintiffs argue that there is no evidence defendant provided an outline of coverage to Walker before it presented her application for the policy to her. Specifically, plaintiffs state that "nothing in the application which is part of Exhibit "A" (The Policy), to the Affidavit of Erin Franklin which would indicate or suggest that any such outline was provided to the applicant by the agent before the application was presented." Pl.'s Br. at 6-7.
Plaintiffs' claim is based on the fact that the outline was not attached to Walker's application. Because the documents were not attached, plaintiffs assert that Walker was never presented with this information. This assumption, however, is unsubstantiated. Section 3923.44(I) does not require the application to indicate that the outline and notice were presented or that physical copies of the outline and notice be attached to the application.
Because plaintiffs have not provided any other evidence that the agent for Conseco did not present the requisite materials, this claim fails.
Defendant's motion for summary judgment is therefore granted as to this claim.
II. O.A.C. § 3901-4-04(I)
O.A.C. § 3901-4-04(I)(1) provides:
No individual long-term care policy or certificate shall be issued until the insurer has received from the applicant either: a written designation of at least one person, in addition to the applicant, who is to receive notice of lapse or termination of the policy or certificate for nonpayment of premium; or a written waiver dated and signed by the applicant electing not to designate additional persons to receive notice.
Section 3901-4-04(I)(3) provides:
No individual long-term care policy or certificate shall lapse or be terminated for nonpayment of premium unless the insurer, at least thirty days before the effective date of the lapse or termination, has given notice to the insured and to those persons designated pursuant to paragraph (I)(1), at the address provided by the insured for purposes of receiving notice of lapse or termination.
Plaintiffs argue that because Walker did not designate a third party for defendant to notify or complete a written waiver of this requirement when she completed her application in October, 1993, defendant violated this regulation by issuing her the long-term care policy. Accordingly, plaintiffs also argue defendant violated the regulation by not notifying a third party before they terminated the policy.
O.A.C. § 3901-4-04's effective date was January 1, 1994. The effective date of Walker's policy, however, is October 13, 1993. Defendant argues, therefore, that the requirements of § 3901-04-4 do not apply to Walker's policy.
Under Ohio law, a "statute is presumed to be prospective in its operation unless expressly made retrospective." O.R.C. § 1.48. Accordingly, where a statute is not expressly made retrospective it may operate prospectively only. Warren Cty. Bd. of Commrs. v. Lebanon, 43 Ohio St.3d 188, 190 (1989); see also Ross v. Farmers Ins. Group of Cos., 82 Ohio St.3d 281, 287 (1998) ("[T]he statutory law in effect at the time of entering into a contract of insurance controls the rights and duties of the contracting parties."). Because O.A.C. § 3901-4-04 is not made expressly retroactive, it operates prospectively only.
Notwithstanding this rule, plaintiffs assert three reasons why § 3901-4-04 is applicable to Walker's policy.
1.
Plaintiffs argue there is no indication in the evidence as to the date on which Walker's policy was "issued." According to plaintiffs, the policy has an effective date of October 13, 1993. The regulations, however, state that "no policy "shall be issued. . . ." Because the policy was effective the day Walker submitted her application — October 13, 1999 — plaintiffs argue that the issue date must have been some time thereafter — possibly after January 1, 1994, the effective date of the regulation. Because defendant has not provided an issuance date, plaintiffs claim the regulation should apply.
An effective date of October 13, 1993, however, is clearly stated in Walker's long-term care policy. Insurance coverage began that day. Therefore, because there is no evidence to the contrary, the date of issuance is synonymous with the effective date of the policy.
2.
Plaintiffs argue that the regulations apply to Walker's policy because each annual renewal was a new contract of insurance. The new contracts were therefore issued after the effective date of § 3901-4-04.
The Ohio Department of Insurance omitted reference to policy renewals in § 3901-4-04, prescribing only that the Act applies to policies "delivered or issued for delivery" in Ohio after January 1, 1994. § 3901-4-04(C).
Under Ohio law, however, "statutes pertaining to a policy of insurance and its coverage, which are enacted after the policy's issuance, are incorporated into any renewal of such policy if the renewal represents a new contract of insurance separate from the initial policy." Benson v. Rosler, 19 Ohio St.3d 41, 44 (1985). Thus, O.A.C. § 3901-04-4 can be incorporated into Walker's policy of insurance if a new contract or a renewal — representing a new contract of insurance — of the existing policy occurred.
Benson was overruled by the Supreme Court of Ohio in Wolfe v. Wolfe, 88 Ohio St.3d 246 (2000). The court's decision in Wolfe, however, did not overrule application of Benson's holding to insurance policies in general or long-term care policies in particular. Rather, the Supreme Court of Ohio abrogated its holding in Benson only to the extent the holding conflicted with O.R.C. § 3937.31(A), which expressly applies to "automobile insurance policies." See Wolfe, 88 Ohio St.3d at 252.
Generally, the renewal of an insurance policy represents a separate and distinct contract. Dixon v. Prof'l Staff Mgmt., 2002 Ohio App. LEXIS 4641, at * 13 (Ohio App. Sept. 3, 2002) (citing Francis v. McClandish 1999 Ohio Lexis 1862 (citing 2 Russ Segalla, Couch on Insurance 3d (1997)), § 29.33)); see also State ex rel. Preston v. Ferguson, 170 Ohio St. 450, 457 (1960) (holding the exercise of an option to "renew" a contract generally results in the creation of a new contract).
Whether a renewal represents a new contract or a continuation of a prior contract depends, however, on the language of the instrument itselfDixon, 2002 Ohio App. LEXIS 4641, at *14. As the Tenth District Ohio Court of Appeals stated:
The interpretation of an insurance contract involves a question of law. "The fundamental goal in insurance policy interpretation is to ascertain the intent of the parties from a reading of the contract in its entirety, and to settle upon a reasonable interpretation of any disputed terms in a manner calculated to give the agreement its intended effect." Burris v. Grange Mut. Cos., 46 Ohio St.3d 84, 89 (1989). When the language used is clear and unambiguous, a court must enforce the contract as written, giving words used in the contract their plain and ordinary meaning. A policy is not to be read as to extend coverage to absurd lengths or to be inconsistent with logic or the law.Id.
In Dixon, the court concluded that a renewal of a homeowner's policy of insurance constituted a new contract of insurance. Therefore, it was subject to the provisions of a statute passed after the effective date of the insurance policy In making this determination, the court considered three factors.
First, the contract specifically stated that the policy period began and ended at midnight on May 21 for twelve months. According to the court, "policies written for specific periods `may be construed as term policies rather than continuing policies.'" Id. at *15 (citing Benson, 19 Ohio St.3d at 44). Second, language in the policy specifying that it applied only to loss which occurred during the policy period demonstrated that the end of each policy period marked the end of the insurance contract. Id. Third, the insurer's option to renew or terminate the policy at the end of each policy period was indicative of separate contracts of insurance rather than a continuing policy. Id. at * 15-16;see also Gibbons-Barry v. Cincinnati Ins. Cos., 2002 Ohio App. LEXIS 4953 (Ohio App. Sept. 19, 2002) (finding that a renewal under a homeowner's insurance policy was a "new" contract because the policy had a specifically dated policy period and the insurer could elect not to renew at the end of the policy period).
Unlike the policies in Dixon or Gibbons-Barry, however, the language of Walker's policy shows that each renewal premium paid by Walker continued the coverage of her original policy and did not form a new contract. The defendants in this case could not cancel the policy as long as Walker paid her premiums. The policy was guaranteed renewable for Walker's lifetime; the insurer had no option to renew or terminate the policy at the end of the policy period. Additionally, from 1994-1998, defendant never issued a new policy, changed the benefits, or extinguished their original contractual obligation.
In fact, O.A.C. § 3901-04-4 provides: "No individual long-term care insurance policy delivered or issued for delivery in this state shall contain a renewal provision other than "guaranteed renewable" or "noncancelable."
As the Ohio Supreme Court concluded in Benson, "policies, when written for specific periods, may be considered term policies rather than continuing policies." 19 Ohio St.3d at 44 (emphasis added). This statement suggests that the court did not intend that every renewal must be considered a new contract. Rather, a renewal "may" be considered a new contract, depending on the specific terms of the policy.
In a similar case in Pennsylvania, that state's appellate court held that the plaintiff's annual renewals of her long-term care insurance policy did not constitute "new" contracts. A statute passed after the effective date of plaintiff's policy, therefore, was not applicable. The court reasoned:
the renewal of the policy in this case cannot be viewed as the formation of a new contract upon each renewal period, as the Insurers did not make a new offer every year as [plaintiff] claims. It is hornbook law that in order to form a contract, there must be an offer, an acceptance, and consideration. Here, the offer which established the terms of the contract was the Insurers' offer in 1989 to provide noncancelable insurance, at potentially increasing rates approved by the Commonwealth, for as long as [plaintiff] paid the premiums. The terms of the contract to which the Insurers were bound were set in 1989, and, absent a decision on [plaintiff's] part to cancel the policy (by declining to pay the premiums), the contract was intended to and did remain in force under those original terms.Yoder v. American Travellers Life Ins. Co., 2002 Pa. Super. LEXIS 3885, at * 10 (Pa.Super. Dec. 20, 2002) (citations omitted).
Likewise, the court in Haley v. AIG Life Ins. Co., 2002 U.S. Dist. LEXIS 1114 (D.N.D. Jan. 24, 2002), concluded that renewals to a long-term care insurance contract continued the original policy. As such, changes in the law did not affect the policy. The court reasoned:
Crucially, plaintiff's policy had a guaranteed renewal clause: The company had no right to refuse renewal so long as plaintiff paid her premiums. Further, the insurer could not unilaterally change the premium, unless it did so for all policies on a class-wide basis. Several courts have concluded that this sort of language indicates an intent to view subsequent renewals as continuations of the existing contract, rather than creations of a new one, which prevents application of statutes enacted after a contract's original effective date.Id. at *8 (citing Oates v. Equitable Assur. Soc. of the United States, 717 F. Supp. 449, 452 (S.D. Miss. 1988) (holding that "the monthly premium constituted a continuation of the original contract," so statutes and regulations enacted after the original issuance did not apply because the policy at issue was "guaranteed renewable during the lifetime of the insured."); Hudson v. Reserve Life Ins. Co., 141 S.E.2d 926 (S.C. 1965) (holding a guaranteed renewable policy contemplated continuous coverage with each renewal, so later-enacted statutes did not apply).
The policy behind these decisions is consistent with the circumstances behind long-term care insurance: "People purchase them to ensure coverage as they grow older and are more likely to need it. If a policy's premiums could be increased, or if it could simply be cancelled as the insured got older, it would be of little use. Viewing each renewal of the policy as a new contract, however, would give an insurer the right to do exactly that." Id. at * 10.
I likewise conclude that each premium payment constituted a continuation of Walker's original policy. Because there was no "new" contract, her insurance contract was therefore not subject to the requirements of O.A.C. § 3901-04-4.
3.
Plaintiffs' third argument of why § 3901-04-4 applies to Walker's policy is based on the statutory language of § 3901-04-4(I)(3). Plaintiffs argue the regulation should be read to prohibit lapses of policies after the effective date of the regulation — even if the policy was issued before the effective date of the regulation.
Section 3901-4-04(C), however, provides:
Except as otherwise specifically provided, this rule applies to all long-term care insurance policies and certificates delivered or issued for delivery in this state on or after the effective date hereof by insurers, fraternal benefit societies, health and medical care corporations, prepaid health plans, and health maintenance organizations.
(emphasis added).
According to the express language of the regulation, § 3901-04-4 only applies to policies "delivered or issued for delivery . . . after the effective date" of the regulation. Because Walker's policy was issued before January 1, 1994, none of the sections of 3901-04-4 are applicable to Walker's long-term care policy.
III. Unpaid Benefits
In the alternative to their statutory and regulatory arguments, plaintiffs argue that Walker's policy did not terminate until at least January 11, 2000 — the date Conseco sent the final overdue payment notice to Walker. Because Walker moved into an assisted living facility on December 1, 1999, and the policy provided for assisted living benefits, plaintiffs therefore argue that defendant owes Walker benefits for that time period.
Defendant argues that the lapse notices and reinstatement offers on December 4, 1999, and January 11, 2000, were merely offers to reinstate Walker's policy on payment of her premium — not an extension of the contract.
Walker's policy specifically provides that a "grace period of 31 days is granted for the payment of each premium due after the first premium, during which time the Policy continues in force." The contract goes on to state: "If the Renewal Premium is not paid before the Grace Period ends, this Policy will lapse. Later acceptance of the premium by us . . . will reinstate the Policy."
Under the terms of Walker's policy, nonpayment of a premium by the renewal date or thirty-one days thereafter, will terminate the policy. Because Walker did not pay before the renewal date or within the grace period, plaintiffs' motion is denied as to this claim.
IV. Equity
Plaintiffs' final argument is that equity requires that Walker's policy be reinstated under these circumstances. According to plaintiffs, defendant sought out people like Walker who were elderly and alone. Defendant further knew that it was not following O.R.C. § 3923.44(I) and O.A.C. § 3904-04-4. Finally, plaintiffs argue that defendant is asking this court to ignore the fact that Walker paid $17,466.84 in premiums without receiving anything in return.
Although Walker's situation is most unfortunate, Conseco did all that it was required to do to remind Walker about the premium being due and to avoid a lapse. Walker did not designate a third party for Conseco to notify of pending termination of the policy. Moreover, Conseco sent five notices to plaintiff so her policy would not lapse.
Plaintiffs' motion for summary judgment based on equity is therefore denied.
CONCLUSION
Because Walker failed to pay her annual premiums, defendant had the right to terminate Walker's insurance contract. It is, therefore,
ORDERED THAT
Plaintiffs' motion for summary judgment be, and hereby is, denied. Defendant's motion for summary judgment be, and hereby is, granted.