Blue Cross contends it had a right under the terms of its policy to cancel the contract, it was not required under the terms of the contract to pay for medical services rendered to Breland after the date of cancellation and the district court committed error by ordering it to do so. The district court relied on Cataldie v. Louisiana Health Service and Indemnity Company, 433 So.2d 367 (La.App. 3rd Cir. 1983) and held "an insuror [sic] may not arbitrarily and without providing just cause terminate a health insurance policy and refuse to pay for medical expenses thereafter incurred by a person covered by such policy when the services are for a continuing illness for which the insuror [sic] had been previously paying benefits up to the time of the termination of the policy." An insurance policy is a contract between the insured and the insurer and has the effect of law between the parties. La.C.C. art. 1901; Lambert v. Mutual Life Insurance Company of New York, 431 So.2d 23 (La.App. 1st Cir. 1983), writ denied, 438 So.2d 571 (La. 1983). Courts are bound to give legal effect to the terms of an insurance policy according to the true intent of the parties, and that intent is to be determined from the words of the contract when they are clear and explicit and lead to no absurd consequences.
As an Erie court, we sit as a Louisiana court. As such, we find dispositive the opinions in Cataldie v. Louisiana Health Service Indem. Co., 433 So.2d 367 (La.App. 1983), aff'd, 456 So.2d 1373 (1984), and Cabibi v. Louisiana Health Service Indem. Co., 465 So.2d 56 (La.App. 1985). Those decisions require that we reverse and remand.
The district court rendered judgment in favor of Cataldie and Blue Cross appealed. The court of appeal amended in part and affirmed, 433 So.2d 367 (1983), holding that after Cataldie's daughter contracted a continuing illness causing the incurrence of expenses covered by the health insurance policy, public policy would not permit Blue Cross to exercise its contractual rights to cancel or drastically modify the policy. We affirm.
In his reasons for judgment, the trial judge ruled that all of plaintiff's claims for medical expenses arising from the automobile accident were covered by defendant's policy, notwithstanding the fact that they were incurred after the lapse of the policy. In arriving at his decision, the trial judge relied on the cancellation provisions of LSA-R.S. 22:213(B)(7), as written at the time of the issuance of the policy and in effect when the medical expenses were incurred, and the cases of Cataldie v. La. Health Service Indem. Co., 433 So.2d 367 (La.App. 3 Cir. 1983), affirmed, 456 So.2d 1373 (La. 1984), and Cabibi v. Louisiana Health Service Indemnity Company, 465 So.2d 56 (La.App. 4 Cir. 1985) interpreting this statute.
In deciding the same case, the Third Circuit noted that "public policy is offended" when an insurer circumvents the terms of a policy by canceling coverage after an insured risk arises. Cataldie v. Louisiana Health Service and Indemnity Company, 433 So.2d 367, 371 (La.App. 3rd Cir. 1983). The Supreme Court of Mississippi has also held that public policy prevents the exercise of an insurer's right to cancel a policy after the onset of a condition or fatal illness.
b. any other person under the age of 21 who is in the care of any person named above. Courts must give legal effect to insurance policy provisions when they are clear and express since the policy constitutes a contract between the parties. Cataldie v. Louisiana Health Service and Indemnity Company, 433 So.2d 367 (La.App. 3rd Cir. 1983), affm'd 456 So.2d 1373 (La. 1984). Courts have no authority to change or alter its terms under the guise of interpretation. Remondet v. Reserve National Insurance Company, 433 So.2d 792 (La.App. 5th Cir. 1983) writ denied 441 So.2d 216 (La. 1983).
" Plaintiff cites language from Cataldie v. Louisiana Health Service Indemnity Company, 433 So.2d 367 (La.App. 3rd Cir. 1983) as support for her assertion that the doctrine of abuse of rights is applicable to the facts of this case. The facts of Cataldie differ greatly from those of the instant case and the holding of the court was expressly limited to situations in which an insurer arbitrarily and without just cause terminates a hospitalization policy.
In addition, insurers have the same rights as individuals to limit their liability and to impose whatever conditions they please upon their obligations under the policy in the absence of conflict with laws or public policy. Cataldie v. Louisiana Health Service Indemnity Company, 433 So.2d 367 (La.App. 3rd Cir. 1983), and Hall v. National Life Accident Insurance Company, 383 So.2d 74 (La.App. 3rd Cir. 1980). Here, the above quoted exclusion from coverage for benefits payable under Medicare is clear and unambiguous.
Where the contractual language is clear and unambiguous the insurance contract is enforced as written. Travelers Insurance Co. v. Blanchard, 431 So.2d 913 (La.App. 2d Cir. 1983). It is well settled that an insurer is entitled to contractually limit his liability in terms of degrees of exposure and maximum amounts so long as these contractual provisions are not in conflict with the law or public policy. Cataldie v. Louisiana Health Service and Indemnity Co., 433 So.2d 367 (La.App. 3d Cir. 1983), affirmed, 456 So.2d 1373 (La. 1984). The insurance policy in effect between State Farm and Bousegard provides that State Farm shall pay "on behalf of the insured all sums which the insured shall become legally obligated to pay as damages."
It has been held by our courts that when an insurer makes alterations to a health or medical policy which are so drastic that it would be unreasonable for the insured to keep the policy in force, the actions of that insurer in doing so constitute an effective termination of the policy by the insurer.Cataldie v. Louisiana Health Service and Indemnity Co., 433 So.2d 367,371 (La.App. 3rd Cir. 1983), aff'd 456 So.2d 1373 (La. 1984). As such, the insured is not "eligible" in that he does not meet the criteria for eligibility by the party offering the coverage.