Opinion
No. 2-908 / 02-0647.
Filed December 30, 2002.
Appeal from the Iowa District Court for Johnson County, WILLIAM L. THOMAS, Judge.
Plaintiff Kinseth Hotel Corporation appeals the judgment of the trial court dismissing its claims against defendant New England Mutual Life Insurance Company, now known as Metropolitan Life Insurance Company, following New England's failure to reimburse Kinseth for medical claims Kinseth paid which Kinseth contends New England had insured it against. AFFIRMED.
Steven Nelson of Davis, Brown, Koehn, Shors Roberts, P.C., Des Moines, for appellant.
David Swinton of Ahlers, Cooney, Dorweiler, Haynie, Smith Allbee, P.C., Des Moines, for appellee.
Considered by SACKETT, C.J., and MILLER and EISENHAUER, JJ.
Plaintiff-appellant Kinseth Hotel Corporation (Kinseth) appeals the judgment of the trial court dismissing its claims against defendant-appellee New England Mutual Life Insurance Company (New England), now known as Metropolitan Life Insurance Company, following New England's failure to reimburse Kinseth for medical claims Kinseth paid, claims which Kinseth contends New England had insured it against. Kinseth claims the trial court erred 1) in adopting New England's interpretation of the contract, and 2) in concluding there was no fiduciary duty between the parties. We affirm.
I. FACTS
Kinseth and New England entered into two contracts dated May 1, 1994. Under one contract New England was obligated to provide administrative and claims processing services for Kinseth's self-funded medical plan. Under a separate contract New England provided Kinseth with two types of stop-loss insurance protecting Kinseth from catastrophic claims expenses: specific stop-loss coverage reimbursed Kinseth for claims by each individual employee exceeding a particular amount; and aggregate stop-loss coverage reimbursed Kinseth once the summation of all claims had exceeded a particular amount, regardless of each particular individual's claim.
In addition to the stop-loss coverage, Kinseth elected to purchase "terminal protection" insurance from New England. The parties agree terminal protection insurance provided that if Kinseth terminated its stop-loss contract with New England, New England would continue to process claims for Kinseth for fifteen months beyond the termination of the insurance contract. Kinseth terminated the stop-loss insurance coverage contract effective May 1, 1999. Both parties agree Article 11 of the stop-loss contract, providing for terminal protection, required New England to continue processing claims for Kinseth and to provide aggregate stop-loss coverage until August 1, 2000, which it apparently did. However, following claims by five employees, each totaling over $35,000, Kinseth sought specific stop-loss coverage. New England refused to provide that coverage, claiming it was not obligated to do so as part of terminal protection under the contract. The subject of dispute in this case is whether the terminal protection insurance also included specific stop-loss coverage.
II. CONTRACT INTERPRETATION
The proper construction of an insurance contract is always an issue of law for the court. LeMars Mut. Ins. Co. v. Joffer, 574 N.W.2d 303, 307 (Iowa 1998). The cardinal principle in the construction and interpretation of insurance policies is that the intent of the parties at the time the policy was sold must control. Ferguson v. Allied Mut. Ins. Co., 512 N.W.2d 296, 299 (Iowa 1994). Except in cases of ambiguity, the intent of the parties is determined by the language of the policy . A.Y. McDonald Indus, Inc. v. Ins. Co. of N. Am., 475 N.W.2d 607, 618 (Iowa 1991) (citation omitted). Because of the adhesive nature of insurance policies, their provisions are construed in the light most favorable to the insured. LeMars, 574 N.W.2d at 307 (citations omitted).
Kinseth argues that the terminal protection provision of the stop-loss contract can reasonably be interpreted to extend specific stop-loss coverage beyond the termination of the contract. Kinseth also argues, under the fundamental rule for interpreting insurance policies, that we must construe the contract in the light most favorable to the insured. See Cincinnati Ins. Co., v. Hopkins Sporting Goods, Inc., 522 N.W.2d 837, 839 (Iowa 1994). In order to construe the contract in such a light, however, Kinseth's interpretation of the contract must be plausible. We conclude that it is not, as the plain language of the contract does not support Kinseth's claim that terminal protection includes specific stop-loss coverage.
The sole basis upon which Kinseth claims entitlement to specific stop-loss coverage is the provision under Article 11 of the stop-loss contract redefining "contract year." Under Article 11, the definition of "contract year," previously defined to end "upon termination of this contract," is changed to "include any months after termination of this contract in which any claim payments are made by [New England]."
That definition change is modified, however, by the sentence, "If the Terminal Attachment Factor shown in Schedule A is applicable on the date of termination of this contract, then the following modifications are hereby made to the terms" including "contract year." As testimony at trial indicated and the district court recognized, "Terminal Attachment Factor" is a term used for purposes of calculating the aggregate stop-loss coverage. It simply does not apply to specific stop-loss coverage determinations, as by their nature those determinations do not require a monthly calculation according to the number of people employed at Kinseth and the maximum Kinseth must pay per month per employee. Furthermore, the other redefined terms in Article 11, including "monthly attachment level," "terminal attachment level," "cumulative attachment level," as well as the reference to "deficit recovery," all of which are used for purposes of calculating the aggregate stop-loss level on a monthly and yearly basis, indicate Article 11 refers only to aggregate stop-loss coverage. As specific stop-loss coverage is based upon a $35,000 specific stop-loss level and a $35,000 corridor specific stop-loss amount, no monthly calculations based upon "attachment factors" are necessary or even relevant.
The provision in Article 3 of the contract that no specific stop-loss benefit reimbursements are available after termination of the contract is consistent with our interpretation that the terminal protection of Article 11 applies only to aggregate stop-loss coverage. Because a contract is to be interpreted as a whole, it is assumed in the first instance that no part of it is superfluous; an interpretation which gives a reasonable, lawful, and effective meaning to all terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect. Iowa Fuel Minerals, Inc. v. Iowa State Bd. of Regents, 471 N.W.2d 859, 863 (Iowa 1991). We conclude the trial court correctly interpreted Article 11 to apply only to aggregate stop-loss coverage.
III. FIDUCIARY DUTY
Kinseth's second argument is that New England breached a fiduciary duty owed to Kinseth by failing to 1) adequately explain terminal coverage; 2) advise Kinseth to submit its claims prior to May 1, 1999, and 3) process claims in a timely fashion. As support for its contention that New England owed it a fiduciary duty, Kinseth refers to the marketing letter used by New England to solicit Kinseth's business in which New England stated Kinseth could think of New England as an extension of Kinseth's own staff.
We conclude, as did the district court, that with respect to the stop-loss contract New England's portrayal of its services did not establish a fiduciary duty to Kinseth under the insurance contract to explain the terminal coverage contract or to advise Kinseth to submit its claims prior to May 1. In spite of Kinseth's claims that New England's statements established such a duty, we conclude the statements were directed more toward the services contract, not the insurance contract at issue, and furthermore, that they were reasonable efforts at marketing rather than binding statements invoking a fiduciary duty. They therefore did not remove New England and Kinseth from the traditional insurer-insured relationship. The supreme court has declined to recognize a fiduciary relationship between insurer and insured in a first-party situation such as the one at issue here. See Stahl v. Preston Mut. Ins. Ass'n. 517 N.W.2d 201, 203 (Iowa 1994). With respect to the services contract and the claimed fiduciary duty of New England to administer the claims in a timely fashion, Kinseth makes only speculative allegations that New England may have unduly delayed its claims processing. Evidence at trial, including the fact that sophisticated claims take longer to process, indicated New England did not unduly delay the processing of claims beyond the date upon which Kinseth would have lost specific stop-loss benefits. We conclude this issue is without merit.