Citation Codes

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Docket Number

Docket No. 82212.

Attorney(S)

Green, Renner, Weisse, Rettig, Rademacher Clark, P.C. (by Richard C. Clark), for plaintiff. Dickinson, Wright, Moon, Van Dusen Freeman (by Theodore R. Opperwall), for defendants.

Acts

Labor — General Provisions — Employee Retirement Income Security Program — Protection Of Employee Benefit Rights — Congressional Findings And Declaration Of Policy
Labor — Regulatory Provisions — Employee Retirement Income Security Program — Protection Of Employee Benefit Rights — Administration And Enforcement — Other Laws

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Smart Summary

Benike v. Scarborough Insurance Trust — Michigan Court of Appeals (Apr. 9, 1986)

Factual and Procedural Background

This case was presented on a stipulation of facts. On June 12, 1982, plaintiff's 15-year-old son was taken into police custody, received medical treatment, and was released to his parents. Later the same day a gunshot was heard from the son's bedroom; the son suffered a self-inflicted gunshot wound, was treated at St. Francis Hospital in Escanaba, and then transferred to Marquette General Hospital for surgery.

Plaintiff's employer maintained a group health insurance policy under which the son was an insured dependent. The Scarborough Insurance Trust administered the policy. Medical bills were submitted: St. Francis Hospital bills were paid; Marquette General Hospital billed for treatment and reported the injury as self-inflicted. The Trust denied payment for the Marquette charges, citing a policy exclusion for intentionally self-inflicted injury or sickness "while sane or insane." The trial court ruled for the plaintiff, applying the Michigan "Scrivener's Rule" (finding ambiguity in the policy and construing it against the insurer). The insurer appealed to the Michigan Court of Appeals.

Legal Issues Presented

Whether ERISA preempts application of Michigan insurance-law principles to the interpretation of the group health insurance policy, or whether the ERISA "insurance savings clause" preserves state insurance regulation for that purpose.
Whether the policy's exclusion for "intentionally self-inflicted injury or sickness while sane or insane" is ambiguous as to whether it applies to dependent insureds as well as employee insureds.
Whether the insured-employee's legal obligation to pay his minor son's medical expenses makes the insurer responsible to reimburse the employee for those expenses despite the exclusion.

Arguments of the Parties

Defendants' Arguments

The group health plan is governed by ERISA and state-law insurance doctrines should not be applied because ERISA preempts state law.
Even if state insurance law applies, the policy language unambiguously excludes benefits for intentionally self-inflicted injuries for any insured (employee or dependent), so the trial court erred in finding ambiguity.

Plaintiff's Arguments

The ERISA "savings clause" preserves the authority of states to regulate insurance; therefore Michigan insurance-law principles may be applied to interpret the policy.
The exclusion should be read to apply only to injuries intentionally inflicted by the employee insured because the policy is issued to the employee and benefits are paid to the insured employee, not to dependents; consequently, coverage should apply to the dependent's expenses.
Because the plaintiff (the employee) is legally obligated to support and pay his minor son's medical expenses, the insurer should reimburse the plaintiff for those expenses.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Metropolitan Life Ins Co v Massachusetts, 471 US ___; 105 S Ct 2380; 85 L Ed 2d 728 (1985)	Interpreting the ERISA preemption provision together with the "insurance savings clause"—that a state law regulating insurance may be saved from ERISA preemption.	The court relied on Metropolitan Life to conclude that Michigan insurance-law principles governing interpretation of insurance policies are saved from ERISA preemption and therefore may be applied here.
Engel v Credit Life Ins Co, 145 Mich. App. 55, 61; 377 N.W.2d 342 (1985)	General principle that ambiguities in insurance contracts are construed against the insurer and exclusionary clauses are strictly construed against insurers.	The court acknowledged this hornbook principle but found the policy unambiguous and therefore did not construe the exclusion in favor of coverage in this case.
Raska v Farm Bureau Ins Co, 412 Mich. 355, 361-362; 314 N.W.2d 440 (1982)	Rules for construction of insurance policies: (1) clauses valid if clear and not contrary to public policy; (2) a contract is ambiguous when words may reasonably be understood in different ways; (3) if fair readings produce coverage and noncoverage, the contract is ambiguous and should be construed for coverage.	The court applied Raska's construction rules to determine whether a fair reading of the policy produced differing interpretations; it concluded the policy unambiguously excluded intentionally self-inflicted injuries for both employees and dependents.

Court's Reasoning and Analysis

The court's analysis proceeded in two main steps.

First, the court addressed ERISA preemption. It recognized ERISA's broad preemption provision (29 U.S.C. § 1144(a)) but observed the statutory "insurance savings clause" (29 U.S.C. § 1144(b)(2)(A)). The court relied on the United States Supreme Court's decision in Metropolitan Life to conclude that state insurance-law principles are preserved by the savings clause and thus applicable to interpretation of the policy in this case.

Second, the court evaluated whether the exclusion for intentionally self-inflicted injury was ambiguous. The policy language at issue excludes "expense for or in connection with: 1. Intentionally self-inflicted injury or sickness while sane or insane." "Expense" is defined in the policy as "a charge which a person is legally obligated to pay." The court noted there is no express statement that the exclusion applies only to employee insureds and observed that the exclusion appears in provisions covering basic, major, comprehensive medical, and accident benefits without differentiation between employee and dependent insureds.

The court considered the plaintiff's interpretive argument (that the exclusion applies only to employee insureds because benefits are payable to the employee) but found that reading would lead to anomalous results: other exclusions in the policy (e.g., service in the military, participating in a felony, lack of regular physician care, workers' compensation coverage, routine examinations) would likewise have to be read as inapplicable to dependents, contrary to the policy's clear intent. The court also rejected the plaintiff's argument that the employee's legal obligation to pay his minor son's expenses transforms the policy into a general liability policy obligating reimbursement.

Applying the principles articulated in Raska and Engel regarding ambiguity and construction against the drafter, the court concluded that a fair reading of the entire contract does not produce two reasonable, conflicting interpretations and therefore the exclusion is not ambiguous. The clear intent of the insurer, as reflected in the policy language, is to exclude coverage for intentionally self-inflicted injuries for both employee insureds and dependent insureds.

Holding and Implications

REVERSED. The judgment of the lower court in favor of the plaintiff is reversed, and judgment is entered for the defendants.

Implications: The direct effect is that the insurer properly denied payment for the Marquette General Hospital charges arising from the son's intentionally self-inflicted injury because the policy unambiguously excluded such coverage for dependents as well as employees. The opinion does not announce any broader departure from established precedent; it applies existing federal and state authorities (Metropolitan Life, Raska, Engel) to conclude the state insurance-law construction governs and that the policy exclusion is unambiguous.

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BENIKE v SCARBOROUGH INSURANCE TRUST

PER CURIAM.

This case was presented on a stipulation of facts, the relevant portions of which follow.

On June 12, 1982, plaintiff's 15-year-old son was taken into custody by the police and after medical treatment was released to his parents. In the early evening of that date a shot was heard coming from the son's bedroom and when plaintiff went to the bedroom he discovered the boy suffering from a self-inflicted gunshot wound. The boy was taken to St. Francis Hospital in Escanaba for emergency care and then to Marquette General Hospital where surgery was performed.

Plaintiff's employer, State Bank of Escanaba, had a group health insurance policy with Allstate Life Insurance Company under which the son was an insured as a result of being a dependent of plaintiff. The Scarborough Insurance Trust was the policy holder for administering its provisions. Medical bills were submitted to the Scarborough Insurance Trust and those from St. Francis Hospital were paid. However, when a report was received from Marquette General Hospital indicating the injury was self-inflicted, payment was denied on the ground that coverage was excluded under the policy for an intentionally self-inflicted injury or sickness while sane or insane. In holding for the plaintiff, the lower court applied the so-called Michigan "Scrivener's Rule", finding that an ambiguity existed in the policy and must be construed against the defendant insurer.

Defendants first submit that employee welfare benefit plans, such as involved herein, are governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (ERISA) and that the lower court erred in applying a principle of Michigan insurance law, since state law is preempted by ERISA. The plaintiff, on the other hand, submits that, by reason of a "savings clause" included in the federal legislation which recognizes the authority of states to regulate insurance, state law is not preempted in the interpreting of the insurance policy. While the preemption argument was not raised in the lower court, it will be considered by this Court.

A broad preemption provision is contained in § 514a of ERISA, 29 U.S.C. § 1144(a), which declares the statute "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan". However, this preemption is substantially qualified by an "insurance savings clause", i.e., § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A) which also broadly states that, with one exception, nothing in ERISA "shall be construed to exempt to relieve any person from any law of any State which regulates insurance, banking or securities".

The scope and effect of the preemption provision and the savings clause was recently considered by the United States Supreme Court in Metropolitan Life Ins Co v Massachusetts, 471 US ___; 105 S Ct 2380; 85 L Ed 2d 728 (1985). Involved therein was a Massachusetts statute which required that specified minimum mental health-care benefits be provided to a Massachusetts resident who is insured under a general insurance policy, an accident or sickness insurance policy, or an employee health-care plan that covers hospital and surgical expenses. After considering the issue at some length, the United States Supreme Court held the Massachusetts statute was saved from the preemption by the savings clause, since the law regulated insurance. Similarly, in the instant case application of principles of Michigan insurance law are "saved" from the preemption.

The defendants next contend that even if the application of Michigan principles of insurance law is not preempted, nevertheless the trial court erred in determining the policy was ambiguous. It is submitted the policy is clear and unambiguous in its exclusion from coverage benefits for intentionally self-inflicted injuries irrespective of whether the person injured is an employee or dependent. Plaintiff argues that, because the policy is issued to an insured employee and not to the dependent, the benefit is paid to the insured and not the dependent. The exclusion, therefore, for self-inflicted injuries applies only to those inflicted by an employee insured. Plaintiff concludes that, since he as the insured employee did not intentionally inflict an injury on himself and since he is legally obligated to pay his minor son's medical expenses, he has incurred an expense which is covered under the policy. The trial court in holding for the plaintiff found that the language of the policy did not support defendant's interpretation or, to the extent it did, it was ambiguous and must be construed against the defendant insurer.

The policy applies to two groups of insured, i.e., employee insureds and dependent insureds. Various portions of the policy apply only to employee insureds. The pertinent exclusion in the policy provides that "no benefit is payable for expense for or in connection with: 1. Intentionally self-inflicted injury or sickness while sane or insane * * *". (Emphasis added.) Twelve other exclusions follow this exclusion. "Expense" is defined as "a charge which a person is legally obligated to pay * * *". There is no specific notation that this exclusion applies only to employee insureds.

It is hornbook law that an insurance contract ambiguity is construed against the insurer, and, in particular, exclusionary clauses in insurance policies are to be strictly construed against the insurer. Engel v Credit Life Ins Co, 145 Mich. App. 55, 61; 377 N.W.2d 342 (1985). In Raska v Farm Bureau Ins Co, 412 Mich. 355, 361-362; 314 N.W.2d 440 (1982), the Supreme Court stated the following rules for construction of an insurance policy:

"Any clause in an insurance policy is valid as long as it is clear, unambiguous and not in contravention of public policy.

* * *

"A contract is said to be ambiguous when its words may reasonably be understood in different ways.

"If a fair reading of the entire contract of insurance leads one to understand that there is coverage under particular circumstances and another fair reading of it leads one to understand there is no coverage under the same circumstances the contract is ambiguous and should be construed against its drafter and in favor of coverage.

"Yet if a contract, however inartfully worded or clumsily arranged, fairly admits of but one interpretation it may not be said to be ambiguous or, indeed, fatally unclear."

A fair reading of the insurance contract does not support a conclusion that the policy is ambiguous. The clear intent of defendant insurer throughout the policy is to exclude coverage for intentionally self-inflicted injuries. The exclusion for intentionally self-inflicted injuries is included in the provisions for basic medical, major medical, comprehensive medical, and accident. The policy does not differentiate between employee insureds and dependent insureds with regard to this and all other limitations, and there is no basis for making such a distinction.

Furthermore if, as plaintiff contends, benefits are payable for intentionally self-inflicted injuries incurred by a dependent, then it follows that one of the other twelve limitations, i.e., exclusion for service in the military, participating in a felony, not being under the regular care of a physician, coverage under a workers' compensation law, routine medical examinations, etc., apply to dependents. Such result is contrary to the clear intent of the policy.

Plaintiff also argues that, because he is obligated to support his minor son and, hence, must pay for his son's medical expenses, defendant insurer is obligated to reimburse plaintiff. The policy in question is not a general liability policy, and the fact that plaintiff is liable for his son's expenses does not obligate defendant insurer to reimburse plaintiff for those expenses.

In conclusion, we find the policy unambiguously excludes coverage for injuries which are intentionally self-inflicted by either the employee insured or a dependent insured. The judgment of the lower court is reversed and a judgment in favor of the defendants is granted.

BENIKE v. SCARBOROUGH INS