Martin John KERSTEN, Respondent, v. The MINNESOTA MUTUAL LIFE INSURANCE COMPANY, Appellant.
No. C6-98-2080
Supreme Court of Minnesota.
April 13, 2000.
608 N.W.2d 869
In both Mikel Drilling and Adent, the defendants did more than simply bring the issue to the plaintiffs’ attention; they requested a determination of the issue of jurisdiction before proceeding on the merits. Our case law demonstrates that a defendant is free to proceed on the merits of a case without fear of waiving the defense so long as the court has been provided an opportunity to determine the validity of the defense. See also Media Duplication Serv., Ltd. v. HDG Software, Inc., 928 F.2d 1228, 1233 n. 2 (1st Cir.1991) (acknowledging that the defendant may waive the defense through conduct but finding no waiver where defendant raised insufficiency of service first in motion to dismiss, then in answer, then in opposition to plaintiff‘s motion for summary judgment and then in defendant‘s motion to dismiss for lack of subject matter jurisdiction). Therefore, defendants need not guess whether their conduct in litigation will amount to waiver if they have provided the court an opportunity to rule on their jurisdictional defense. Cf. Michelson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 709 F.Supp. 1279, 1284 (S.D.N.Y.1989) (rejecting plaintiff‘s argument that any participation in litigation constitutes waiver where defendant was awaiting ruling on motion to dismiss and participated in the litigation).
Price asks this court to hold that he had not subjected himself to the district court‘s authority and jurisdiction when he asked for partial summary judgment. While participating in litigation through discovery and responding to an opposing party‘s motions are not sufficient to waive the defense, moving for a decision on the merits of part of a claim invites the court to exercise its authority on behalf of the moving party and implicitly acquiesces to the court‘s exercise of jurisdiction over that party, much like the injunctive relief requested in Mississippi Valley. See 300 Minn. at 72, 217 N.W.2d at 764. Clearly Price submitted himself to the authority and jurisdiction of the district court by moving for partial summary judgment.
We conclude that once a defendant affirmatively invokes the court‘s power to determine the merits of all or part of a claim, the defendant cannot then deny the court‘s jurisdiction over him based on defective service. Therefore, we hold that by failing to move the district court to dismiss Patterson‘s claims before, or contemporaneously with, moving for partial summary judgment, Price affirmatively invoked the jurisdiction of the district court and waived by implication the defense of insufficient service of process.
Reversed and remanded to the district court for further proceedings consistent with this opinion.
Steven G. Mahon, Ryan, Mahon & Brown, P.A., St. Paul, for appellant.
Robert E. Wilson, Matthew C. Bazzano, Robert Wilson & Assoc., Minneapolis, for respondent.
OPINION
PAUL H. ANDERSON, Justice.
Minnesota Mutual moved for summary judgment. The district court granted the motion, finding that the policy provision defining sickness properly excluded Kersten‘s current illness as having manifested itself prior to the effective date of the policy. The Minnesota Court of Appeals reversed and remanded, holding that Minnesota Mutual could not limit coverage to those disabilities that “first manifest” themselves after the policy is in force. The sole question presented to us on appeal is whether the statutorily required pre-existing condition provisions of
On October 18, 1985, appellant Minnesota Mutual Life Insurance Company issued a disability insurance policy to respondent Martin John Kersten. The policy provided that if Kersten became disabled as defined in the policy as the result of an injury or sickness, he would be entitled to a monthly income benefit of $1,600 during his period of disability. The policy defined “sickness” as
A disease or illness which first manifests itself while this policy is in force. A disease or illness first manifests itself when symptoms exist that would cause an ordinarily prudent person to seek diagnosis, care or treatment, or when a physician recommends or provides medical advice or treatment.
It is undisputed that from October 1985 until September 1993, Kersten made all premium payments and made no claim for benefits.
In September 1993, Kersten was involved in a motor vehicle accident. Following the accident, he was unable to work due to injuries received in the accident. Kersten submitted a claim for disability benefits under his Minnesota Mutual policy and Minnesota Mutual began to pay disability benefits to him effective from September 1993.
While receiving disability benefits, Kersten also received no-fault insurance benefits from his automobile insurance carrier. In July 1994, after an independent medical examiner rendered an opinion that Kersten was no longer disabled from the injuries he received in the motor vehicle accident, Kersten‘s automobile insurance carrier discontinued no-fault benefits. On May 22, 1995, an arbitrator denied Kersten‘s claim for additional no-fault benefits. Following this decision, Kersten sought benefits under the uninsured motorist provisions of his automobile insurance policy. In November 1996, an arbitration panel concluded that Kersten was not entitled to benefits beyond the no-fault benefits already paid.
In July 1997, Kersten brought a breach of contract action against Minnesota Mutual in district court claiming that because he remained disabled, Minnesota Mutual was obligated by its policy to continue disability benefits. Minnesota Mutual moved for summary judgment, claiming that Kersten was collaterally estopped from relitigating his disability because the findings of the no-fault arbitrator were conclusive and Kersten never appealed this decision. Minnesota Mutual also argued that Kersten could bring no new claims because the policy lapsed for nonpayment after his disability benefits were discontinued. Kersten responded, arguing that his continued disability resulted not only from the motor vehicle accident, but also from his psychological illness, which the no-fault arbitration decision did not address. Minnesota Mutual then argued that because Kersten‘s psychological illness first manifested itself before the policy was in force, any claim based on a psychological illness was not covered by the policy. The court granted summary judgment for Minnesota Mutual, concluding that Kersten‘s claims for injuries from the motor vehicle accident were collaterally estopped and that Minnesota Mutual‘s policy language defining sickness properly excluded Kersten‘s claims for his psychological illness. The court also found that because Kersten was no longer disabled under the terms of the policy, his failure to make premium payments after benefits were discontinued caused the policy to lapse.
Kersten appealed, arguing that the district court erred because there were material issues of fact about whether his disability continued due to his psychological illness. Kersten also claimed that Minnesota Mutual‘s “first manifest” definition of sickness violated the coverage requirements of
This is a matter of first impression in Minnesota and involves the interpretation of both the requirements of a statute and the contractual provisions of an insurance policy. Both statutory and contractual interpretation present questions of law that we review de novo. See Housing & Redevelopment Auth. ex rel. City of Richfield v. Adelmann, 590 N.W.2d 327, 330 (Minn.1999); Metropolitan Property & Cas. Ins. Co. & Affiliates v. Miller, 589 N.W.2d 297, 299 (Minn.1999). General contract principles govern the construction of insurance policies and insurance policies are interpreted to give effect to the intent of the parties. See Dairyland Ins. Co. v. Implement Dealers Ins. Co., 294 Minn. 236, 244-45, 199 N.W.2d 806, 811 (1972). Because most insurance policies are presented as preprinted forms, which a potential insured must usually accept or reject as a whole, ambiguities in a policy are generally resolved in favor of the insured. See Atwater Creamery Co. v. Western Nat‘l Mut. Ins. Co., 366 N.W.2d 271, 277 (Minn.1985).
It is undisputed that Minnesota Mutual‘s disability policy is subject to Minnesota Statutes Chapter 62A, which regulates various health and disability policies. See generally
A statutorily required provision in an insurance policy will not necessarily be construed against the insurer. See Laidlaw v. Commercial Ins. Co. of Newark, 255 N.W.2d 807, 811 (Minn.1977). Incontestability clauses, being in derogation of common law, are generally strictly construed. See 18 George J. Couch, Couch on Insurance § 72.9, at 289 (Ronald A. Anderson ed., 2d ed.1983); see also Chuz v. Columbian Nat‘l Life Ins. Co., 10 N.J. Misc. 1145, 162 A. 395, 395 (N.J.Cir.Ct. 1932). Further, we agree with those commentators who have noted that while incontestability clauses should be strictly construed, they also
should be given a common-sense construction, bearing in mind the nature and purpose of the contract, that is, the meaning which would be understood by
a reasonably prudent person, not what the insurer intended or what meaning would be given by a language expert.
18 Couch, supra § 72.9, at 289 (citation omitted). This view is consistent with the previously stated principle that ambiguities in insurance contracts be generally construed in favor of the insured. See Atwater Creamery Co., 366 N.W.2d at 277.
In the context of this general background, we begin our analysis with a discussion of the workings of
We first note that it was not conclusively resolved below whether the commissioner approved Minnesota Mutual‘s definition of sickness. While the district court noted that the commissioner had approved the policy, it made no detailed finding. The court of appeals discussed but did not resolve the question. The court of appeals observed that the commissioner expressed some concerns over the language and that the commissioner had no record of the approval. On appeal to our court and for the first time, Minnesota Mutual submitted a letter indicating some type of approval by the commissioner. Kersten has properly objected to this evidence as being submitted for the first time on appeal.
In addition to being improperly before us, the letter submitted by Minnesota Mutual has minimal relevance to the issue before us on appeal. First, the letter does not indicate that the commissioner considered or reached a conclusion on the specific question before us.
As previously noted,
Minnesota Mutual‘s disability policy contains a provision similar to
The goal of statutory interpretation is to “ascertain and effectuate the intention of the legislature.”
We conclude that the plain language of clause (b) indicates a legislative intent that, 2 years after a policy is in force, pre-existing conditions be covered by the policy, subject to specific exclusion by the insurer. Clause (b) states:
No claim for loss incurred or disability (as defined in the policy) commencing after two years from the date of issue of this policy shall be reduced or denied on the ground that a disease or physical condition not excluded from coverage by name or specific description effective on the date of loss had existed prior to the effective date of coverage of this policy.
Clause (b) operates in conjunction with clause (a) of
Minnesota Mutual and the dissent assert that because the language of clause (b) permits the insurer to define disability in the context of the policy, Minnesota Mutual‘s “first manifest” definition of sickness is not expressly prohibited by the statute. They also assert that incontestability clauses such as the one at issue here only affect a policy‘s validity and not its coverage. Quoting a Fifth Circuit decision, they argue that an “incontestable clause in a disability policy does not deprive the insurer from defending on the ground that the particular disability was never within the policy coverage.” Massachusetts Cas. Ins. Co. v. Forman, 516 F.2d 425, 428 (5th Cir.1975). Minnesota Mutual and the dissent then conclude that because Minnesota Mutual has defined “sickness” as those illnesses that first manifest themselves while the policy is in force, those illnesses that manifested themselves before are not “sicknesses” as defined in the policy and therefore were never within the policy coverage.1
Additionally, the assertion that the language of clause (b) affects a policy‘s validity but does not relate to coverage is contrary to a plain reading of the clause. As noted earlier, clause (b) requires that “no claim for loss incurred or disability (as defined in the policy) * * * shall be reduced or denied on the ground that a disease or physical condition * * * had existed prior to the effective date of coverage of this policy.”
Having determined that clause (b) involves coverage, we next must determine whether Minnesota Mutual‘s “first manifest” definition of illness makes Kersten‘s policy “less favorable in any respect to the insured.”
These clauses are now required by statute in most states because without them, insurers were apt to deny benefits on the grounds of a pre-existing condition years after a policy had been issued. This left beneficiaries * * * in the untenable position of having to do battle with powerful insurance carriers. The incontestability clause is thus in the nature of a statute of limitation and repose, obliging the insurer to investigate the insured‘s medical history promptly else it become bound by the representations contained on the insured‘s application.
Id. (quotations and citations omitted).
We conclude that clause (b) of
Minnesota Mutual urges us to accept its position that a “first manifest” definition of sickness resolves uncertainty in coverage with respect to pre-existing conditions by providing a clear rule applicable in all cases regardless of the disclosures made in a policy application. See Forman, 516 F.2d at 429-30. However, accepting this approach would allow an insurer to define away all coverage for “diseases and physical conditions” that occurred in any way prior to the effective date of the policy. On this point we agree with the Wischmeyer court that such a result is clearly contrary to legislative intent. In Wischmeyer, the court observed that to permit an insurer to generally exclude pre-existing conditions by a “first-manifest” definition of illness, in the face of a statute requiring them to do so specifically by “name or specific description,” would be to render the statutory provision “absurd.” 725 F.Supp. at 1005. The Wischmeyer court noted that then “all insurers would instantly place such a statement in their form policies, and thereafter no insurer would be precluded from denying claims based on pre-existing conditions.” Id.
We acknowledge that a “first manifest” definition does not necessarily eliminate coverage for all pre-existing conditions. But
It is relatively certain that an insurer would prefer not to specifically “by name or specific description” refuse coverage to a potential insured for a “disease or physical condition” for which the insured has a reasonable concern may cause a future disability. A specific refusal to cover the “disease or physical condition” may dissuade a potential insured from purchasing a policy. However, the legislature has required that in order to exclude a preexisting condition from coverage, the insurer must do so by “name or specific description.” This makes certain that the insured knows exactly what coverage he is purchasing and the insurer knows exactly for what it will and will not be asked to provide disability benefits. In fairness to the insurer, the legislature removed from clause (a) any incentive for the insured to conceal a known pre-existing “disease or physical condition” by permitting the insurer to void the policy on the grounds of fraud at any time. See
Finally, Minnesota Mutual claims that its “first manifest” definition of sickness addresses the same issues of certainty of coverage as does
We hold that because Minnesota Mutual‘s “first manifest” definition of sickness makes the required coverage of clause (b) of
Affirmed.
STRINGER, Justice (dissenting).
I respectfully dissent. The majority‘s holding violates fundamental principles of insurance law relating to indemnification of
The operative facts are that respondent was treated for depression and anxiety in 1974. Minnesota Mutual issued a disability insurance policy to respondent on October 18, 1985. The policy, which was approved by the Commissioner of Commerce,3 included coverage for “sickness,” defined as “[a] disease or illness which first manifests itself while this policy is in force.” (emphasis added). Respondent received disability benefits from Minnesota Mutual but the benefits were discontinued when Minnesota Mutual discovered that the cause of respondent‘s disability had not first manifested itself during the policy period but rather more than ten years prior to the policy‘s inception.
Respondent‘s claim that he should nonetheless be entitled to disability benefits is inconsistent with the clear language of his disability policy and basic principles of insurance law. “The primary requisite essential to a contract of insurance is the assumption of a risk of loss and the undertaking to indemnify the insured against such loss.” 1 George J. Couch, Couch on Insurance § 1:3, at 6-7 (Ronald A. Anderson ed., 2d ed.1983). We have defined insurance as “any agreement whereby one party, for a consideration, undertakes to indemnify another to a specified amount against loss or damage from specified causes,” State v. Bean, 193 Minn. 113, 114-15, 258 N.W. 18, 18 (1934), and have held that the date the policy goes into effect is determined by the terms of the policy. See Oster v. Riley, 276 Minn. 274, 277, 150 N.W.2d 43, 46 (1967). Moreover, “it is customary for policies to bear a certain date and to insure against losses arising after that date. * * * [T]he insured may not recover for losses occurring
The majority finds coverage for a loss resulting from a sickness that manifested itself years before the policy became effective based upon
No claim for loss incurred or disability (as defined in the policy) commencing after two years from the date of issue of this policy shall be reduced or denied on the ground that a disease or physical condition not excluded from coverage by name or specific description effective on the date of loss had existed prior to the effective date of coverage of this policy.
The purpose of the incontestability provision, as noted in Appleman, is to give insurers an incentive to within a “reasonable period of time * * * check into and to ascertain the truth of the declarations made by the applicant and to take such action as will protect its rights. If it fails to do so, these defenses are barred.” 1A Appleman & Appleman, supra, § 333, at 385-86. We also held long ago that an incontestability clause is intended to “render all statements by the insured in the application for the insurance representations and not warranties [,]” Sellwood v. Equitable Life Ins. Co. of Iowa, 230 Minn. 529, 536, 42 N.W.2d 346, 351 (1950) (emphasis added)—that is, to protect an insured from the harsh results of an inadvertent mistake in the policy application which might otherwise be grounds for rescission. See, e.g., Schaedler v. New York Life Ins. Co., 201 Minn. 327, 333, 276 N.W. 235, 239 (1937) (stating that an incontestability clause permits the insurer a defense for false statements made in a policy but “[n]o oral or written misrepresentation made by the assured * * * in the negotiation of insurance, shall * * * defeat or avoid the policy, or prevent its attaching, unless made with intent to deceive and defraud“). In short, the incontestability provision prevents the insurer from denying the validity of a policy because of inadvertent misstatements made by the insured, but cannot create coverage for illnesses manifesting themselves prior to
These principles are reflected in Metropolitan Life Ins. Co. v. Conway, where then Chief Judge Cardozo held:
The provision that a policy shall be incontestable after it has been in force during the lifetime of the insured for a period of two years is not a mandate as to coverage * * *. It means only this, that within the limits of the coverage the policy shall stand, unaffected by any defense that it was invalid in its inception, or thereafter became invalid by reason of a condition broken.
252 N.Y. 449, 169 N.E. 642, 642 (1930). More recently, in Massachusetts Cas. Ins. Co. v. Forman, 516 F.2d 425, 429 (5th Cir.1975), the Fifth Circuit held that an incontestability clause similar to the one here4 did not extend coverage to a disability where the disability first manifested itself prior to the term of the policy.5 The court reasoned that because the condition manifested itself almost a year before the policy became effective, “disability resulting from [the condition] was never within the scope of policy coverage,” and the incontestability provisions of the policy could not breathe life into a claim that never existed. Forman, 516 F.2d at 428. The court then concluded that extending coverage beyond the date of the policy “is contrary to the general principle that incontestable clauses do not operate to extend coverage * * *.” Id. at 429. The purpose of an incontestability clause is thus to preclude insurers from denying the validity of a policy based upon a defect in the application, with the sole exception of fraud. It has not and should not be construed to expand coverage to risks clearly not intended to be insured by the policy.
Respondent‘s depression is a sickness that was never within the scope of policy coverage because it did not manifest itself during the policy period. Because there never was coverage for the sickness, the expiration of two years or five years or ten years is wholly irrelevant. Not only does basic insurance law—that insurable losses are those that occur during the policy period and the parties to an insurance contract can agree to exclude from coverage losses caused by preexisting sicknesses—compel this conclusion, it also appropriately puts the burden on the insured to disclose and bear the risk of non-coverage for sicknesses manifesting themselves prior to the policy period.6
Finally, the majority relies on
I would reverse the ruling of the court of appeals because the incontestability provision does not have its roots in creating coverage where it never existed. Its purpose is instead to prevent the denial of the validity of a policy after the expiration of the requisite years of being in force.
PAUL H. ANDERSON
JUSTICE
Notes
a disease or injury which:This event, disability, is the loss that must occur after the policy is in force. After the policy is in force for 2 years,(1) requires the reasonable and customary care of a physician; and
(2) results in your inability to perform substantial and material duties of your regular occupation * * *.