Cary v. United of Omaha Life Insurance Co.

RICE, Justice.

Petitioner, Thomas Cary, individually and on behalf of his minor daughter, Dena Cary, appeals a judgment of the court of appeals holding that the Arvada Medical and Disability Health Care Plan unambiguously excludes Dena’s injuries from coverage.

We hold that the Plan is ambiguous because it is susceptible to more than one reasonable interpretation. Therefore, we reverse the court of appeals’ holding and remand with instructions to return the case to the trial court for proceedings consistent with this opinion.

I. Facts and Procedural History

Petitioner was an employee of the City of Arvada, which provided him and his fourteen-year-old daughter, Dena, with health coverage under the Arvada Medical and Disability Health Care Plan (Plan), a partially self-funded municipal health plan overseen by the Arvada Medical and Disability Trust Fund (Trust). Like all Arvada employees, Petitioner did not receive a copy of the Plan itself. Rather, in February 1994, Arvada distributed a summary plan description (1994 SPD), which highlighted relevant aspects of the Plan.

In 1996, the Trust retained Respondent, United of Omaha Life Insurance Company (United), to administer the Plan. United was responsible for handling and processing all claims, and for determining the extent of coverage. United’s determinations were ap-pealable to the Trust. Mutual of Omaha of Colorado, Inc. (Antero) sub-contracted with United to fulfill some of United’s claims investigations and appeals responsibilities.

In November 1996, Arvada distributed a flier entitled “Mutual [of] Omaha Companies Point-of-Service Plan Summary” (1996 Flier) that summarized benefits and listed general exclusions from the Plan. In or around July 1997, Arvada distributed a new summary plan description to its employees (1997 SPD) which stated that it was effective January 1, 1997. Both the 1996 Flier and the 1997 SPD contained markedly different exclusions than the 1994 SPD.

In June 1997, Dena shot herself under the chin in an unsuccessful suicide attempt. At the time, she was suffering from a major depressive episode associated with diagnosed bipolar disorder, a biologically based mental illness covered by the Plan. Dena’s gunshot injuries required extensive treatment, hospitalization, and multiple surgeries.

Petitioner and Dena (Insureds) applied for benefits under the Plan, but United denied the claim. After an unsuccessful appeal to the Trust, Insureds brought suit in Denver District Court (trial court) against Arvada, the Trust, United, and Antero¹ seeking a declaration that the Plan covered Dena’s injuries, as well as damages for breach of insurance contract and bad faith failure to provide insurance benefits.

On cross motions for summary judgment, the trial court held that the Plan’s definitions and exclusionary provisions were ambiguous, and resolved the ambiguity in favor of coverage. Additionally, the trial court dismissed Insured’s bad faith claim with prejudice, holding that claims of insurance bad faith against third-party administrators are limited to the workers’ compensation arena.

Insureds appealed summary judgment on their claim of insurance bad faith, and United cross-appealed summary judgment on the issue of coverage. In Cary v. United of Omaha Life Insurance Co., 43 P.3d 655, 659 (Colo.App.2001) (Cary I), the court of appeals affirmed the trial court’s grant of summary judgment on Insureds’ bad faith claim. Having determined that judgment for United was proper, the court of appeals did not address United’s cross-appeal. Id. at 660.

In Cary v. United of Omaha Life Insurance Co., 68 P.3d 462, 464 (Colo.2003) (Cary II), we reversed the trial court’s determination that United owed no duty of good faith when investigating and servicing insurance claims under the Plan. We concluded that United “had primary control over benefit determinations, assumed some of the insurance risk of loss, undertook many of the obligations and risks of an insurer, and had the power, motive, and opportunity to act unscrupulously in the investigation and servicing of the insurance claims.” Id. at 463. Accordingly, we held that a special relationship existed between United and Insureds that was sufficient to establish United’s duty to act in good faith. Id. Consequently, we reinstated Insureds’ bad faith claim against United and remanded the issue of coverage to the court of appeals. Id.

On remand, the court of appeals reversed the trial court’s grant of summary judgment on the issue of coverage, holding that the Plan unambiguously excluded coverage for Dena’s injuries. Cary v. United of Omaha Life Ins. Co., 91 P.3d 425, 428, 430 (Colo.App.2003) (Cary III). This appeal followed.

We accepted certiorari to determine (1) whether the court of appeals correctly held that the Plan unambiguously excluded coverage for Dena’s injuries, and (2) if so, whether the 1994 SPD created an ambiguity that the 1996 Flier and 1997 SPD later cured.²

Because the Plan is susceptible on its face to more than one reasonable interpretation, we hold that the Plan is ambiguous and resolve the ambiguity in favor of coverage. We therefore reverse and remand to the court of appeals with instructions to return it to the trial court for proceedings consistent with this opinion.

II. Analysis

An insurance policy is a contract, the interpretation of which is a matter of law that we review de novo. State Farm, Mut. Auto. Ins. Co. v. Stein, 940 P.2d 384, 387 (Colo.1997); Union Ins. Co. v. Houtz, 883 P.2d 1057, 1061 (Colo.1994). As with any contract, we construe the terms of an insurance policy to promote the intent of the parties. Houtz, 883 P.2d at 1061.

We must enforce an insurance policy as written unless the policy language contains an ambiguity. Stein, 940 P.2d at 387. An insurance policy is ambiguous if it is susceptible on its face to more than one reasonable interpretation. Houtz, 883 P.2d at 1061. Any ambiguity in an insurance policy is construed in favor of providing coverage to the insured. Am. Fam. Mut. Ins. Co. v. Johnson, 816 P.2d 952, 953 (Colo.1991). A mere disagreement between the parties concerning interpretation of the policy does not create an ambiguity. Houtz, 883 P.2d at 1061. To determine whether a policy contains an ambiguity, we must evaluate the policy as a whole. Id.; Stein, 940 P.2d at 387.

In this case, the Plan provides that it pays a specified percentage of “covered expenses” per year. To qualify as a “covered expense,” a medical expense must be “Medically Necessary for the treatment of an Injury or an Illness not specifically excluded or otherwise limited under [the] Plan.”³

The Plan defines “injury” and “illness” as follows:

Injury. Injury means accidental bodily Injury which occurs independently of Illness. Injury does not include self-inflicted bodily Injury, either while sane or insane,⁴ or disease or infection (except pyogenic infection occurring through an accidental cut or wound).

Illness. Illness means a physical or mental disorder, including pregnancy.

These definitions are controlling throughout the Plan.

The Plan also contains an exclusionary provision which provides that “[c]harges in connection with a self-inflicted injury, whether sane or insane” are not covered. However, because the Plan definitions are controlling throughout the Plan, this provision cannot be read in isolation, but must be read in context with the specific definitions set forth in the Plan. Accordingly, this exclusionary provision only applies to “injury” as the Plan defines that term.

United argues that the Plan language clearly and unambiguously excludes self-inflicted injuries from coverage. Insureds agree with United that this is one reasonable interpretation of the Plan. However, Insureds argue that an equally reasonable interpretation of the Plan is that if a self-inflicted injury results from an illness, treatment for that injury is covered. We agree that each interpretation is reasonable.

One reasonable interpretation of these definitions is that the first sentence in the “injury” definition (“Injury means accidental bodily Injury which occurs independently of Illness”) is a definitional sentence that narrows the effect of the limitation contained in the second sentence (“Injury does not include self-inflicted bodily Injury, either while sane or insane”). Thus, the self-inflicted injury limitation in the second sentence of the “injury” definition modifies only the phrase “accidental bodily Injury which occurs independently of Illness.” As a result, injuries that occur as a result of illness, even if self-inflicted, are defined out of the “injury” definition and are covered by the Plan’s promise to provide coverage for treatment of an illness.

The trial court illustrated this interpretation of the language by comparing a self-inflicted injury resulting from a drunken dare with a self-inflicted injury resulting from narcolepsy. Because a drunken person does not suffer from a covered illness, the Plan does not cover self-inflicted injuries resulting from drunken behavior. Conversely, because narcolepsy is a covered illness, self-inflicted injuries resulting from a narcoleptic fall down the stairs would be covered as “Medically Necessary for the treatment of an Illness.” Similarly, because Dena’s bipolar disorder is a covered illness, self-inflicted injuries resulting from her bipolar disorder would be covered as well.⁵

However, an equally reasonable interpretation is that both sentences in the “injury” definition are of like definitional value, that is to say that one does not modify the other. Thus, to be covered, an injury must be “accidental bodily Injury which occurs independently of Illness” and must not be “self-inflicted bodily Injury, either while sane or insane.” Accordingly, if an injury is accidental or is the result of an illness, it nonetheless would be excluded from coverage if it is self-inflicted. Likewise, though the result of her bipolar disorder, Dena’s injuries would be excluded because they were self-inflicted.

Both interpretations are equally reasonable, but problematic. The first interpretation is problematic because it presumes that injuries occurring as a result of an illness, though expressly excluded from coverage under the “injury” definition, are covered by default under the “illness” definition. The second interpretation is problematic because it completely reads “which occurs independently of Illness” out of the “injury” definition. Most importantly for our purposes, however, the Plan is ambiguous because it is susceptible to each equally reasonable interpretation.

The Plan is also ambiguous because the second sentence in the “injury” definition references “self-inflicted bodily injury” without more. The term “injury” is defined generally as “accidental bodily injury.” Many injuries are accidentally self-inflicted, such as cutting one’s finger while chopping vegetables or falling while skiing. It is unclear from the Plan language whether these injuries are covered or excluded under the Plan. Rather, the Plan is susceptible to two equally reasonable interpretations because accidental self-inflicted injuries are within the definition of injury and also within the self-inflicted injury exclusion.⁶ Because we resolve ambiguities in favor of coverage, Dena’s injuries are covered.

Based on our conclusion that the Plan is ambiguous, we need not address whether or not the 1994 SPD created an ambiguity that the 1996 Flier and 1997 SPD later cured.⁷

We therefore reverse and remand to the court of appeals with instructions to return this case to the trial court for proceedings consistent with this opinion.

Justice KOURLIS dissents and Justice BENDER joins in the dissent. Justice COATS dissents.

1 . Arvada and the Trust settled immediately after the trial court decision. Antero settled after we issued our opinion in Cary v. United of Omaha Life Insurance Co., 68 P.3d 462 (Colo.2003) (Cary II), but before the court of appeals’ decision in Cary v. United of Omaha Life Insurance Co., 91 P.3d 425 (Colo.App.2003) (Cary III). Thus, United is the sole party remaining in this case. The issue of coverage is central to Insureds’ claim of bad faith failure to provide insurance benefits.

2 . We granted certiorari on the following issues:

1) Whether the court of appeals correctly interpreted Tom Cary's health insurance plan as excluding coverage for injuries sustained by his fourteen year old daughter when she shot herself because she was suffering from a biologically based major depressive episode.

2) Whether a brochure or the draft of a new Summary Plan Description which purports to exclude coverage can trump a previously published and distributed Summary Plan Description which contains no such exclusion even though the draft Summary Plan Description had not been distributed to insureds.

3 . Capitalization of words and phrases in quoted Plan material indicates that such words and phrases are expressly defined in the Definitions section of the Plan. Only Plan definitions that are relevant to the analysis in this case are included in this opinion.

4 .Citing Bigelow v. Berkshire Life Insurance Co., 93 U.S. 284, 287, 23 L.Ed. 918 (1876), United argues that the "sane or insane” language contained in the Plan is meant to exclude benefits for self-destructive behavior regardless of the degree or nature of the mental disorder from which the individual is suffering. However, Bigelow is distinguishable on its facts because it involved a life insurance policy whose exclusion prohibited coverage where the decedent "shall die by suicide (sane or insane).” Id. at 285-86. Here, there is no mention of the term "suicide” in the Plan and it is not apparent that the Plan's exclusion for self-inflicted injuries means attempted suicide.

5 . United argues that although the Plan provides coverage for treatment of the mental illness itself, it does not cover all the consequences that might flow from the mental illness. Thus, United argues that although depression may be a symptom of Dena’s bipolar disorder, her injuries are not themselves a symptom of bipolar disorder and are not covered in the treatment of her mental illness. In other words, United argues that the sequela of a symptom can be isolated from the symptom itself, and that the symptom is covered, but the sequela is not. This argument is without merit.

Bipolar disorder is a biologically based mental illness that is a disease or illness in the same sense as cancer, diabetes, or heart disease. See, e.g. § 10-16-104(5.5), C.R.S. (2004) (“Every group policy, plan certificate, and contract of a carrier subject to the provisions of ... this article ... shall provide coverage for the treatment of biologically based menial illness that is no less extensive than the coverage provided for any other physical illness."). It is well established that physically self-destructive behavior, including attempted suicide, is a symptom of bipolar disorder. American Psychiatric Association, Diagnostic and Statistic Manual of Mental Disorders 320, 322 (4th ed.1994). Thus, Dena's injuries are physical manifestations of a symptom of her mental illness. Arguing that Dena’s injuries are not covered is tantamount to arguing that coverage is available for treatment of diabetes, but not the consequences of high blood sugar, which is a symptom of diabetes. Not only is this argument contrary to the concept of health care, it is inconsistent with Insureds' reasonable interpretation of the Plan, namely that the “injury” definition defines injuries occurring as a result of illness out of the definition of "injury" and into the definition of "illness.”

6 . In a related argument, Insureds argue that the Plan is also ambiguous because it does not state whether the self-inflicted injury exclusions require the injuiy to have been intentionally self-inflicted. If the self-inflicted injury exclusions require the injury to have been intentional, Insureds argue that this only aggravates the ambiguity in the Plan because the word "intentionally” has more than one meaning. Insureds further argue that the phrase “whether sane or insane" fails to clarify this ambiguity. Because we conclude that the ambiguity in the Plan arises solely as a result of the effect of the first two sentences in the definition of "injury," and because an analysis of the intentional/accidental and sane/insane dualities has no effect upon our finding of ambiguity, we do not address either of these arguments.

7 . Each of these documents ultimately defers to the Plan if there is a conflict. The 1994 SPD provides that "[i]n any cases of conflict, the official Plan document will determine your eligibility or benefit.” Similarly, the 1997 SPD expressly provides that "[i]n the event of any inconsistencies between the [Pjlan documents and the summary plan description, the [Pjlan documents will govern.” For full details on coverage, the 1996 Flier instructs Insureds to "refer to the plan document [they] will receive after enrollment.”