O'Neill v. Blue Cross of Western Iowa & South Dakota

HENDERSON, Justice

(concurring in part, dissenting in part).

This case constitutes nothing more than an action in contract on an insurance policy.* If I, or others of like mental ilk, followed the majority opinion’s powers of reasoning, a person could obtain coverage and impregnate a theoretically infinite number of women and obtain coverage for each birth. Believing that such a result, as begot by the majority’s platform of legal thought, could scarcely be determined by the intent or reasonable expectation of either party to this contract, I dissent. I further dissent because the insurance company either owes an obligation to O’Neill under the insurance contract, or it does not. And all rationale for justifying coverage herein cannot be in equity or bottomed in need. The innocence of the child is immaterial to the contract provisions. The minor child is not a party to the contract and any benefit accruing under the policy *822would be paid to the father and not to the child. We cannot eradicate principles of contract law by sugarcoating it with extraneous and immaterial philosophy espoused in the majority opinion to justify coverage.

Blue Cross undertook to insure a family unit consisting of Charles O’Neill, Jr., Gloria (his wife), and Justin (his son). This family unit was set forth in O’Neill’s application. A requirement existed, per the insurance contract, that Blue Cross be notified in writing within 30 days of any change in family status. O’Neill’s wife and son left his abode. A different woman came to live with him and did. There were no children when she first arrived. This was a change in family status. Blue Cross had a right, under contract, to know what family it was insuring. O’Neill had no right to substitute a different family and still maintain coverage under the policy per the application he submitted. Blue Cross, out-and-out, denied coverage upon the basis that O’Neill, Ms. Wise, and Sherri O’Neill (illegitimate child) were not the family unit to which it had provided coverage pursuant to the initial application. Blue Cross is right in its legal position and I sustain its cause hereby. It is undisputed that O’Neill never notified Blue Cross of his separation from his wife, Gloria, and Justin, his son; likewise, it is undisputed that he never advised Blue Cross that he had instituted a new “family” in the marital home by cohabiting with one Mary Wise.

O’Neill takes the position that his illegitimate daughter is automatically covered under the family plan. O’Neill has never claimed any benefits for Mary Wise, the mother of his child. He professes to the Court that Mary Wise is really not a member of his family and yet his new family is covered under a family contract. It is obvious that his positions are inconsistent for, if the mother of the illegitimate child is not a member of the family or household, the illegitimate child cannot be brought within the parameters of the contract language. A child who is born, such as here, simply is not born under the family contract. For a case supporting my viewpoint, see Potter v. Bennett, 40 A.D.2d 546, 334 N.Y.S.2d 511 (1972).

I maintain that the introduction of a different woman into his household and the vacation by his wife and son of the household introduced a new risk that Blue Cross did not expect nor intend to cover. Once the family unit changed, Blue Cross could not be expected to insure individuals of which it had no knowledge or background. Under the majority’s rationale, O’Neill could have more than one wife impregnated each year. And, under the majority’s rationale, O’Neill could seek coverage for any number of women bearing his children. One would ordinarily believe that one wife is capable of bearing a child once each year. Therefore, O’Neill wishes to impose upon Blue Cross additional risks, and these risks are not anticipated nor bargained for under the language of this insurance contract. To expect Blue Cross to cover unknown pregnancies to diverse women, without providing any notice whatsoever to Blue Cross and permitting Blue Cross to make a determination of continued coverage, goes to the essence of the policy. An insurance company is entitled to know what and whom it is insuring.

The trial court erred in extending coverage under the contract and I would reverse its judgment. The majority opinion hangs its hat on several pegs which, perhaps, I have addressed, but one peg deserves greater discussion. The family contract covering O’Neill, the employee, likewise covers the employee’s spouse and dependent children. As no spouse benefits are claimed, we concern ourselves with an interpretation of “dependent children.” We are not blinded by a complication in this matter, for there are four separate categories of dependent children specified in the policy: (1) Unmarried dependent children under the age of 19; (2) unmarried dependent children under the age of 23 who are full-time students; (3) unmarried children totally or permanently disabled provided the disability occurred prior to age 19; and (4) a category including stepchildren, foster children and adopted children, provided these children live in the household of the employee in a regular parent-child relationship, and who depend on the employee for *823support. As the reader can discern, an illegitimate child does not fall within any of these four definitions. It is true that children born into the family are automatically covered. This is commonly referred to as the “newborn clause.” But this infant was not born “into the family.” She was born “outside of the family.” She was born when O’Neill was still married to his wife, Gloria. Newborn coverage is afforded only to children born under the family contract. O’Neill was under a family contract. When he applied for coverage, he asked for “Family Coverage.” He evidenced this by an “x” placed in the appropriate box on the application. It is clear that the intent of the policy is to cover legitimate children, for maternity coverage is limited to the insured or the spouse of the insured with newborn coverage afforded to children born under the family contract. This infant child, born within a live-in relationship, is simply not a dependent child under the contract definitions.

I agree with that portion of the decision which affirms the trial court on the issue of specific performance, a denial of attorney’s fees, and the nonavailability of tort remedy against Blue Cross.

Blue Cross appeals from an order granting a money judgment against it in the amount of $36,125.63, arising out of a lawsuit instituted by O’Neill against Blue Cross — for benefits under a contract of insurance. The South Dakota Public Employees Insurance System has never been privy to this litigation or appeal. O'Neill’s application for insurance’ was submitted to Blue Cross. O’Neill refers to Blue Cross in his brief as "his insurance carrier” and submitted a claim to Blue Cross. The aforesaid system issued no policy. A tort cause of action against Blue Cross for vexatious refusal to pay and "intentional infliction of mental stress” was pleaded and ultimately dismissed. O’Neill wins under a contract of insurance with Blue Cross or he wins nothing at all.