Ambiguity Expands Coverage in Home Health Policy
In its third insurance-related opinion of July 3, the Florida Supreme Court in Washington National Insurance Corporation v. Ruderman answered the following questions certified to it by the United States Court of Appeals for the Eleventh Circuit:
IN THIS CASE, DOES THE POLICY’S “AUTOMATIC BENEFIT INCREASE PERCENTAGE” APPLY TO THE DOLLAR VALUES OF THE “LIFETIME MAXIMUM BENEFIT AMOUNT” AND THE “PER OCCURRENCE MAXIMUM BENEFIT”?
The Eleventh Circuit further explained that answering this question might include answering the three following sub-questions:
A. Does an ambiguity exist about whether the Policy’s “Automatic Benefit Increase Percentage” applies only to the “Home Health Care Daily Benefit” or whether it also applies to the “Lifetime Maximum Benefit Amount” and the “Per Occurrence Maximum Benefit”?
B. If an ambiguity exists in this insurance policy—as we understand that it does—should courts first attempt to resolve the ambiguity by examining available extrinsic evidence?
C. Applying the Florida law principles of policy construction, does the Policy’s “Automatic Benefit Increase Percentage” apply to the “Lifetime Maximum Benefit Amount” and to the “Per Occurrence Maximum Benefit” or does it apply only to the “Home Health Care Daily Benefit”?
The Supreme Court answered the main question in the affirmative— the increase applies to the daily benefit, the per-occurrence maximum, and the lifetime maximum. The Court agreed at sub-question A. that the policy was ambiguous, it answered negatively at question B. meaning that no extrinsic evidence should be considered when a policy is found to be ambiguous, and it answered affirmatively that the percentage increased applied to all of the coverages.
The policy at issue was a home health services contract issued by Pioneer Life Insurance Company, which was later succeeded by Washington National. The policy provided coverage up to a maximum daily limit, an occurrence limit, and a lifetime maximum. The policy provision setting forth the benefits indicated that the daily limit would be increased each year by a percentage set forth in an accompanying schedule. The schedule listed dollar amounts for the daily benefit, the occurrence benefit and the lifetime benefit. It then generically referenced an 8% annual increase in the benefit amount. Because the daily, occurrence and lifetime amounts each were described as “benefits” in the schedule, the Court found that the schedule could have been interpreted to mean that the percentage increase applied to all of the limits, which was different than the policy itself wherein the percentage increase was said to apply only to the daily benefit. The Court then used traditional principles of construction to conclude that considering extrinsic evidence was not necessary and that the ambiguity in the policy should be construed in favor of increased coverage (i.e., applying the annual percentage increase to the daily, occurrence and lifetime caps). The majority’s opinion was met with a strongly worded dissent arguing that the policy was not ambiguous at all— it provided that the daily limit would be increased each year by an amount set forth in the schedule, and the schedule did exactly that. Nonetheless, the majority apparently believed the schedule was general enough to created uncertainty as to the proper interpretation of the policy as a whole.