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Kirven v. Cent. States Health & Life Co.

Supreme Court of South Carolina

November 19, 2013, Heard; June 25, 2014, Filed

Opinion No. 27403

Opinion

 [*34]   [**796]  CERTIFIED QUESTION

JUSTICE KITTREDGE: We certified the following questions from the United States District Court for the District of South Carolina:

1. Can the definition of "actual charges" contained within S.C. Code Ann. Section 38-71-242 be applied to insurance contracts executed prior to the statute's effective dates?

2. Can the South Carolina Department of Insurance mandate the application of "actual charges" definition in S.C. Code Ann. Section 38-71-242 to policies already in existence on the statute's effective dates by prohibiting an insurance company from paying claims absent the application of that definition?

We answer both certified questions, "no."

This case concerns ] supplemental health insurance policies, which differ from ordinary health insurance policies in both purpose [***2]  and operation. Indeed, "[s]upplemental insurance policies pay cash benefits directly to the policyholders, as opposed to primary insurance policies that pay benefits directly to a third-party health care provider." Montague v. Dixie Nat. Life Ins. Co., No. 3:09-CV-687-JFA, 2011 U.S. Dist. LEXIS 61539, 2011 WL 2294146, at *18-19 (D.S.C. June 8, 2011) (noting the reason for this difference lies in the purpose of the policies and stating "the benefits under specified disease policies have nothing to do with how much a particular cancer treatment may cost" because ] supplemental insurance policies contain a "two-fold  [*35]  promise: a promise to pay for the medical treatment and a promise to provide its policyholders with additional monetary relief . . . to cope with the myriad of other costs and expenses that arise from their battle with cancer, but are not covered by their primary health insurance policies."); accord Guidry v. Am. Pub. Life Ins. Co., 512 F.3d 177, 182 n.6 (5th Cir. 2007) [**797]  (] "Although the fundamental purpose of ordinary health insurance coverage is to indemnify against loss from disease or illness, the purpose of a supplemental insurance policy, such as the one at issue in this case, is not only to cover medical expenses but also . . . to provide supplemental income for general living expenses or any other purpose. Thus, the payment of benefits [***3]  in amounts exceeding actual expenses does not lead to an unreasonable result." (quotations omitted)).

Plaintiff Diane Kirven purchased a supplemental Cancer and Specified Disease policy from defendant Central States Health and Life (Central States) in 1999. Under the policy, Central States promised to pay Kirven a defined benefit in an amount equal to, or based on a percentage of, the "actual charges" for certain medical and pharmaceutical cancer treatments. However, the term "actual charges" was not defined under the policy. Kirven was diagnosed with cancer in 2003, and she underwent chemotherapy and radiation treatments. Consistent with the understood purposes of a supplemental insurance policy, Central States paid Kirven benefits based on the amount she was billed by her medical providers.1 The cancer fell into remission.

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409 S.C. 30 *; 760 S.E.2d 794 **; 2014 S.C. LEXIS 211 ***; 2014 WL 2880575

Diane Kirven, on behalf of herself and all others similarly situated, Plaintiff, v. Central States Health & Life Co., of Omaha, and Philadelphia American Life Insurance Company, Defendants.

Prior History:  [***1] ON CERTIFICATION FROM THE UNITED STATES DISTRICT COURT FOR SOUTH CAROLINA. Appellate Case No. 2013-000273. Margaret B. Seymour, United States District Judge.

Kirven v. Cent. States Health & Life Co., 2013 U.S. Dist. LEXIS 15191 (D.S.C., Feb. 5, 2013)

Disposition: CERTIFIED QUESTIONS ANSWERED.

CORE TERMS

actual charge, insurance policy, insured, policies, benefits, retroactivity, supplemental, cancer, disease, effective date, provider, terms, contracts, public purpose, substantial impairment, contractual, regulation, impairing, questions

Healthcare Law, Health Insurance, Reimbursement, General Overview, Insurance Law, Types of Insurance, Excess Insurance, Insurance Coverage, Disability Insurance, Policy Interpretation, Ambiguous Terms, Construction Against Insurers, Obligations, Governments, Legislation, Interpretation, Evidence, Inferences & Presumptions, Presumptions, Particular Presumptions, Effect & Operation, Prospective Operation, Retrospective Operation, Constitutional Law, Congressional Duties & Powers, Contracts Clause, Scope, Application & Interpretation, Claim, Contract & Practice Issues, Premiums, Grace Periods, Administrative Law, Agency Rulemaking