Third Party Beneficiary – Donor Beneficiary – One Year Limitation
Clause Enforceable Against Non-Party To Insurance Contract
QualChoice v. Brotherhood Insurance Co., 2007-Ohio-226
Fifth District Court of Appeals Case No. 06 CA 00020
The Fifth District Court of Appeals affirmed the granting of summary judgment in favor of Brotherhood Mutual Insurance Company who insured Canal Fulton Christian Fellowship Church. William Cunningham was volunteering at the church and was injured. The church had a $5,000 medical payment provision and Mr. Cunningham had his own health benefits coverage with QualChoice. QualChoice paid Mr. Cunningham’s medical expenses, slightly over $1,000, and thereafter commenced the within subrogation claim seeking recoupment of monies paid via the med-pay portion of the Brotherhood Mutual Insurance Company policy. Mr. Wright successfully argued that QualChoice had failed to submit the claim within one year from the date of injury which is a policy requirement.
In the appellate court, QualChoice argued that it was not in privity of contract with Brotherhood and, therefore, the one year limitation clause was unenforceable. The court discussed the privity argument and stated in paragraphs 12 and 13 of its opinion, the following:
“Since medical payments coverage is optional coverage not required by operation of law, it is purely contractual in nature. If the language of a contract is clear and unambiguous, courts must enforce the instrument as written. (Citations omitted). Therefore, so long as the language limiting medical payments benefits to only those expenses incurred within one year of the accident is clear and unambiguous, it will be enforced ...
Appellant claims that it was unaware of the one year time limitation, and should therefore not be bound by it, as it was not in privity with appellee. This argument is unpersuasive since, although appellant was not in privity with the appellee, appellant’s insured was a third party beneficiary of the appellee’s policy.”
The court thereafter undertook a legal analysis of the third party beneficiary status and stated in paragraph 15 of its opinion, the elements associated with this legal concept:
“’A third party beneficiary is one for whose benefit a promise has been made in a contract but who is not a party to the contract.’ (Citation omitted) ‘The third party need not be named in the contract, as long as (she) is contemplated by the parties to the contract and sufficiently identified.’ Id. Moreover, the ‘promisee must intend that a third party benefit from the contract in order for that third party to have enforceable rights under the contract.’ (Citation omitted). A third party beneficiary is free to accept or reject the benefits of the contract; however, by accepting the benefits of the contract, the third party beneficiary also assumes the attendant burdens.” (Emphasis original)
The court concluded that William Cunningham was a third party beneficiary of the contract entered into between Brotherhood Mutual Insurance and the church. Once QualChoice paid Mr. Cunningham’s bills, they became subrogated to his rights.
The court thereafter concluded in paragraph 17 of its opinion the obligation incumbent upon Mr. Cunningham and QualChoice:
“As an intended third-party beneficiary, appellant’s insured may choose to accept the benefits of the insurance contract. However, he must also assume the attendant burdens. As stated above, appellant’s insured, and thus the appellant, cannot receive a greater benefit than that provided for in the contract. (Citation omitted)”
The remaining argument advanced by QualChoice was that the one year notice provision should not be enforced as against Mr. Cunningham (and derivatively as against QualChoice) due to lack of knowledge by QualChoice of the provision.
The Fifth District rejected this argument and stated in paragraph 18 of its opinion, the following:
“The question remains as to why appellant’s insured, and appellant as the subrogated claimant, should be bound by the one year notice provision when appellant’s insured was not a party to the contract and could not have known about the provision. The answer is that appellant’s insured was a donee beneficiary and ‘a donee beneficiary may sue to enforce the contract only if the contract was intended for his benefit and it was intended that he have the right to enforce it.’ In the case sub judice, Brotherhood and the Church intended for injured persons to be able to obtain some medical payments, regardless of whether the Church was at fault. These two contracting parties also intended that this coverage be available only if notice were given within a certain time. This rationale makes sense especially when you consider that appellant’s insured was a donee beneficiary. A person is a donee beneficiary when ‘it appears from the terms of the promise ... that the purpose of the promisee (the church) in obtaining the promise (by Brotherhood to pay insurance benefits) ... is to make a gift to the beneficiary or to confer upon him a right against the promisor (Brotherhood) to some performance neither due nor supposed or asserted to be due from the promisee to the beneficiary.”
Thus QualChoice (or Mr. Cunningham) was bound by the one year notice provision.
The case is of interest to review in this Newsletter inasmuch as it does discuss in detail the legal distinction between “third party beneficiaries” and “donee beneficiaries” and, more importantly, can be of important application in the insurance arena.
The information contained in this newsletter is not a legal opinion and is for informational purposes only. Specific questions should be directed to an attorney for a legal opinion.
Third Party Beneficiary – Donor Beneficiary – One Year Limitation
Clause Enforceable Against Non-Party To Insurance Contract
QualChoice v. Brotherhood Insurance Co., 2007-Ohio-226
Fifth District Court of Appeals Case No. 06 CA 00020
The Fifth District Court of Appeals affirmed the granting of summary judgment in favor of Brotherhood Mutual Insurance Company who insured Canal Fulton Christian Fellowship Church. William Cunningham was volunteering at the church and was injured. The church had a $5,000 medical payment provision and Mr. Cunningham had his own health benefits coverage with QualChoice. QualChoice paid Mr. Cunningham’s medical expenses, slightly over $1,000, and thereafter commenced the within subrogation claim seeking recoupment of monies paid via the med-pay portion of the Brotherhood Mutual Insurance Company policy. Mr. Wright successfully argued that QualChoice had failed to submit the claim within one year from the date of injury which is a policy requirement.
In the appellate court, QualChoice argued that it was not in privity of contract with Brotherhood and, therefore, the one year limitation clause was unenforceable. The court discussed the privity argument and stated in paragraphs 12 and 13 of its opinion, the following:
“Since medical payments coverage is optional coverage not required by operation of law, it is purely contractual in nature. If the language of a contract is clear and unambiguous, courts must enforce the instrument as written. (Citations omitted). Therefore, so long as the language limiting medical payments benefits to only those expenses incurred within one year of the accident is clear and unambiguous, it will be enforced ...
Appellant claims that it was unaware of the one year time limitation, and should therefore not be bound by it, as it was not in privity with appellee. This argument is unpersuasive since, although appellant was not in privity with the appellee, appellant’s insured was a third party beneficiary of the appellee’s policy.”
The court thereafter undertook a legal analysis of the third party beneficiary status and stated in paragraph 15 of its opinion, the elements associated with this legal concept:
“’A third party beneficiary is one for whose benefit a promise has been made in a contract but who is not a party to the contract.’ (Citation omitted) ‘The third party need not be named in the contract, as long as (she) is contemplated by the parties to the contract and sufficiently identified.’ Id. Moreover, the ‘promisee must intend that a third party benefit from the contract in order for that third party to have enforceable rights under the contract.’ (Citation omitted). A third party beneficiary is free to accept or reject the benefits of the contract; however, by accepting the benefits of the contract, the third party beneficiary also assumes the attendant burdens.” (Emphasis original)
The court concluded that William Cunningham was a third party beneficiary of the contract entered into between Brotherhood Mutual Insurance and the church. Once QualChoice paid Mr. Cunningham’s bills, they became subrogated to his rights.
The court thereafter concluded in paragraph 17 of its opinion the obligation incumbent upon Mr. Cunningham and QualChoice:
“As an intended third-party beneficiary, appellant’s insured may choose to accept the benefits of the insurance contract. However, he must also assume the attendant burdens. As stated above, appellant’s insured, and thus the appellant, cannot receive a greater benefit than that provided for in the contract. (Citation omitted)”
The remaining argument advanced by QualChoice was that the one year notice provision should not be enforced as against Mr. Cunningham (and derivatively as against QualChoice) due to lack of knowledge by QualChoice of the provision.
The Fifth District rejected this argument and stated in paragraph 18 of its opinion, the following:
“The question remains as to why appellant’s insured, and appellant as the subrogated claimant, should be bound by the one year notice provision when appellant’s insured was not a party to the contract and could not have known about the provision. The answer is that appellant’s insured was a donee beneficiary and ‘a donee beneficiary may sue to enforce the contract only if the contract was intended for his benefit and it was intended that he have the right to enforce it.’ In the case sub judice, Brotherhood and the Church intended for injured persons to be able to obtain some medical payments, regardless of whether the Church was at fault. These two contracting parties also intended that this coverage be available only if notice were given within a certain time. This rationale makes sense especially when you consider that appellant’s insured was a donee beneficiary. A person is a donee beneficiary when ‘it appears from the terms of the promise ... that the purpose of the promisee (the church) in obtaining the promise (by Brotherhood to pay insurance benefits) ... is to make a gift to the beneficiary or to confer upon him a right against the promisor (Brotherhood) to some performance neither due nor supposed or asserted to be due from the promisee to the beneficiary.”
Thus QualChoice (or Mr. Cunningham) was bound by the one year notice provision.
The case is of interest to review in this Newsletter inasmuch as it does discuss in detail the legal distinction between “third party beneficiaries” and “donee beneficiaries” and, more importantly, can be of important application in the insurance arena.
The information contained in this newsletter is not a legal opinion and is for informational purposes only. Specific questions should be directed to an attorney for a legal opinion.