Loblaw, Inc. v. Employer’s Mut. Liab. Ins. Co. of Wisconsin, 88 N.Y.2d 852 (1996)
When an insurance policy exclusion is ambiguous and subject to multiple reasonable interpretations, it must be construed in favor of the insured.
Summary
Loblaw, Inc. sued its insurer, Employer’s Mutual, seeking reimbursement for anesthesiologist services related to surgery, arguing that the policy’s exclusion for “anesthesia” was ambiguous. The New York Court of Appeals held that the term “anesthesia” could reasonably be interpreted to exclude only the cost of anesthetic agents themselves, not the related medical services. Because the insurance company failed to demonstrate the exclusion was clear and unambiguous, the court reversed the Appellate Division’s order and reinstated the Supreme Court’s order in favor of Loblaw.
Facts
Loblaw, Inc. sought insurance reimbursement for the cost of surgery-related anesthesiologist services. The insurance policy covered certain medical and surgical care but contained an exclusion for “anesthesia.” The insurer, Employer’s Mutual, denied coverage, contending the exclusion applied to all costs associated with anesthesia, including the anesthesiologist’s services.
Procedural History
The Supreme Court ruled in favor of Loblaw. The Appellate Division reversed. The New York Court of Appeals granted leave to appeal and reversed the Appellate Division, reinstating the Supreme Court’s order.
Issue(s)
Whether the term “anesthesia” in an insurance policy unambiguously excludes reimbursement for the cost of anesthesiologist’s services, or whether it can reasonably be interpreted to exclude only the cost of the anesthetic agents themselves.
Holding
No, because the term “anesthesia” is ambiguous and could reasonably be construed to exclude only the cost of the anesthetic agents, not the services provided by an anesthesiologist.
Court’s Reasoning
The court reasoned that while “anesthesia” can broadly refer to the entire process of becoming anesthetized, it is also commonly used to refer specifically to the anesthetic substance. The court cited numerous cases and statutes where “anesthesia” is used to denote the substance itself. Because the term is susceptible to multiple reasonable interpretations, the ambiguity must be resolved in favor of the insured, Loblaw. The court also rejected the insurer’s argument that a separate exclusion for “inpatient drugs or supplies” would be rendered redundant if “anesthesia” only referred to the substance, noting that the inpatient exclusion only applied to drugs and supplies “normally included in a hospital’s charges.” The court also observed that the policy contained specific exclusions for other professional services like podiatry and chiropractic care, suggesting the absence of a similar exclusion for anesthesiologists implied their services were covered. The court emphasized that the insurer bears the burden of demonstrating that an exclusion is “stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case” (quoting Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 652). Because the insurer failed to meet this burden, the exclusion could not be enforced to deny coverage for the anesthesiologist’s services.