Bushnell v. Medico Insurance Company

Leroy Bushnell (plaintiff), on behalf of his mother, Evelyn Bushnell, purchased a long-term care insurance policy for Evelyn from Medico Insurance Company (defendant). Evelyn’s policy was effective starting in 1986. The Medico policy covered skilled nursing care in a skilled nursing facility (SNF) but required that the insured have a three-day hospital stay immediately preceding admission to the SNF. The Medico policy was effective for a year-long term and renewed each successive year as a new year-long contract. The Medico policy also contained a conformation clause stating that the policy would amend itself to comply with state law. In 1988, Washington law was amended to forbid long-term care insurance companies from requiring prior hospitalization as a condition of coverage. In addition, the Medico policy had a 20-day elimination period during which SNF care would not be covered if the policy holder failed to pay the premium; however, the 20-day elimination period only started after the expiration of the policy’s 30-day grace period. Evelyn paid her premiums on time for 20 years. Leroy started paying Evelyn’s premiums for her in January 2007. Leroy paid the premium for March 2007 late, but within the 30-day grace period. On the recommendation of Evelyn’s doctor, Evelyn was admitted to an SNF on February 24, 2007. Leroy submitted a claim for coverage to Medico on Evelyn’s behalf. Medico denied Evelyn’s claim, stating that (1) Evelyn had failed to complete the required three-day hospital stay prior to SNF admission; (2) Washington’s 1988 law banning prior hospitalization requirements was inapplicable because Evelyn’s policy commenced in 1986; and (3) coverage had lapsed for nonpayment. Leroy challenged, arguing that (a) Medico’s prior hospitalization requirement violated Washington law; (b) the 1988 Washington law applied to Evelyn’s Medico policy even though coverage started in 1986 because the policy renewed under a new contract each year; and (c) coverage did not lapse because Leroy paid the March 2007 premium within the grace period. The trial court dismissed Leroy’s claim. Leroy appealed.