APPEAL FROM THE CIRCUIT COURT OF THE THIRD JUDICIAL CIRCUIT BROOKINGS COUNTY, SOUTH DAKOTA HONORABLE DAVID R. GIENAPP Judge.
The opinion of the court was delivered by: Gilbertson, Chief Justice
[¶1.] Dellas Cole (Dellas) and Margie Cole (Margie) submitted an application for health insurance coverage to Wellmark of South Dakota, Inc. (Wellmark). Della Tschetter (Tschetter), an independent insurance agent, assisted Coles with the application process. Wellmark claimed it mailed riders for exclusions to Coles at their home address. It further claimed it denied Coles' application when they failed to return signed riders as requested by Wellmark. Coles claimed they did not receive the riders, rejection notice, or the premium refund. After their daughter was injured, Coles discovered they had not been approved and sued Wellmark and Tschetter claiming each had a duty under tort or contract to provide the coverage. The trial court dismissed the matter on Defendants' motions for summary judgment. Coles appeal. We affirm.
[¶2.] In September 2003, Dellas and Margie Cole contacted Della Tschetter Insurance to obtain quotes for health insurance for their family. Margie's employment change in August required the family to purchase a new policy or enroll for COBRA coverage with her previous employer by September 31, 2003, in order to avoid a lapse in coverage. Tschetter's agency was one of three the Coles contacted. Tschetter dropped off information at the Coles' home the same day she spoke over the telephone with Margie. Due to Tschetter's prompt service, the Coles decided to work with her on obtaining health insurance coverage.
[¶3.] The Coles decided to apply to Wellmark.*fn1 They were motivated to select Wellmark because of their ability under "Option 1" of its individual plan to select the effective date of the policy in exchange for paying the first month's premium at the time the application was submitted. Coles determined that "Option 2," wherein Wellmark would assign an effective date, was not something that would suit their timeline.
[¶4.] On September 10, 2003, Tschetter met with the Coles who had completed most of their application form prior to the meeting. Tschetter helped them finalize their application and answered their questions. Tschetter informed the Coles that their youngest son's allergies would probably be considered a preexisting condition for which a rider (exclusion) would be issued. The application stated immediately above the signature line:
COVERAGE APPLIED FOR WILL NOT BE EFFECTIVE UNTIL WELLMARK OR USAL, AS THE UNDERWRITERS OF THE HEALTH AND LIFE COVERAGES, RESPECTIVELY, HAVE REVIEWED AND APPROVED THIS APPLICATION AND NOTIFIED ME IN WRITING OF THE APPROVAL OF SUCH INSURER'S COVERAGE. WELLMARK UNDERWRITES COVERAGE UP TO THE EFFECTIVE DATE OF THE POLICY REGARDLESS OF WHEN THE APPLICATION WAS APPROVED. Any payment will be deposited immediately upon Wellmark's receipt of this application. Should my application not be approved, my payment will be refunded in full.
(Bolding, underlining, and all capitals in original). The Coles both signed and dated the form on the signature lines immediately below these statements.
[¶5.] Coles selected October 1, 2003, as the effective date for coverage and noted this on their application. As the meeting wrapped up, Tschetter said that the Coles were "all set," and "good to go." The application, a check for $567.00 for the first month's premium, and an authorization form for Wellmark to electronically deduct premiums from Coles' checking account for subsequent monthly premiums were mailed by Tschetter to Wellmark.
[¶6.] Wellmark received the application on September 15, 2003, and immediately cashed the Coles' check. Wellmark claimed it attempted to contact the Coles by letter dated September 18, 2003, to advise them that two riders would be issued on their proposed policy. In that letter, Wellmark claimed it requested their signatures on the riders before the policy would issue. When Wellmark did not receive the signed riders, it claimed it sent a letter dated October 24, 2003, advising Coles that their application had been rejected. The Coles claimed they never received either letter.
[¶7.] Tschetter claimed she also attempted to contact the Coles by telephone to inquire as to why they had not signed and returned the riders. Tschetter later testified that she left two messages on Coles' answering machine. Coles testified they never received the messages. Tschetter further testified she assumed the Coles had decided to use one of the other local agents Coles had been in contact with before electing to work with Tschetter, and had procured coverage with another insurer.
[¶8.] On November 4, 2003, Wellmark issued a refund check to the Coles for the $567.00 premium payment. Coles claimed they did not receive the refund check.*fn2 Coles also testified they never received an approval letter, insurance cards, or any notice they were insured. They further testified premiums for November and December were not deducted from their checking account.
[¶9.] On November 9, 2003, Coles' daughter suffered a knee injury. On December 2, 2003, medical care was sought. It was then that Margie contacted Tschetter to inquire about the insurance policy. Tschetter informed Margie that the policy was never issued due to the Coles' failure to sign and return the riders. Coles incurred $20,000.00 in medical expenses for their daughter's knee surgery. A suit was filed against Wellmark and Tschetter for breach of contract, negligent misrepresentation, estoppel, reformation, waiver, and breach of fiduciary duty in an effort to obtain the coverage with an effective date of October 1, 2003.
[¶10.] During his deposition, Dellas testified as to what he understood the language, as reprinted in paragraph four above, meant regarding when coverage would be in effect:
Q: As you sit here today, what does that sentence mean?
A: It means that what is discussed in this application form, that the insurance we applied for with this application does not kick in, is not effective, until they notify us, until we receive something in the mail, they notify us in writing.
Q: So the approval of your application and the issuance of coverage, according to this sentence, is subject to review by Wellmark, is that how you read it?
Q: What did you think that meant when you were filling out the application and when you signed it?
A: It would mean that they would review our application and then act upon it.
Q: And how would they act upon it?
A: Approve or whatever, whatever they do. . . .
Q: At the time you were meeting with Della Tschetter to discuss this application and fill it out, and when you signed the application, did you understand the ...