Quaid v. U.S. Healthcare, Inc.

2007 UT 27
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
----oo0oo----
Robert and Sue Quaid, individually No. 20051066
and as guardians of Skylar Quaid,
Plaintiffs and Appellants,
v.
U.S. Healthcare, Inc., dba Aetna
U.S. Healthcare; Hoffman Products
New York Medical Benefits Plan;
and Loren Cook Company Health F I L E D
Care Benefit Plan,
Defendants and Appellees. March 23, 2007
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Third District, Salt Lake
The Honorable Ann Boyden
No. 030901500
Attorneys: Brian S. King, James L. Harris, Salt Lake City, for
plaintiffs
Gary L. Johnson, Martha Knudson, Salt Lake City, for
defendants
---
PARRISH, Justice:
INTRODUCTION
¶1 Robert and Sue Quaid ask this court to reverse the
district court’s summary judgment ruling that the Loren Cook
Company Health Care Benefit Plan (the “Loren Cook plan”) was not
liable for covering the medical expenses of their newly adopted
son, Skylar Quaid, because Skylar was also covered under his
birth parents’ HMO policy provided by Aetna U.S. Healthcare (the
“Aetna policy”). We find that the Aetna policy’s coverage of
Skylar effectively ceased when the parental rights of his birth
parents were terminated. Consequently, the Loren Cook plan’s
coordination of benefits (“COB”) provision does not operate to
deny Skylar coverage. We therefore reverse the district court’s

1 Skylar’s adoption proceedings are sealed. In
consideration of his birth parents’ privacy, we will refer to him
throughout this opinion by his adopted name, Skylar Quaid.
2 There is conflicting evidence about when the Quaids’
adoption of Skylar took place. Loren Cook contends that adoption
proceedings were merely initiated in November 1999, while the
Quaids contend that the adoption paperwork was completed and
parental rights were terminated on November 14, 1999. There is
evidence in the record, however, that an official decree of
adoption was signed by a Utah district court judge on May 8,
2000. The first provision of that adoption decree terminated the
parental rights of Skylar’s birth parents. Because this is an
appeal from summary judgment, we view disputed facts in the light
most favorable to the nonmoving party. Surety Underwriters v.
E & C Trucking, Inc., 2000 UT 71, ¶ 15, 10 P.3d 338.
Consequently, for the purposes of this opinion, we proceed with
the assumption that the parental rights of Skylar’s birth parents
were terminated on November 14, 1999.
3 The reason why coverage was provided from November 19,
1999, onward, rather than from November 14, 1999, the day on
which the Quaids contend the adoption was final, is unclear.
No. 20051066 2
summary judgment ruling and remand the case for further
proceedings consistent with this opinion.
BACKGROUND
¶2 Skylar Quaid1 was born in New York on June 24, 1999.
He suffered from severe birth defects, including congenital heart
disease. His illnesses rendered him totally disabled, and he
received inpatient treatment at Schneider Children’s Hospital in
New York. Robert and Sue Quaid initiated adoption proceedings in
the fall of 1999. The Quaids’ adoption of Skylar was finalized
on November 14, 1999,2 after which they began planning to move
Skylar to his new home in Utah.
¶3 Prior to the initiation of adoption proceedings,
Skylar’s treatment at Schneider Children’s Hospital was covered
by his birth parents’ Aetna policy. Robert Quaid, who was then
employed by the Loren Cook Company, added Skylar to the Loren
Cook plan on December 3, 1999, and his coverage was retroactive
to November 19, 1999.3 The Loren Cook plan is an employee
welfare benefit plan governed by the Employee Retirement Income
Security Act of 1974 (“ERISA”). Despite Skylar’s enrollment,
Loren Cook refused to guarantee Skylar coverage upon his arrival

3 No. 20051066
in Utah until it could determine how benefits should be
coordinated with the Aetna policy.
¶4 Utah Medicaid agreed to cover Skylar’s prospective
treatment at Primary Children’s Medical Center (“Primary
Children’s”) while the Quaids sorted out coverage with their
private insurance company. Although the transportation costs
were beyond the terms of the Aetna policy, Aetna agreed to pay
for Skylar’s trip to Salt Lake City after it was assured that
another party would assume responsibility for coverage once
Skylar was in Utah. The Quaids and Aetna’s regional general
counsel, James E. Brown, understood that this service marked the
end of Aetna’s obligation to Skylar. On December 23, 1999,
Skylar’s health was stable enough to allow travel, and the Quaids
brought him to Primary Children’s in Salt Lake City.
¶5 Ultimately, the administrators of the Loren Cook plan
denied coverage of Skylar’s medical treatment at Primary
Children’s because they believed that Aetna was liable as
Skylar’s primary insurance provider. They based their reasoning
on various provisions of both plans. The Loren Cook plan’s COB
provision states that “[i]f a Plan Participant is under a
disability extension from a previous benefit plan, that benefit
plan will pay first and this Plan will pay second.” The Aetna
policy does have a provision that extends benefits to totally
disabled members for up to a year after termination of their
coverage. The Loren Cook plan’s COB provision further provides
that it will deny coverage when “an HMO or network plan is
primary” and the covered person does not use the HMO’s services.
¶6 Aetna likewise denied claims submitted for Skylar’s
care because he was treated outside of its New York-based
provider network. In communications with Loren Cook plan
administrators, however, Aetna representatives did state that the
extension of benefits provision would have provided Skylar with
benefits had he stayed in New York. Skylar’s medical bills
exceeded $420,000 and were ultimately paid by Utah State
Medicaid.
¶7 The Quaids brought suit against Aetna and the Loren
Cook plan in district court. The Quaids later abandoned their
claim against Aetna. Following discovery, both the Quaids and
Loren Cook moved for summary judgment. The trial court granted
summary judgment to Loren Cook, finding that an extension of
benefits based on total disability was available to Skylar under
the Aetna policy and that, consequently, the COB provision
precluded coverage under the Loren Cook plan. The Quaids
appealed to this court; we have jurisdiction pursuant to Utah
Code section 78-2-2(3)(j).

No. 20051066 4
STANDARD OF REVIEW
¶8 On summary judgment, we review the trial court’s legal
conclusions for correctness, assuming that the material facts are
not in question. Surety Underwriters v. E & C Trucking, Inc.,
2000 UT 71, ¶ 14, 10 P.3d 338. If there is a factual dispute, we
view the facts in the light most favorable to the nonmoving
party. Id. ¶ 15.
ANALYSIS
¶9 The Quaids argue that an exclusion within the Aetna
policy precludes Skylar from receiving any benefits under Aetna’s
extension of benefits provision and that, consequently, Loren
Cook is liable for Skylar’s medical care. Because we agree with
this contention, we decline to consider the Quaids’ alternative
argument that 29 U.S.C. § 1169(c) overrides the COB provision of
the Loren Cook plan.
I. WE INTERPRET EACH INSURANCE POLICY ON THE BASIS
OF ITS PLAIN LANGUAGE
¶10 Our analysis is rooted in the concept that an insurance
policy is a contract between two parties. Benjamin v. Amica Mut.
Ins. Co., 2006 UT 37, ¶ 14, 140 P.3d 1210. If the language
within the four corners of the policy is unambiguous, the
parties’ intent should be surmised from the “‘plain meaning of
the contractual language.’” Id. (quoting Saleh v. Farmers Ins.
Exch., 2006 UT 20, ¶ 21, 133 P.3d 428). Exclusions from coverage
are interpreted no differently when the policy language is clear.
See S.W. Energy Corp. v. Cont’l Ins. Co., 1999 UT 23, ¶ 13, 974
P.2d 1239 (holding that unambiguous language is given its
ordinary meaning regardless of whether the specific provision
works to affirm or deny coverage); Alf v. State Farm Fire & Cas.
Co., 850 P.2d 1272, 1275 (Utah 1993) (rejecting the argument that
an exclusion was ambiguous and unenforceable because it was
inconsistent with the expectation of coverage); Allen v.
Prudential Prop. & Cas. Ins. Co., 839 P.2d 798, 803 (Utah 1992)
(finding that even though “an insurance contract is adhesive
[that] is no reason, in itself, to enforce what might be found to
be the reasonable expectations of the insured when those
expectations conflict with the plain terms of the policy”).
Insurance policy language is considered ambiguous if it is
“unclear, it omits terms, or the terms used to express the
intentions of the parties may be understood to have two or more
plausible meanings.” Saleh, 2006 UT 20, ¶ 15 (internal quotation
marks and citation omitted).

4 The United States Supreme Court also has stated that the
interpretation of ERISA plans like the Loren Cook plan at issue
should be based on their plain language. See Curtiss-Wright
Corp. v. Schoonejongen, 514 U.S. 73, 83 (1995) (instructing
courts to rely on the “face of written plan documents” when
interpreting ERISA plans); Allison v. Bank One-Denver, 289 F.3d
1223, 1236 (10th Cir. 2002) (“We have repeatedly rejected efforts
to stray from the express terms of the plan, regardless of whom
those express terms may benefit.”).
5 The phrase “except as described in the Covered Benefits
section of this Certificate or by a rider attached to this
Certificate” indicates that an explicit inclusion of a service in
the covered benefits section will trump an exclusion of the same
(continued...)
5 No. 20051066
¶11 Loren Cook places a great deal of reliance on
interpretations of the Aetna policy by James E. Brown, Aetna’s
regional general counsel. Neither party asserts, however, that
the language of either plan is ambiguous, and we agree.
Consequently, we refrain from using external sources to interpret
the plain language of each contract. See Bakowski v. Mountain
States Steel, Inc., 2002 UT 62, ¶ 16, 52 P.3d 1179 (“[A] court
will look to extrinsic evidence only when the contract language
is ambiguous.”).4
II. THE LOREN COOK PLAN IS LIABLE FOR SKYLAR’S MEDICAL COVERAGE
FROM THE POINT WHEN HIS BIRTH PARENTS’ PARENTAL
RIGHTS WERE TERMINATED
¶12 With the termination of their parental rights, any
legal obligation between Skylar and his birth parents was
severed. The Aetna policy excludes from coverage any service
that a member is not legally obligated to pay. This exclusion
countermands the extension of benefits provision, removing from
coverage all of Skylar’s treatment after the termination of his
birth parents’ parental rights. Because Skylar’s treatment would
not have been covered by Aetna regardless of location, the Loren
Cook plan’s COB provision does not exclude Skylar’s treatment
from coverage.
A. The Applicability of Aetna’s Exclusion for Services for
Which a Member Is Not Legally Obligated to Pay
¶13 The lead-in clause of the “Exclusions and Limitations”
section of the Aetna plan states, “The following are not Covered
Benefits except as described in the Covered Benefits section of
this Certificate or by a rider attached to this Certificate.”5

5 (...continued)
service in the exclusions and limitations section. For instance,
the rider providing limited coverage for prescription lenses
overrides the exclusion for “vision care services and supplies.”
6 There are other exclusions in the list based on the
context in which service is provided rather than the service
itself. For instance, the section excludes “payment for benefits
for which Medicare . . . is the primary payer” and “services
resulting from the commission or attempt to commit a felony.”
7 Defendants argue that this exclusion has nothing to do
with Aetna’s extension of benefits provision. In support of this
contention, they rely exclusively on the testimony of Mr. Brown,
who testified that Skylar was covered under the extension of
benefits provision, but acknowledged that he had not focused on
the exclusion. Rather than relying on his conjecture, we base
our evaluation on the plain policy language.
No. 20051066 6
Following the lead-in clause, the section alphabetically lists
services, from beam neurologic testing to religious counseling,
that are not covered benefits. Within this list is an exclusion
for “services for which a Member is not legally obligated to pay
in the absence of this coverage.”6
¶14 Covered benefits are defined as “Medically Necessary
Services and supplies set forth in this Certificate which are
covered subject to all of the terms and conditions of the Group
Agreement and Certificate.” Because covered benefits are subject
to “all of the terms and conditions” of the Aetna policy, any
reference to “covered benefits” within the policy necessarily
includes consideration of the exclusion for “services for which a
Member is not legally obligated to pay.” In short, if the
exclusion is applicable in this case, it would affect any
coverage for which Skylar might otherwise have been eligible
under Aetna’s extension of benefits provision.7
¶15 “Member” is defined in the Aetna policy as a
“Subscriber or Covered Dependent.” Skylar’s biological father
was a subscriber under the Aetna policy. Skylar was a covered
dependent under the Aetna policy until his birth parents
relinquished their parental rights. We therefore consider
whether Skylar or his birth parents had a legal obligation to pay
for his care absent Aetna’s coverage.
¶16 When Skylar’s birth parents relinquished their parental
rights, they had no further legal obligation to pay for his care.

8 For the purposes of this opinion, we assume that Skylar’s
adoption was finalized in New York, see supra note 1, and
consequently analyze the obligations of Skylar’s birth parents
under New York law. Because there is some indication in the
record, however, that Skylar’s adoption was finalized in Utah, we
note that our analysis of parental rights would be the same under
Utah law. In Utah, the termination of parental rights is defined
as “the permanent elimination of all parental rights and duties,
including residual parental rights and duties, by court order.”
Utah Code Ann. § 78-3a-103(1)(ee) (Supp. 2006). After parental
rights have been terminated, familial ties through the birth
parents are not legally recognized. See, e.g., Kasper v.
Nordfelt, 815 P.2d 747, 750 (Utah Ct. App. 1991) (holding that
grandparent visitation rights are severed “where the rights of
natural parents are terminated and the grandchildren are adopted
by nonrelatives”).
9 Although it appears from the spotty record that the
adoption and termination of the birth parents’ parental rights
occurred simultaneously, we emphasize that Aetna ceased to be
liable for Skylar when the parental rights were terminated. By
its terms, the Loren Cook plan’s coverage provided for Skylar’s
medical care from that point forward inasmuch as the plan
includes in its listing of covered dependents “children placed
with a covered employee in anticipation of adoption.”
7 No. 20051066
Under New York law,8 “after the making of an order of adoption
the birth parents of the adoptive child shall be relieved of all
parental duties toward and of all responsibilities for and shall
have no rights over such adoptive child.” N.Y. Dom. Rel. Law
§ 117, 1(a) (Consol. 2006).9
¶17 Next, we consider whether Skylar, though an infant, had
any legal obligation to pay for his care. Under New York law, an
unemancipated minor in the custody of his or her parent has “no
responsibility for satisfying . . . hospital charges.” Albany
Med. Ctr. Hosp. v. Johnston, 102 A.D.2d 915, 916 (N.Y. App. Div.
1984). Because Skylar was in the custody of either his birth
parents or his adoptive parents during the period of treatment in
question, he was without obligation to pay for his medical care.
In sum, the exclusion applies because neither Skylar nor his
birth parents had a legal obligation to pay for his medical
services.
¶18 Although we acknowledge that the drafting and placement
of this exclusion are not ideal, the exclusion is nevertheless
enforceable. The language clearly precludes from coverage any
service for which a member has no legal obligation to pay. While

No. 20051066 8
it is true that the exclusion is included in a long list of
coverage exclusions, the heading informs the reader of the
section’s import. Further, the certificate of coverage warns the
insured in bold, capitalized letters that “[I]T IS THE CONTRACT
HOLDER’S AND THE MEMBER’S RESPONSIBILITY TO UNDERSTAND THE TERMS
AND CONDITIONS IN THIS CERTIFICATE. IN SOME CIRCUMSTANCES,
CERTAIN MEDICAL SERVICES ARE NOT COVERED OR MAY REQUIRE
PREAUTHORIZATION BY HMO.” The unambiguous nature of the
exclusion requires its enforcement.
B. The Effect of the Exclusion on the Extension of Benefits
Provision in the Aetna Policy
¶19 Having determined that the exclusion applies to Skylar,
we next consider its operation in relation to the Aetna policy.
Neither party contests that Skylar’s status as a dependent
eligible for enrollment under the Aetna policy terminated when
Skylar was adopted. Rather, the dispute turns on the operation
of Aetna’s extension of benefits provision, which extends limited
benefits to those who meet its terms when full coverage has
terminated. Consequently, we carefully review the extension of
benefits provision, which reads as follows:
Any Member who is Totally Disabled on the
date coverage under this Certificate
terminates is covered in accordance with the
Certificate.
This extension of benefits shall only:
1. commence when a Medical Service is
rendered for the condition causing Total
Disability while the Member is covered
under this Certificate; and
2. provide Covered Benefits that are
necessary to treat medical conditions
causing or directly related to the
disability as determined by HMO; and
3. remain in effect until the earlier of
the date that:
a. the Member is no longer Totally
Disabled; or

9 No. 20051066
b. the Member has exhausted the
Covered Benefits available for
treatment of that condition; or
c. after a period of twelve (12)
months in which benefits under such
coverage are provided to the
Member.
¶20 Skylar was unquestionably covered as a dependent of his
birth father prior to the termination of parental rights, so he
meets the provision’s threshold requirement: coverage prior to
termination.
¶21 The exclusion at issue, however, clearly operates to
eliminate all services that would otherwise be available under
the extension of benefits provision. The provision is narrowly
drawn to “provide Covered Benefits” only for conditions relating
to the former member’s disability. And the exclusion removes
from the “Covered Benefits” category any service for which the
member has no legal obligation to pay. Further, the extension of
benefits provision remains in effect only until “the member has
exhausted the Covered Benefits available for treatment of that
condition.” In effect, Skylar “exhausted” the benefits he was
eligible to receive upon the termination of his birth parents’
parental rights because, at that point, neither he nor his birth
parents had any legal obligation to pay for his care. Thus, the
policy’s exclusion eviscerates any potentially available service
under Aetna’s extension of benefits provision.
C. The Effect of the Exclusion on the Loren Cook Plan’s
Coordination of Benefits Provision
¶22 Having determined that the exclusion eviscerates any
coverage under the Aetna policy’s extension of benefits
provision, we now turn to the Loren Cook plan’s COB provision.
The COB provision provides an order for payment when alternate
coverage exists. Because we have concluded that the Aetna policy
does not cover any of the services provided to Skylar after the
termination of his birth parents’ parental rights, the very
applicability of the COB provision is highly suspect.
¶23 Even assuming its applicability, however, the COB
provision does not relieve the Loren Cook plan from liability for
Skylar’s care. The COB provision states that the plan will not
cover “any charge that would have been covered by the HMO or
network plan had the Covered Person used the services of an HMO
or network provider.” Had Skylar used Aetna’s services, the
Aetna policy still would not have covered those services because

1 29 U.S.C. §§ 1001-1461, as amended by 29 U.S.C. § 1169(c).
No. 20051066 10
neither Skylar nor his biological parents had an obligation to
pay for them. Therefore, we conclude that the COB provision does
not excuse the Loren Cook plan from its obligation to pay for
Skylar’s medical care during the year after his adoption.
CONCLUSION
¶24 Skylar was excluded from receiving benefits under his
birth parents’ Aetna policy when their parental rights were
terminated. The Aetna policy excludes from coverage “services
for which a Member is not legally obligated to pay in the absence
of this coverage.” This exclusion prevents Skylar from receiving
any benefits under Aetna’s extension of benefits provision. As a
result, the Loren Cook plan’s COB provision does not operate to
deny Skylar coverage. We therefore reverse and remand to the
district court for proceedings consistent with this opinion.
---
¶25 Associate Chief Justice Wilkins and Justice Durrant
concur in Justice Parrish’s opinion.
---
NEHRING, Justice, concurring:
¶26 I join in Justice Parrish’s opinion. I write
separately because I believe it is important to bring proper
comfort to adoptive parents by confirming that provisions of the
Employee Retirement Income Security Act of 1974 (ERISA),1
guarantee that the adoption of a child who had the good fortune
to have been covered by health insurance will not result in the
perverse outcome urged on us by the defendant insurers.
¶27 That an adopted child takes on a new legal persona can
scarcely be made more clear than in this case, in which a child
known as Z.C. became Skylar Quaid. To be sure, certain matters
of consequence like his social security number and medical
records may have accompanied Z.C.’s corporeal self through his
transition to Skylar. In other important ways in the eyes of the
law, when Skylar was “born” through his adoption by the Quaids,
Z.C. legally expired. Under Utah law, the entry of the adoption
decree created a parent-child relationship between Mr. and Mrs.
Quaid and Skylar and caused the Quaids to “have all the rights
and be subject to all the duties of that relationship.” Utah
Code Ann. § 78-30-10 (2006). The Quaids acquired “a

11 No. 20051066
constitutionally protected liberty and privacy interest in
retaining custody of an adopted child.” Id. § 78-30-4.12(2)(d).
Conversely, with the entry of the decree of adoption,
Z.C./Skylar’s birth parents were “released from all parental
duties toward and all responsibilities for the adopted child, and
have no further rights with regard to that child.” Id.
§ 78-30-11.
¶28 Our laws give expression to Utah’s “compelling
interest” in “providing stable and permanent homes for adoptive
children in a prompt manner, in preventing the disruption of
adoptive placements, and in holding parents accountable for
meeting the needs of children.” Id. § 78-30-4.12(2)(a).
Stability and permanence are promoted by laws that permit an
adoptive family to fully integrate an adopted child into its
life. The goal of bringing an adopted child into the nurturing
embrace of the adopting family is made less attainable when the
health insurance coverage that is critical to a family’s
psychological and physical well-being is denied to the adopted
child. It is furthermore clear that this state’s interest in
promoting parental accountability for meeting the needs of
adopted children also falls victim to this circumstance.
¶29 To the defendant insurers, the event of young
Z.C./Skylar’s adoption by the Quaids, if relevant at all to the
legal analysis of the issues in this case, deserves little more
than a footnote. To me, his status as an adopted child is the
centerpiece of the analysis. The legal creation of Skylar Quaid
was accompanied by the legal extinction of Z.C. The same force
of law that brought Skylar Quaid into existence made him a
stranger to Aetna’s extension of benefits clause. The person who
qualified as a member under Aetna’s plan the instant before his
adoption disappeared with the entry of the adoption decree.
¶30 To the extent that the conceptual formulation I have
thus far presented does not provide a fully satisfying rationale
for imposing on the Loren Cook Company the obligation to extend
coverage to Skylar, those shortcomings are remedied by federal
law. By its very title, section 1169(c)(1) contemplates the
requirements of group health care plan coverage of dependent
children in cases of adoption. It states:
Coverage effective upon placement for
adoption. In any case in which a group
health plan provides coverage for dependent
children of participants or beneficiaries,
such plan shall provide benefits to dependent
children placed with participants or
beneficiaries for adoption under the same

No. 20051066 12
terms and conditions as apply in the case of
dependent children who are natural children
of participants or beneficiaries under the
plan, irrespective of whether the adoption
has become final.
29 U.S.C. § 1169(c)(1).
¶31 My reading leaves me convinced this statutory provision
is animated by an intention to provide persons contemplating
adoption with the assurance that they could know the scope of
available coverage in advance of an adoption. Only then could
they confidently pursue an adoption without the need to
investigate and compare the health care benefits to which
candidates for adoption might be entitled. The challenges posed
by adoption are great enough. To add to them the obligation to
obtain legal opinions concerning health care benefits is, at the
very least, unseemly and rendered unnecessary under section
1169(c)(1). The mandate of section 1169(c)(1) is clear: Adopted
children like Skylar are entitled to enjoy the same health plan
coverage as the biological children of his adoptive parents. The
statute neither invites nor admits exceptions.
¶32 Finally, I take up a matter that, unlike Skylar’s
adoptive status, is a footnote in this appeal, but one that
merits greater prominence. Utah State Medicaid paid more than
$420,000 for medical services rendered to Skylar. The
circumstances that led Medicaid to make these payments are not
clear, nor are they relevant to the issues we decide today. I am
in no way troubled that the taxpayers of this state exhibited
their compassion for a child in need by seeing to it that he was
provided critical medical services. In light of our
determination that the responsibility to pay for most if not all
of these medical services fell to Loren Cook, I hope the
compassion of our taxpayers is conditional and temporary.
---
¶33 Chief Justice Durham concurs in the concurring opinion
of Justice Nehring.