October 19, 1978

Ms. Jane Nelson, Secretary 
Department of Commerce and
  Consumer Affairs 
State Capitol 
Pierre, South Dakota 57501

Official Opinion No. 78-46

Health insurance sold to students of South Dakota colleges

Dear Ms. Nelson:

You have requested an opinion from this office based upon the following factual situation:

FACTS: 

Various insurers market a type of health insurance to students at South Dakota colleges which is, of course, acceptable and probably commendable. However, several of these insurees with the cooperation of the various educational institutions are marketing this product in a manner which could be termed as “negative-option.”  In other words, unless the student expressly signs some sort of form stating that he does not wish the insurance program, he is automatically enrolled in the program and he is charged accordingly. We are led to believe that if the student or his family does not pay this charge for insurance that perhaps his grades are withheld or possibly, he could be prohibited from receiving his degree.

Based upon the above facts, you have asked the following question:

QUESTION: 

Is such a scheme or marketing insurance illegal under the laws of the State of South Dakota or in the alternative, should such a mode of merchandising be determined to be void as a matter of public policy?

It is a basic principle of law that a contract of insurance must be assented to by both parties either in person or by their agents. There must be a meeting of the minds of the parties on the essential terms and elements of the contract.  43 Am.Jur.2d Insurance § 403.  These basic principles of law are also reflected in SDCL 53-3 and SDCL 53-7 relating to general requirements of contract law in South Dakota.

In my view, the situation you describe does not meet the requisites of law with respect to establishment of a valid legal insurance contract.  It is understandable that the various colleges in South Dakota would feel it desirable to have a high degree of participation in such programs, but I do not believe this practicality authorizes such a deviation from general insurance contract law.

Respectfully submitted,

William J. Janklow
Attorney General

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