Arkansas Poultry Federation Ins. Trust v. Lawrence, CA

• Decision Date: 13 March 1991
• Docket Number: No. CA,CA
• Citation: 805 S.W.2d 653,34 Ark.App. 45
• Parties: ARKANSAS POULTRY FEDERATION INSURANCE TRUST, Appellant, v. Larry LAWRENCE and Arkansas Blue Cross and Blue Shield, a Mutual Insurance Co., Appellees. 90-161.
• Court: Arkansas Court of Appeals

Page 653

805 S.W.2d 653

34 Ark.App. 45

ARKANSAS POULTRY FEDERATION INSURANCE TRUST, Appellant, v. Larry LAWRENCE and Arkansas Blue Cross and Blue Shield, a Mutual Insurance Co., Appellees.

No. CA 90-161.

Court of Appeals of Arkansas Division II.

March 13, 1991.

Randy Coleman, Little Rock, for appellant.

Winslow Drummond, Little Rock, for appellees.

ROGERS, Judge.

This case involves a dispute between two health insurance carriers. The insured, appellee Larry Lawrence, underwent a heart transplant on March 3, 1986. In 1978, Lawrence began working as a truck driver for Caldwell Milling Company in Rosebud, an egg production, grading and distribution operation. As a full-time employee, Lawrence was eligible for coverage, and was covered, under a group health insurance plan with appellant Arkansas Poultry Federation Insurance Trust (hereinafter "Trust"). In June of 1979, Lawrence stopped working for Caldwell Milling on a full-time basis, and resumed being an independent producer for the company as he had been before his employment. As a producer, Lawrence remained eligible for health insurance coverage with the Trust under a different plan, but his coverage was never formally converted. Nevertheless, Lawrence continued to pay premiums, and claims were submitted and accepted by the Trust on his behalf. Since his employment with Atlas Carriers in 1984, Lawrence was covered under a group insurance plan for employees with appellee Arkansas Blue Cross and Blue Shield (hereinafter "Blue Cross").

Prior to surgery, Lawrence first contacted the Trust about benefits, but was informed by its acknowledged third-party administrator, Fewell & Associates, Inc., that a heart transplant was considered an experimental procedure, and was thus excluded from coverage under the plan. Blue Cross paid benefits in the amount of $103,727.41, and thereafter filed this lawsuit, joined by Lawrence, seeking contribution from the Trust, based on a coordination of benefits clause contained in the Trust's policy. The case was tried before the trial court sitting as the trier of fact. The trial court ruled in appellees' favor, finding that Lawrence remained covered under the Trust's plan as an employee, that each insurer extended primary coverage for the loss, and that the Trust would share equally in the loss up to the maximum limits of its liability of $50,000. The trial court also assessed a penalty and attorney's fees against the Trust.

The Trust appeals from this decision and raises four issues for reversal. We find merit in one of the issues raised, and affirm in part and reverse in part.

First, the Trust argues that the trial court erred in awarding judgment when Lawrence was not an eligible, covered employee pursuant to its written eligibility and termination provisions. Under the Trust's plan for employees, only full-time employees, those who work thirty hours a week, are eligible for coverage, and by its terms coverage terminates when this eligibility requirement is no longer met. Thus, the Trust argues that its coverage effectively terminated when Lawrence ceased full-time employment with Caldwell Milling in June of 1979. Appellees do not question this eligibility requirement, but argue that the Trust is estopped from asserting this position based on certain events which followed the cessation of Lawrence's employment.

At trial, Lawrence testified that when he quit working for Caldwell Milling, he had discussions with Reta Caldwell, the company bookkeeper, about continuing his coverage with the Trust. He said that it was his understanding that his coverage would remain in effect. He testified that the premiums for the insurance were deducted from the payments made to him by Caldwell Milling as a producer, and that he continued to submit claims to the Trust. There is documentation in the record reflecting the submission and payment of numerous claims on behalf of Lawrence and his family from 1981 through 1985.

Reta Caldwell testified that in her conversations with Lawrence, he indicated that he wanted to maintain the insurance by switching over to the producer plan without a gap in coverage. She called this a "unique" situation, as she had never done a change-over before. She said that normally, a producer requesting coverage would fill out a form proving insurability, but that she felt that this form would not apply since Lawrence was already insured. She stated that because she was unsure as to how to proceed, she called Fewell & Associates for instruction. She said that in this conversation she advised that Lawrence was no longer an employee, but that he wanted to continue coverage as a producer. Ms. Caldwell testified that the woman she spoke to on the phone told her to "leave it as it is for the time being." She said that she did what she was told, and had Lawrence fill out a form authorizing the company to withhold premiums from his earnings. She further testified that she never heard anything more from Fewell & Associates about the matter.

Robert Alexander, staff counsel with Fewell & Associates, testified that there was no documentation in its files regarding a request to change Lawrence to the producer plan. He acknowledged, however, that Lawrence remained covered as an employee throughout this period of time. He stated that the difference in coverage between employees and producers was slight, the differences being in maternity coverage, life insurance benefits and premiums.

Laura Lawrence, the administrator and underwriter at Fewell & Associates, testified that she was responsible for handling the Caldwell Milling account in 1979. She said that she recalled no conversations with Ms. Caldwell about changing plans for Lawrence, and that she never would have advised her to leave his coverage as that of an employee. She described a changeover as a "very simple process," involving the filling out of a request form.

The trial court made the following written findings on this issue:

The only real dispute as to any essential facts is whether or not Ms. Caldwell advised Arkansas Poultry Federation Insurance Trust of Mr. Lawrence's leaving Caldwell's employment and his request to continue his insurance coverage. The Court is of the conviction that the evidence preponderates the accuracy of her testimony on that fact. That testimony is supported by these facts: (1) Mr. Lawrence paid the entire premiums required for the following several years; (2) The claims paid subsequent to that notice are consistent with his family's continuing need for medical insurance coverage; (3) a conversion form was signed by Lawrence at the direction of Ms. Caldwell; (4) Ms. Caldwell had never before experienced those requirements to change coverages from an employee to a producer. All of these factors support the concept that a notice and inquiry was made by Ms. Caldwell of the Federation through Fewell. If inquiry was made, logic dictates that directions were received and some efforts required to conform by these directions. Equally important was the lack of a motive for either Ms. Caldwell or Mr. Lawrence to fail to complete the conversion on the event of his employment termination. The Court has no way to determine whether Ms. Caldwell failed through misunderstanding to complete the instruction she received from Fewell, or Fewell neglected after receiving notice to follow through to completely inform Ms. Caldwell of those additional stages required to complete the transfer of plans; however, in review of the procedures employed between Caldwell and Fewell, the billing originating with Fewell, the Court would conclude that Fewell neglected to remove Lawrence from one form of coverage and transfer him to the second.

Estoppel in pais is the doctrine by which a person may be precluded by his acts or conduct, or by failure to act or speak under circumstances where he should do so, from asserting a right which he otherwise would have had. Daves v. Hartford Accident & Indemnity Co., 302 Ark. 242, 788 S.W.2d 733 (1990). The doctrine of estoppel can be applied to bar the defense of noncoverage in insurance cases. See Time Insurance Co. v. Graves, 21 Ark.App. 273, 734 S.W.2d 213 (1987) (substituted opinion on rehearing). Any agreement, declaration, or course of action on the part of an insurance company which leads a party insured honestly to believe that, by conformity thereto, a forfeiture of his policy will not be incurred, followed by due conformity on his part, will estop, and ought to estop, the company from insisting on a forfeiture, although it might be claimed under the express terms of the contract. Home Mutual Fire Insurance Co. v. Riley, 252 Ark. 750, 480 S.W.2d 957 (1972).

Our standard of review is well-settled. The findings of fact of a trial judge sitting as the finder of fact will not be disturbed on appeal unless, considering the evidence in the light most favorable to the appellee, the findings are clearly erroneous or clearly against the preponderance of the evidence, giving due regard to the opportunity of the trial court to assess the credibility of the witnesses. Special Insurance Services, Inc. v. Adamson, 20 Ark.App. 8, 722 S.W.2d 875 (1987).

Here, the trial court found credible Ms. Caldwell's testimony that she informed Fewell & Associates that Lawrence was no longer an employee, and that a request was made for the conversion of coverage. For seven years, there was reliance on the representation that Lawrence's coverage was continued. Premiums were paid and accepted, and claims were submitted and paid by the Trust. There is further evidence in the record that in connection with this claim in 1986, Fewell & Associates was again informed that Lawrence was not an employee and that he had not been since 1979. Fewell & Associates advised that coverage would need to be changed to the producer plan, and there were assurances that no medical benefits would be lost. We are also mindful that Lawrence's claim was not...