Autrey v. Blue Cross and Blue Shield of Alabama

CourtSupreme Court of Alabama
Citation481 So.2d 345
PartiesHarold AUTREY v. BLUE CROSS AND BLUE SHIELD OF ALABAMA and Don Lawhorn. 84-243.
Decision Date08 November 1985

Bob Sherling of Drinkard & Sherling, Mobile, for appellant.

J. Edward Thornton and William A. Kimbrough, Jr., Mobile, for appellees.

HOUSTON, Justice.

Harold Autrey appeals from a summary judgment granted in favor of Blue Cross-Blue Shield and Don Lawhorn in this action to recover damages for breach of an insurance contract and reckless misrepresentation. We affirm in part, reverse in part, and remand for further proceedings.

In late April or early May 1983, Autrey discussed with Lawhorn 1 the possibility of purchasing a group policy of hospital insurance for his company. On May 5, 1983, Lawhorn prepared an enrollment agreement for Autrey and furnished application cards for him and two of his employees to complete and return. The application cards, in pertinent part, read as follows:

"I hereby make application for one of your Hospital Service Certificates.... I understand that this application is subject to your acceptance and that you will evidence its acceptance by forwarding to me an identification Card specifying the types and effective dates of the contract and coverage thereunder for which I am eligible...."

The Hospital Service Certificate, for which application was made, provides for its issuance "in consideration of the application of the Subscriber for this Certificate and of the payment in advance of the applicable fees." Section VI of the Certificate, entitled "Fees And Term," reads, in part:

"1. FEES--Fees are due and payable to, and must be received by, the Corporation in advance....

"2. TERM--In the event that the initial fee is received and accepted by the Corporation, this Contract shall commence and continue in force from and after the Subscriber's Effective Date for the term for which fees have been paid in advance and from term to term thereafter so long as the applicable fees are paid in advance unless terminated as hereinafter provided.

"3. GRACE PERIOD--A grace period of thirty (30) days shall be allowed within which the Subscriber may make payment ... to the Corporation of any fees except the initial fee...."

Section VIII, subpart 3, entitled "Varying Terms of Contract," reads:

"No representative or employee of the Corporation is authorized to vary the terms and conditions of this Contract between the Corporation and the Subscriber or to make any agreement or promise not specifically contained herein or to waive any provision hereunder other than by written endorsement issued so as to form a part of this Contract and signed by an executive officer of the Corporation."

Although disputed by Lawhorn, Autrey contends that he offered to pay an initial premium on May 5, but that Lawhorn represented to him that coverage would be effective as of that date if he returned the application cards and initial premium anytime during the month of May. Five days later, on May 10, Autrey's wife, Carolyn, was hospitalized. It is undisputed that at the time of her admittance, the application cards and initial premium had not been returned by Autrey to either Lawhorn or Blue Cross. In her affidavit, submitted in opposition to the motion for summary judgment, she states that she was informed by officials at the hospital that coverage had been confirmed with Blue Cross and, consequently, no payment was required upon her release. Blue Cross subsequently refused to pay for Mrs. Autrey's May 10 hospitalization and Autrey filed this suit, alleging breach of contract and reckless misrepresentation. 2

Summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Rule 56(c), Ala.R.Civ.P. All reasonable doubts concerning the existence of a genuine issue of fact must be resolved against the moving party. Fountain v. Phillips, 404 So.2d 614 (Ala.1981).

It is well recognized that an application for insurance is a mere offer which does not ripen into a contract unless, and until it is accepted by the insurance company. Liberty National Life Insurance Co. v. Smith, 356 So.2d 646 (Ala.1978). Furthermore, an agent whose authority is limited to soliciting insurance, delivering policies, and collecting premiums has no power to make a binding contract of insurance or to change stipulations in a contract of insurance. To do so, he must either be a general agent or be specially so authorized, or his course of dealing to that extent must have been ratified expressly or impliedly by the company. Liberty National Life Insurance Co. v. Staggs, 242 Ala. 363, 6 So.2d 432 (1942).

Summary judgment on the contract claim was proper in the present case because the application cards and initial premium were not returned by Autrey to either Lawhorn or Blue Cross prior to Mrs. Autrey's hospitalization. Moreover, Lawhorn, being only a soliciting agent, had no authority to vary the terms of the contract and thus bind Blue Cross. Autrey's contractual...

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