Blount v. Metropolitan Life Ins. Co.

• Decision Date: 23 May 1984
• Docket Number: No. 14039,14039
• Parties: Joyce M. BLOUNT, Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, et al., Appellees.
• Court: Texas Court of Appeals

Page 565

677 S.W.2d 565

Joyce M. BLOUNT, Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, et al., Appellees.

No. 14039.

Court of Appeals of Texas,

Austin.

May 23, 1984.

Rehearing Denied Sept. 12, 1984.

Joseph Hunter, Alvin, for appellant.

Jim Alsup, Gary A. Thornton, Small, Craig & Werkenthin, Austin, for Metropolitan Life Ins. Co.

Jim Mattox, Atty. Gen., Susan Henricks, Asst. Atty. Gen., Austin, for The Employees Retirement System of Texas.

Before PHILLIPS, C.J., and POWERS and BRADY, JJ.

POWERS, Justice.

Joyce M. Blount sued the Metropolitan Life Insurance Company and the Employees Retirement System in a district court of Travis County. The trial court rendered judgment that she take nothing by her suit. We will reverse the trial-court judgment and remand the case for trial.

THE CONTROVERSY

In Blount's original petition, she alleged that her deceased husband, Ronald A. Blount, was killed as the result of an accidental gunshot wound while a member of the Employees Retirement System and an insured under a group life insurance policy issued by Metropolitan. She alleged, in addition, that Metropolitan refused to pay her, as named beneficiary, certain sums the company was obligated to pay her under the group policy. Metropolitan contends that the sums claimed by Mrs. Blount are not owed under the insurance contract because Mr. Blount's death was a suicide.

The controversy between the parties was previously presented to the Employees Retirement System. After an evidentiary hearing, the System found that Mr. Blount's death was a suicide. Based upon that finding of fact, the System, on December 14, 1981, issued an order "that the claim of Joyce Blount for $46,000 of life and accidental death benefits arising from the death of Ronald A. Blount be in all respects denied." Thereafter, Mrs. Blount filed the present suit in a district court of Travis County.

The trial court denied Mrs. Blount's request for a jury and proceeded to determine her cause of action based upon the evidentiary record compiled in the Employees Retirement System. The trial court judgment orders that she take nothing and recites as follows:

The Court having considered the pleadings on file, the record of the proceedings before the Defendant Employees Retirement System of Texas, and the argument of counsel is of the opinion that the administrative order of the Defendant Employees Retirement System of Texas is supported by substantial evidence, is lawful, and should be affirmed.

DISCUSSION AND HOLDINGS

Mrs. Blount brings three points of error: (1) the trial court erred in denying her a trial de novo on her contract claim against Metropolitan; (2) the trial court erred in overruling her request for a jury trial; and (3) the trial court erred in its conclusion that the administrative order of the Employees Retirement System was supported by "substantial evidence."

We hold the case has been tried on the wrong theory and, in the interests of justice, remand the cause to the district court for a new trial. Jackson v. Hall, 147 Tex. 245, 214 S.W.2d 458 (1948); United Gas Corp. v. Shepherd Laundries Co., 144 Tex. 164, 189 S.W.2d 485 (1945).

The applicable statute is the Texas Employees Uniform Group Insurance Benefits Act, Tex.Ins.Code Ann. art. 3.50-2 (1981 & Supp.1984) (the "Act" hereafter). The statute establishes a framework for the purchase of group life, accident, and health insurance for State employees. Section 4 of the Act vests in a "trustee" the sole power to administer and implement the Act. The "trustee" so empowered is the State Board of Trustees of the Employees Retirement System of the State of Texas, a body consisting of three appointed members and three members elected by members of the State retirement system. Title 110B, §§ 25.003, 25.004 (Pamph.Supp.1984). This body, as trustee under the Act, is given several powers designated in the Act, including the power to: (1) hire employees and designate their duties; (2) "contract with a qualified, experienced firm of group insurance specialists or an administering firm who shall act for the trustee in a capacity as independent administrators and managers of the programs authorized under" the Act; (3) "enter into interagency contracts with any department of the State of Texas;" (4) "promulgate all rules, regulations, plans, procedures, and orders reasonably necessary to implement and carry In addition, § 4(e) of the Act provides that the trustee shall have full power and authority as to the following:

out the purposes and provisions of" the Act; (5) prepare specifications for the insurance coverages authorized by the Act; (6) prescribe the conditions for eligibility for insurance coverages provided under the Act; (7) determine "the methods and procedures of claims administration;" (8) determine "the amount of employee payroll deductions" and the "procedures by which such deductions shall be made;" (9) establish plans of group coverages for active and retired employees, which plans, in the trustee's discretion, may include group life coverage, accidental death and dismemberment, and health benefit plans; (10) formulate and submit to the State Board of Insurance the insurance coverages determined by the trustee; (11) and the power to select particular insurance carriers to furnish such coverages, the selection to follow a competitive-bidding process conducted by the State Board of Insurance. § 3.50-2, §§ 4, 5, 11.

[E]stablishment of grievance procedures by which the trustee shall act as an appeals body for complaints by employees regarding the allowance and payment of claims, eligibility, and other matters.

Nothing in the Act, unless it be this subsection, purports to vest in the trustee a power to adjudicate claims on a group life insurance contract entered into by the trustee under the Act. ¹ The parties have assumed "Contested case" means a proceeding, including but not restricted to ratemaking and licensing, in which the legal rights, duties, or privileges of a party are to be determined by an agency after an opportunity for adjudicative hearing.

that § 4(e) does give the trustee a power to adjudicate such claims and the trial court judgment rests upon the assumption that the trustee has such power. If this be a proper construction of § 4(e), then the parties' controversy may, of course, be viewed as a "contested case" as defined in § 3(2) of Tex.Rev.Civ.Stat.Ann. art. 6252-13a, the Texas Administrative Procedure and Texas Register Act (APTRA) (Supp.1984):

(emphasis added). If, however, the trustee has under the Act no power of adjudication, it follows that the trustee lacked authority to conduct an "adjudicative hearing" and the resulting order issued by the trustee is void.

We construe § 4(e) of the Act as vesting in the trustee an authority to establish grievance procedures regarding employee complaints about "the allowance and payment of claims, eligibility, and other matters;" and a power to determine and act upon such complaints as internal, administrative matters only, short of any power finally to determine the rights and obligations between a beneficiary and a carrier so as to bind them thereto. It is a power to take informal discretionary action in a claim dispute between the carrier and a beneficiary, the "lifeblood" of the administrative process, but it is not the power to adjudicate. K.C. Davis, Administrative Law Text, § 4.01, (1972). ² Our construction is based upon the following.

"The cardinal rule in statutory interpretation and construction is to seek out the legislative intent from a general view of the enactment as a whole, and, once the intent has been ascertained, to construe the statute so as to give effect to the purpose of the Legislature." Citizens Bank of Bryan v. First State Bank, 580 S.W.2d 344, 348 (Tex.1979). When one takes a general view of the Act, one finds that it does not concern the State's exercise of its police power to effectuate the public health, safety, comfort, and convenience. For example, the Act does not concern the State's power as a lawmaker to regulate or license in an entire industry, profession, trade or business. Instead, by its very terms and title, the Act plainly concerns a different power inherent in the State's sovereignty--its power as an employer, issuing from its general power to contract. It is within this context that § 4(e) must be interpreted to determine whether the trustee is therein given a power to adjudicate claims arising out of an insurance contract entered into by the trustee under the Act.

While no part of the Act purports expressly to give the trustee the power to adjudicate between a beneficiary and a carrier on any claim dispute between them, we find that the Act does give the trustee a power to adjudicate between the State and any employee, annuitant, or dependent in the matter of fraudulent claims. Section 13A(a) provides that the trustee may, after notice and hearing, "expel from participation in the Texas employees uniform group insurance program any employee, annuitant, or dependent who submits a fraudulent claim under or has defrauded or attempted to defraud any health benefits plan offered under the program." Subsections 13A(c) and (e) specifically provide that such proceedings constitute a "contested case" under APTRA and that an appeal therefrom "is under the substantial evidence rule." Nothing in this section of the Act purports to empower the trustee to make a fraudulent-claim determination as between the carrier and a beneficiary, so that it would be a binding determination between those parties, precluding any obligation of payment on the carrier's insurance contract.

Section 13A is, however, useful for interpretative purposes because it illustrates vividly that the Legislature, had it intended to vest in the trustee an adjudicative power reviewable as a "contested case" and under the "substantial evidence rule," would have chosen language more direct and suitable for the...