Blue Cross & Blue Shield of Mississippi, Inc. v. Larson, 55312

• Decision Date: 19 March 1986
• Docket Number: No. 55312,55312
• Parties: BLUE CROSS & BLUE SHIELD OF MISSISSIPPI, INC. v. Kenneth W. LARSON, et ux.
• Court: Mississippi Supreme Court

Page 1071

485 So.2d 1071

BLUE CROSS & BLUE SHIELD OF MISSISSIPPI, INC. v. Kenneth W. LARSON, et ux.

No. 55312.

Supreme Court of Mississippi.

March 19, 1986.

Warren C. Dorsey, Jr., Jackson, for appellant.

Roland J. Mestayer, Jr., Megehee, Brown, Williams & Mestayer, Charles J. Weeks, Pascagoula, for appellees.

Before PATTERSON, C.J., and SULLIVAN and ANDERSON, JJ.

PATTERSON, Chief Justice, for the Court:

This appeal concerns the construction of insurance contract provisions. One is a Coordination Of Benefits (C.O.B.) provision in a Blue Cross & Blue Shield group policy of Moss Point Marine covering Kenneth Larson, a participating employee, and his wife, Carolyn, as his dependent. The second is an "Other Insurance" provision contained in the Pascagoula-Moss Point Bank Employee Medical Expense Reimbursement Trust (Trust) covering Carolyn as a bank employee participant.

Carolyn was an employee of the Pascagoula-Moss Point Bank which created the Trust to pay medical expenses of its employees if there was no other medical coverage. Carolyn was also protected by Blue Cross & Blue Shield as a dependent through her husband's policy as an employee of Moss Point Marine. Medical expenses of over $600.00 were incurred by Carolyn for which she unsuccessfully sought reimbursement from Blue Cross. The claim was denied because Blue Cross maintained its obligation was secondary, and that her employer's Trust was primarily liable. Accordingly, it tendered less than $200.00 (excess) to the Larsons as a secondary insurance carrier.

The original complaint for declaratory relief was filed in the County Court of Jackson County where, after submission of joint stipulations of fact, oral arguments and briefs, the court determined Blue Cross to be primarily liable and the Trust liable to Carolyn for "contingent excess liability" for her medical expenses. Blue Cross appealed this judgment to the circuit court where it was affirmed. This appeal follows.

The Blue Cross policy contains a C.O.B. provision to limit benefits for a single medical risk to not more than one hundred percent of the medical expenses. The C.O.B. is intended to avoid duplication of coverage, and thereby avoid twofold payment exceeding the actual medical expenses to a claimant. The C.O.B. provision of the Blue Cross policy follows:

This provision shall apply in determining the benefits as to a person covered under this Contract for any Claim Determination Period if, for the Covered Services incurred as to such person during such period, the sum of the benefits that would be payable under this Contract in the absence of this Provision, and the benefits that would be payable under all other Plans in the absence therein of contractual terms of similar purpose to this Provision would exceed the reasonable cost of such Covered Services.

The Bank's Trust for its employees contained a clause relating to "Other Insurance," viz:

Reimbursement under this Plan shall be made by the Trust only in the event and to the extent that such reimbursement or payment is not provided for under any other employer sponsored or labor union sponsored insurance policy or policies, regardless of whether the coverage is attributable to the employment of the spouse or a dependent of an enrolled Employee. In the event that there is such a policy or plan in effect, the Employer shall be relieved of any liability hereunder.

Coordination of benefits is a valid method to contain health care cost within reasonable limits by the prevention of duplication of payments in excess of actual medical charges. These provisions provide an orderly procedure for the determination of primary and secondary coverage responsibilities. Complexities have arisen largely because our society supports, and family economics demand, the employment of both spouses outside the family unit. The Supreme Court of Kansas in Blue Cross & Blue Shield of Kansas Inc. v. Riverside Hospital, 237 Kan. 829, 703 P.2d 1384 (1985), in recognition of the need for C.O.B. clauses stated:

In modern American society, husbands and wives frequently both work outside the home with each being covered by his or her own employee health care group plan. Family coverage, in such circumstances, sets up the potential for duplication of benefits where one or both has family coverage under a plan. Duplication of benefits accomplishes none of the goals of such plans, serving only to run up the cost of the plans. Hassles, such as the one before us, increase the costs of administration of the plans and can delay payment of the medical bills (or reimbursement to the employees who have previously paid the bills). Obviously, litigation of the dispute between plans as to coverage should be avoided wherever possible.

703 P.2d at 1388-89.

The procedures for equitably resolving the issues arising from duplicating coverage have been addressed by this Court. In Travelers Indemnity Co. v. Chappell, 246 So.2d 498 (Miss.1971), we gave examples of three broad categories of "other insurance" clauses where the phraseology of the policies permitted. The first is a "pro rata" clause in which one company is primary but agrees to pay its prorata share with other primary insurers. The second category is the "excess" clause, which insures the loss only to the extent it is not paid by other insurance. The third category is the "escape" clause where the insurer disclaims any liability where there is other coverage. We discussed the development of these legal principles stating:

The courts had little trouble with this rule; that is to say, so long as the escape v. escape clauses, excess v. excess clauses and prorata v. prorata clauses were identical, the courts held them to be conflicting and nugatory so as to cancel each other out, and therefore liability under the two policies was prorated between the two insurance policies in the ratio of the limits of liability fixed in each policy which bears to the total limits in all of the policies covering the risk.

246 So.2d at 503.

We observed, however, that if there were conflicting clauses not within similar categories whereby one clause of a policy predominates over a somewhat similar clause of another policy, legal entanglements would likely follow. We observed:

When there was a conflict between an escape clause and an excess clause, the excess clause ordinarily would be given full effect and would not activate the liability in that policy. Likewise, where an excess clause is in conflict with either an escape clause or a prorata clause in the other policy, the excess clause ordinarily would be given full effect. The courts are thus attempting to give full effect to the intent of the two policies to offer two different levels of coverage.

246 So.2d at 503.

Our interpretation of the C.O.B. provision of Blue Cross encompasses not only its language to achieve the prevention of overpayment of claims; but necessarily entails other considerations in resolving, or attempting to, the procedural steps necessary to the resolution of primary and secondary coverage. One such fact employed in the resolution is the status of the protected employee; i.e., whether a subscribing beneficiary of his employer's protection plan, or whether the claimant is a dependent beneficiary of the subscribing beneficiary, but who is also a primary beneficiary of another program of a different employer. In this circumstance the dependent claimant, by ordinary C.O.B. agreements, would be required to seek primary medical benefit payments from the insurer to whose services he or she subscribes. By this method of determining primary and secondary liability coverage, the claimant's status as a designated beneficiary in coverage provided by a spouse is largely overlooked. By invoking this procedure the liability of Blue Cross in this case is secondary simply because the claimant enjoys or is burdened by the protection plan of her own employer.

Although this expedient procedure undoubtedly has admirable persuasions to support it such as simplicity and the avoidance of litigation with its cost, it overlooks and erodes the privileged right of the several parties to contract, assuming such is not against public policy, by expressing their intentions through the language of their choice. Other well...