Blue Cross-Blue Shield of Ala. v. Fowler

• Decision Date: 27 September 1966
• Docket Number: CROSS-BLUE,8 Div. 23
• Citation: 195 So.2d 910,43 Ala.App. 572
• Parties: BLUESHIELD OF ALABAMA v. Frances L. FOWLER.
• Court: Alabama Court of Appeals

Page 910

195 So.2d 910

43 Ala.App. 572

BLUE CROSS-BLUE SHIELD OF ALABAMA v. Frances L. FOWLER.

8 Div. 23.

Court of Appeals of Alabama.

Sept. 27, 1966.

Rehearing Denied Oct. 18, 1966.

T. J. Carnes, Albertville, Lange, Simpson, Robinson & Somerville, Birmingham, for appellant.

Clark E. Johnson, Jr., Albertville, for appellee.

CATES, Judge.

This appeal was submitted on oral argument January 18, 1966.

After a layoff, Mrs. Fowler thought that her employer had reinstated her hospital service policy and that the employer was remitting her premiums. She recovered $254.70 for breach of the policy.

Blue Cross defended on the theory that it had never received the premiums.

I.

Mrs. Fowler became ill February 6, 1964. She incurred hospital and medical expense of more than $254.70, of which Blue Cross-Blue Shield paid nothing.

She had been issued Blue Cross-Blue Shield's contract for hospital, surgical, medical benefits (effective March 5, 1963), and an extended benefit rider (effective April 5, 1963).

Section VI, 'Fees and Terms,' of the basic Certificate stated as follows:

'1. FEES--Fees are due and payable to, and must be received by, the Corporation in advance. Payment of fees by a subscriber in a group shall be made in the amount and manner and for the term then in effect for the said group. The Corporation assumes no responsibility for the failure of any remitting agent to pay fees to it when due. Payment of fees by the subscriber not in a group shall be made directly to the Corporation at the rates then in effect for a term of a quarter year.

'2. TERM--The subscriber's contract shall continue in force from and after its 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 herein provided.

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

'Remitting Agent' is defined thus:

"Remitting Agent' means any individual, partnership, organization or corporation which, as agent for the subscriber, has agreed with the Corporation to collect and remit the fees payable hereunder.'

Section VII, 'Termination and Continuance of Coverage,' subsection 1, provides:

'Non-Payment of Fees--Failure of the subscriber, or his remitting agent, to pay fees on their due date shall automatically terminate the subscriber's contract as of such due date, and the Corporation shall not be liable for any hospital service received by any member after said due date unless such fees in full are received by the Corporation within the thirty (30) day grace period allowed hereunder.'

In May of 1963, Mrs. Fowler temporarily left her employment at the store of Bargain Town USA in Albertville. She applied to Blue Cross-Blue Shield for a direct payment contract under Section VI(1), above quoted.

Blue Cross-Blue Shield sought to show that it sent Mrs. Fowler the following letters:

'DEFENDANT'S EXHIBIT #5

June 12, 1963

'Ms. Frances L. Fowler

410 Bolagers Street

Route 2 Box 10

Albertville, Alabama

'Dear Ms. Fowler:

Contract #1045804

'According to our records, you are listed with and paying through the group with Bargain Town U.S.A. As long as you are employed by this group, your dues must be paid as billed on their monthly invoices. We cannot accept your individual payment. For this reason, we must return your Money Order for $5.30 dated June 10, 1963.

'If you are no longer employed by the group, please let us know right away so that we may transfer your contract to a direct-pay basis. We will be glad to hear from you if there is any way in which we may be of help.

Yours very truly

Pervy W. Matthews

Subscriber Accounts Manager

'da

'Enclosure--Money Order for $5.30.

'DEFENDANT'S EXHIBIT #6

June 21, 1963

'Ms. Frances L. Fowler

Albertville, Alabama

'Dear Ms. Fowler:

Contract # BA--4--45 1045804

'Now that your dues will no longer be paid through a group, we will be happy to have you continue coverage on a direct quarterly payment basis. Only groups are permitted to make monthly payments. Direct rates are slightly higher than group rates because of the extra expense involved in handling individual accounts.

'Your $50 Deductible Contract will be continued, however, there will be a slight change in your medical benefits which will now be provided under Rider #45. This rider provides that, while a bed patient in the hospital, your doctor will be paid $5.00 per visit, after the third day, for ten days, and up to 57 additional visits paid for at $3.00 each day. Your dues are now paid to July 5, 1963. Attached is a statement of the amount needed to pay to your next quarterly billing date of October 5, 1963. In the future, quarterly statements will always be mailed to you about ten days before payments are due.

'We are returning your Money Order for $5.30 dated June 10, 1963, and ask that you make payment as billed on the enclosed statement. New identification cards will be sent to you as soon as this payment is received. If we may be of further help, please do not hesitate to let us know.

Yours very truly

Pervy W. Matthews

Subscriber Accounts Manager

'da

'Enclosures' Mrs. Fowler testified on direct (R. 31--32) that she wrote for an individual policy and after some correspondence she continued paying her premium (R. 37). No receipts came in evidence.

Afte a two-months' layoff, Bargain Town USA called her back to work. She testified that she wrote Blue Cross-Blue Shield at that time. She further testified that all through the Fall of 1963 and during January and February the monthly premium was deducted from her pay.

Blue Cross-Blue Shield called as a witness Mrs. Marie Lowery who was assistant officer manager of the Birmingham office of Bargain Town USA. She had supervision over the bookkeeping of the Albertville store. She was custodian of payrolls including those from outlying stores prepared by bookkeepers at those establishments. Her testimony was partly favorable to Mrs. Fowler, the plaintiff:

'Q Now, can you determine from that payroll record for 1963 what payroll periods the deductions were made from Mrs. Fowler's wages for Blue Cross fees?

'A On November 4, 1963 she was deducted $5.30 for Blue Cross Insurance, on November 25th, $5.30 also, On December 30, 1963, $5.30 also.

'Q So, according to those records, no deductions were made for Blue Cross from the time of employment on August 1st through the time November 9th?

'A November 4th.

'Q Now, are these deductions that are made, what amounts are those?

'A $5.30 per month.

'Q Now, that is for each month's premium?

'A Yes.

'Q And a deduction is made once a month for those?

'A Yes.

'Q Now, I hand you Defendant's Exhibit #10, which is the 1964 payroll records for Frances Fowler with Bargain Town,--would you tell me what dates premiums were deducted for Blue Cross?

'A January 27, 1964, $5.30, February 24, 1964, $5.30, March 23, 1964, $5.30.'

But Bargain Town USA did not cross check its hospital insurance deductions each month against the 'premium invoice' which it used in remitting to Blue Cross-Blue Shield. According to Mrs. Lowery's testimony, Mrs. Fowler's name got left off this form from her return to work in August, 1963:

'Q When was the last time you paid any dues for Mrs. Fowler to Blue Cross?

'A The payment was sent to Blue Cross-Blue Shield Office on June 14, 1963; she was included on our June invoice.

'Q On your June invoice which would cover what period?

'A The month of June.

'Q That was the last time that any payment was made?

'A Yes, through our office.

'Q What did you do after you found out that Bargain Town had been making deductions?

'A I issued Mrs. Fowler a check for the payments that had been deducted.

'Q You issued her a check?

'A Yes.

'Q And what amount did this check cover?

'A $31.80.'

II.

We do not have in this record the form of authorization for Mrs. Fowler's payroll deductions. We assume that the original insurance was effected by prepayment of the premium and not by Mrs. Fowler's making any promissory assignment of future wages. Hence, we forego any consideration of Code 1940, T. 39, § 201. ¹ Stephens v. United Staes Steel Corp., 5 Cir., 212 F.2d 705; Continental Cas. Co. v. Vines, 201 Ala. 486, 78 So. 392.

In his oral charge to the jury the trial judge adopted the theory that the common law--contrary to Section VI of Blue Cross-Blue Shield's contract--made Bargain Town USA the agent of Blue Cross-Blue Shield.

Defendant excepted to (and argues for error in) the giving of the following direction of law to the jury:

'Now, gentlemen, it is the law of Alabama that the payment by an employee of his or her monthly premiums through a deduction from his or her monthly salary by his employer, who by prearrangement is to retain the same and make payment of monthly premium on the group policy to an insurance company, that that is payment to the insurance company insofar as such employee is concerned, whether the employer makes remittance of that amount or not. * * *'

Both parties agree that the root of this instruction is from the opinion in All States Life Ins. Co. v. Tillman, 226 Ala. 245, 146 So. 393.

The appellant contends, however, that Blue Cross-Blue Shield, through the definition of 'Remitting Agent' and the italicized language in Section VI(1), both above quoted, has contracted itself outside the Tillman rule of agency.

Moreover, in brief, Blue Cross-Blue Shield points out that the instant contract was with the subscriber directly. In Tillman the contract was between employer and the insurance company with the employee being in a vicarious relationship.

If, under Hill v. Metropolitan Life Ins. Co., 266 Ala. 285, 96 So.2d 185, the employer is the 'owner' of a group policy, then it seems clear that under the Blue Cross-Blue Shield policy in this record the employee is the 'owner.' In Blue Cross-Blue Shield v. Jackson, 42 Ala.App. 594, 172 So.2d...