Blue Cross-Blue Shield of Alabama v. Thornton

• Decision Date: 10 December 1975
• Docket Number: CROSS-BLUE
• Citation: 325 So.2d 187,56 Ala.App. 678
• Parties: BLUESHIELD OF ALABAMA, a corporation v. William James THORNTON and Rosie Mae Thornton. Civ. 634.
• Court: Alabama Court of Civil Appeals

Page 187

325 So.2d 187

56 Ala.App. 678

BLUE CROSS-BLUE SHIELD OF ALABAMA, a corporation v. William James THORNTON and Rosie Mae Thornton.

Civ. 634.

Court of Civil Appeals of Alabama.

Dec. 10, 1975.

Rehearing Denied Jan. 7, 1976.

J. Connor Owens, Jr., Bay Minette, for appellant.

Taylor D. Wilkins, Jr., Bay Minette, for appellees.

BRADLEY, Judge.

This is an appeal from a judgment rendered against defendant Blue Cross-Blue Shield for amounts recoverable under a group hospitalization insurance policy. Gunter-Dunn Company, a defendant below, does not join in the appeal.

Plaintiffs, Mr. and Mrs. Thornton, commenced this action on December 21, 1973 by filing a complaint in the Circuit Court of Baldwin County, alleging that Blue Cross-Blue Shield issued an insurance policy which by its terms provided coverage to Mr. Thornton and his dependents; that Blue Cross-Blue Shield agreed to pay Mr. Thornton and his dependents the cost of medical expenses for in-patient hospital services; that on March 27, 1972 Mrs. Thornton, as the result of an automobile accident, was confined to a hospital, thereby incurring hospital and doctor bills; that all premiums due on the insurance policy at the time of the accident were paid; and that Blue Cross-Blue Shield refuses to pay the costs of the wife's hospital and doctor services.

Blue Cross-Blue Shield filed an answer alleging that Mr. Thornton had in fact been enrolled for coverage under a payroll group plan issued to Gunter-Dunn Company, his employer; that the entire group was terminated at the request of Gunter-Dunn effective March 20, 1972; and that at the time of the automobile accident, neither of the Thorntons was covered by any policy issued by Blue Cross-Blue Shield.

Plaintiffs thereafter filed an amended complaint, adding an allegation they had not received notice of or consented to any cancellation of the insurance contract, and therefore any cancellation by Gunter-Dunn was ineffective as to them.

Subsequent to the denial of a motion to dismiss, and to a further amendment to the complaint, Blue Cross-Blue Shield amended their answer to include the statement that Gunter-Dunn had requested cancellation effective March 31, 1972, but that the insurance was actually cancelled by Blue Cross-Blue Shield effective March 20, 1972; and further that Mr. Thornton, at the time this claim accrued, was not an employee of Gunter-Dunn, and therefore not entitled to the benefits of any insurance policy issued to Gunter-Dunn.

At the hearing of this cause, the court sitting without a jury heard the husband's testimony and that of Mr. Pervie Mathews, manager of subscriber's accounts for Blue Cross-Blue Shield. Additionally, several documentary exhibits were introduced, including the group policy and related papers; plaintiffs' Blue Cross-Blue Shield identification card; an itemized hospital bill; and a check dated March 15, 1972, drawn by Mr. Thornton to the order of Gunter-Dunn, purportedly representing plaintiffs' share of the March insurance premium. Also, plaintiffs introduced a second insurance policy from Blue Cross-Blue Shield, which Mr. Thornton claimed was delivered to his mailbox at Gunter-Dunn. However, the evidence tends to show that plaintiffs were covered, if at all, by the group hospitalization contract issued to Gunter-Dunn by Blue Cross-Blue Shield.

This group plan provided coverage to all eligible employees, and Gunter-Dunn paid a group premium based on the number of employees it invoiced to Blue Cross-Blue Shield each month. Premiums were due on the twentieth of each month, with a thirty day grace period. By specific provision, coverage ceased on the twentieth if any amount was outstanding, but would be reinstated if payment of amounts due was made during the grace period. The testimony taken at the hearing tended to show that Gunter-Dunn required contribution of premiums from the employees, as was authorized by the group insurance contract. In most cases contributions were made by payroll deduction.

The problem which led to this lawsuit arose because plaintiffs made contributions in a different manner. In January 1971 Mr. Thornton was injured and did not return to his duties at Gunter-Dunn. He was paid no more wages after this accident; he drew workmen's compensation in lieu of wages. Nevertheless, Gunter-Dunn continued to carry Mr. Thornton on their monthly insurance group invoice, and required him to make his monthly premium contribution by check. The issue of whether plaintiffs were thereby ineligible for coverage was not assigned as error and will not be considered on appeal.

In February 1972 Gunter-Dunn wrote Blue Cross-Blue Shield, informing the latter that a new group plan with Aetna Life & Casualty had been arranged, commencing April 1, 1972. Cancellation of the existing group contract was requested effective March 31, 1972. It is stipulated by the parties that no further correspondence regarding the requested cancellation occurred prior to March 31.

On March 17 plaintiffs gave Gunter-Dunn a check for their contribution to the premium due March 20. Gunter-Dunn, however, never forwarded to Blue Cross-Blue Shield that money or any other portion of the group premium due on March 20, 1972.

On March 27 the accident which produced plaintiffs' present claim took place. Blue Cross-Blue Shield denied coverage, saying that the policy had been cancelled effective March 20, 1972.

On March 19, 1975 the trial court entered its decree awarding plaintiffs $656.60, and making the following factual findings: that plaintiffs were entitled to notice of cancellation of the group policy under the terms of the policy; that the policy was cancelled by Blue Cross-Blue Shield because Gunter-Dunn had obtained other insurance; that Gunter-Dunn had requested cancellation effective March 31, 1972, and Blue Cross-Blue Shield's attempt to cancel on March 20, 1972, without notice to either plaintiffs or Gunter-Dunn was ineffective; and that plaintiffs had paid all premiums required of them under the policy. On March 24, 1975 the trial court amended its decree to add the finding that Blue Cross-Blue Shield attempted to cancel for the reason that Gunter-Dunn had obtained other insurance when, in fact, no other insurance was in effect on either the date of attempted cancellation or the date Mrs. Thornton suffered her injuries. The amount of the award was unamended.

Blue Cross-Blue Shield's motion for new trial was denied, and the present appeal was filed.

Despite the contrary finding of the trial court, we believe that the true cause of cancellation was the failure of Gunter-Dunn to pay premiums for the group policy due March 20. Cancellation for this reason under the terms of the policy is self-executing; it does not require an election or other affirmative procedure by the insurer. Section VI of the policy clearly states than when premiums are not timely paid coverages ceases. This provision is unambiguous; there is no room for the court to vary it by construction or by taking inconsistent oral testimony, General Motors Acceptance Corp. v. Kendrick, 274 Ala. 566, 150 So.2d 185. Furthermore, there is no evidence of conduct by Blue Cross-Blue Shield on which to base a finding of waiver as to the group policy.

Notwithstanding this view toward cancellation of the group policy, we perceive that the trial court discovered a unique legal relationship arising among Mr. Thornton, Gunter-Dunn and Blue Cross-Blue Shield, which does not easily submit to analysis under the terms of the written contract alone, but called for the court to apply a more critical decisional theory in adjusting the rights and liabilities of the parties.

Mr. Thornton stands apart from the other members of the group. Unlike any other previously covered employee, his portion of the premium was not deducted from his salary and then forwarded to Blue Cross-Blue Sheld by Gunter-Dunn, but it was collected from him with the understanding that it was the amount due for group hospitalization coverage under the policy in effect on March 17, 1972. The trial court found that he 'paid all premiums required of him under said insurance policy.' We are asked to reverse this finding.

There...