Butler v. Provident Life and Acc. Ins. Co.

• Decision Date: 11 September 1985
• Docket Number: Civ. A. No. H84-0242(R).
• Citation: 617 F. Supp. 724
• Parties: Jerry T. BUTLER and Jennifer L. Butler, Plaintiffs, v. PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Mississippi

617 F. Supp. 724

Jerry T. BUTLER and Jennifer L. Butler, Plaintiffs, v. PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, Defendant.

Civ. A. No. H84-0242(R).

United States District Court, S.D. Mississippi, Hattiesburg Division.

September 11, 1985.

Robert F. Drake, Hattiesburg, Miss., Thomas L. Casey, Laurel, Miss., for plaintiffs.

Kenna L. Mansfield, Jr., Jackson, Miss., for defendant.

MEMORANDUM OPINION

DAN M. RUSSELL, Jr., District Judge.

This cause is presently before the Court on cross-motions for summary judgment. The plaintiffs, husband and wife, seek to recover certain amounts alleged to be due under a group insurance policy issued by the defendant, together with punitive and other extra-contractual damages. The plaintiffs argue that their position is supported by the public policy articulated by the Mississippi Supreme Court in Brown v. Blue Cross and Blue Shield of Miss., 427 So.2d 139 (Miss.1983), Gulf Guaranty Life Ins. Co. v. Kelley, 389 So.2d 920 (Miss. 1980), and Locomotive Engineers' Mutual Life & Accident Ins. Co. v. Meeks, 157 Miss. 97, 127 So. 699 (1930). The defendant attempts to distinguish the above cases, argues that Mississippi law has been superseded by federal law, and asserts alternatively that the defendant is not liable for any punitive or extra-contractual damages.

The facts of this case are relatively simple. Prior to January 12, 1984, plaintiff, Jerry T. Butler, was an employee at DAPSCO, Inc. ("DAPSCO") in Laurel, Mississippi. On October 1, 1977, the defendant issued its Group Policy No. H206 ("the policy") to DAPSCO, as policyholder, insuring certain employees of DAPSCO and their dependents according to the terms and provisions of the policy. The group policy as issued to DAPSCO was amended, effective May 25, 1979, to comply with Pregnancy Discrimination Amendment, to Title VII of the Civil Rights Act of 1964. Insurance coverage for Jerry T. Butler, including maternity benefits for Jennifer L. Butler, became effective on December 18, 1981. Monthly premiums were withheld from Jerry T. Butler's payroll checks for his dependent's coverage.

In August of 1983, Jennifer L. Butler was initially diagnosed as being pregnant. She visited her doctor on several occasions in connection with her pregnancy from August, 1983 through January 12, 1984. The defendant fully paid all claims submitted for pregnancy incurred prior to January 12, 1984. On January 12, 1984, Jerry T. Butler was laid off from his employment at DAPSCO due to lack of work. On April 11, 1984, Jennifer Butler gave birth to a child, approximately seventy (70) days subsequent to the termination of Jerry Butler's employment and the termination of his coverage under the group policy.

The defendant's position is that plaintiffs' claims were not covered under the terms of the policy, and it declined to pay any amount for pregnancy related expenses incurred subsequent to the termination of Jerry Butler's employment. The group policy was not cancelled either by DAPSCO or by the defendant. In fact, the group policy remains in full force and effect insuring the employees of DAPSCO.

The policy provision in question provides that the coverage of an employee and an employee's insured dependents terminates upon the termination of his employment with DAPSCO, as follows:

The insurance with respect to any individual employee shall terminate as the earliest date determined in accordance with the following provisions:

* * * * * *

(f) The date the employee's active employment with the group policyholder is terminated,...."

The policy does not contain any provision for the payment of pregnancy related expenses subsequent to the termination of Jerry Butler's coverage. The policy defines the term "illness" as including pregnancy or pregnancy related conditions. Therefore, pregnancy is treated on the same basis as any other illness under the terms of the policy. The policy's insuring clause specifies that benefits are payable only for expenses relating to an illness or injury, as those terms are defined in the policy, and that the expense must be incurred while the insured individual is covered under the policy.

The plaintiffs contend that defendant is precluded from termination of the plaintiff's coverage for pregnancy related expenses based upon the public policy of this State as espoused in Brown v. Blue Cross & Blue Shield of Miss., 427 So.2d 139 (Miss.1983), Gulf Guaranty Life Ins. Co. v. Kelley, 389 So.2d 920 (Miss.1980), and Locomotive Engineers Mutual Life & Accident Ins. Co. v. Meeks, 157 Miss. 97, 127 So. 699 (1930). In Brown, Jerry Brown was employed by Corr-Williams Tobacco Company. Brown's employer had in effect a group policy with Blue Cross which covered maternity benefits. The Browns, relying upon such coverage, planned and conceived a child in October, 1975, after the required waiting period had expired. Mrs. Brown gave birth to a son in July, 1976, resulting in medical and hospital expenses. In February, 1976, the employer had terminated its group policy with Blue Cross without notification or consultation with the Browns. The replacement policy carried no maternity benefits and the cancellation precluded the Browns from obtaining adequate insurance. It was Blue Cross' position that it had a contractual right to terminate all benefits under the policy without consideration to the beneficiaries who made plans in reliance thereon and had irrevocably committed themselves to incur expenses for which they anticipated at least partial payment under the policy. The Mississippi Supreme Court dispelled Blue Cross' contention relying primarily upon the Gulf Guaranty decision.

In Gulf Guaranty, the insured procured a credit life insurance policy through a Lucedale bank on June 28, 1975. He suffered a heart attack on July 1, 1975. The insurance company learned of the heart attack on July 18, 1975, and cancelled the policy relying upon its contract language which gave the insurance company the absolute right to cancel at any time within ninety (90) days from the date of issue. The Mississippi Supreme Court recognized the contractual rights of the insurance company to cancel the policy, but held Gulf Guaranty was estopped to cancel as a matter of public policy:

Defendant argues it had the absolute right under the terms of its master policy to cancel the certificate of insurance issued to Kelley within 90 days from the date of issue. Ordinarily, this defense would be upheld; however, in this case the onset of Kelley's fatal illness occurred after the policy was in effect and continued without remission until his death. Considerations of public policy persuade us that, exercise by the insurer of its right to cancel should not be permitted after the onset of a fatal illness and death therefrom, upon the ground of estoppel. In Volume 3A of Appleman's Insurance Law and Practice, ¶ 1813, the author states:

And where the company has accepted the premium on a policy and the insured has relied on its protection, the company is estopped to cancel the policy after the insured has reached such a physical condition that he cannot obtain desirable insurance on his life in any reputable company. Mutual Benefit Life Ins. Co. v. Robison, C.A. Iowa 1893, 54 F. 580, 598.

Gulf Guaranty Life Ins. Co. v. Kelley, 389 So.2d at 922.

Getting back to the Brown case, the court went on to reverse and remand the case for trial on the merits with consideration to the public policy set forth in Gulf Guaranty. The Court in Brown also noted in footnote that "liability might be predicated" upon an Alabama decision, Blue Cross-Blue Shield of Alabama v. Turner, 43 Ala.App. 542, 195 So.2d 807 (1966) cert. denied 280 Ala. 709, 195 So.2d 814 (1967) wherein the Alabama Court of Appeals held in pertinent part that

liability of the insurer attached at the moment of the insured's conception, regardless of the possibility of occurrence of events relieving it of liability. Appellee's interest in the policy was obtained through an expenditure of her and her husband's own money. This interest is sufficient to prevent cancellation or modification if such prevents the insured from timely exercise of any conversion privilege which may be available to her under the terms of the policy or, where such privilege is not given, if it prevents her from reasonably obtaining similar insurance protection on her own account elsewhere.

Turner, supra, 43 Ala.App. at 546, 195 So.2d at 810.

The plaintiffs contend that they were economically precluded from exercising their conversion privilege and were likewise precluded from obtaining any maternity benefits coverage elsewhere. The defendant asserts that Jerry T. Butler was notified of his right to convert his coverage under the group policy to an individual policy of insurance and cites his deposition which corroborates the assertion. A question remains, however, as to the cost of the premium for the conversion policy and also the extent of coverage provided by the conversion policy, i.e., whether the plaintiffs were able to obtain reasonably similar insurance protection.

Rule 56(c) authorizes summary judgment only where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The Court must view the evidence presented in a light most favorable to the party opposing the motion, resolving all doubts in any of the facts against the movant. Breen v. Centex Corp., 695 F.2d 907 (5th Cir.1983). The Court is limited to an inquiry into whether a genuine issue of material fact remains for trial "`so as to insure that factual issues will not be decided without the benefit of the truth-seeking procedures of a trial.'" Southern Distributing Co. v. Southdown, Inc., 574 F.2d 824, 826 (5th Cir.1978), quoting from Jackson Tool & Die, Inc. v....