EMPLOYEES'BENEFIT ASS'N v. Grissett

• Decision Date: 11 September 1998
• Citation: 732 So.2d 968
• Parties: EMPLOYEES' BENEFIT ASSOCIATION v. Richard D. GRISSETT.
• Court: Alabama Supreme Court

732 So.2d 968

EMPLOYEES' BENEFIT ASSOCIATION v. Richard D. GRISSETT.

1961766.

Supreme Court of Alabama.

September 11, 1998.

Janie Salmon Gilliland of Memory & Gilliland, L.L.C., Montgomery, for appellant.

Sam E. Loftin of Loftin, Herndon, Loftin & Miller, Phenix City, for appellee.

LYONS, Justice.

The defendant, Employees' Benefit Association ("EBA"), appeals from a judgment entered in favor of the plaintiff, Richard D. Grissett. We affirm conditionally.

Grissett is a truck driver who has been employed for 18 years by Consolidated Freightways, Inc. EBA is a corporation that was formed in 1942 to provide certain benefits for the employees of Consolidated Freightways, Freightliner, Inc., and their subsidiaries. Membership in EBA is entirely voluntary. EBA provides the following benefits for each member: life insurance of $25,000, additional group accidental death and dismemberment insurance, a funeral benefit of $300, and disability benefits in the amount of $15 per day for a maximum of six months for nonoccupational illness and injuries not covered by workers' compensation laws. In addition, EBA provides life insurance of $2,000 to any retiring member who has the requisite years of service. EBA provides its life insurance and accidental death benefits through a group life insurance policy that it obtains from a separate company; however, EBA provides its disability benefits from its own funds, which are received from the dues of its members. Each member pays dues of $6.75 per week.

EBA is governed by a five-member board of trustees; all of the board members must be members of the association. Four trustees are elected by EBA's membership; the fifth is appointed by the elected trustees. The board sets the policies of the association and controls its funds, both investments and disbursements. The board also appoints a manager to conduct the association's business. At all times pertinent to this case, Charles Prehn was EBA's manager. At the time of trial, he had served in that capacity for 17 years. A full-time secretary and a part-time bookkeeper are EBA's only other employees. EBA's offices are located in Portland, Oregon.

Upon joining EBA, each new member is provided with a copy of the association's articles of incorporation, its bylaws, and an informational pamphlet. A new member must agree to abide by the terms of the bylaws, which specify the time frame for submitting claims, the method for notice, and the forms necessary for use by the members when requesting disability payments. Grissett joined EBA in 1990. He acknowledged that upon joining he had received a copy of the bylaws and that he had agreed to abide by their terms.

On December 5, 1992, Grissett suffered a cerebral aneurysm at his home in Pittsview. He underwent neurosurgery in Birmingham on December 7 and was hospitalized until December 15. He then went home to recuperate. Grissett testified that he continued to take pain medication for about two months and that his doctors prescribed antiseizure medication for him until April 1993. He was not allowed to drive while he was taking this medication. Although Grissett's doctors had estimated that he would be disabled for six months, he was released on April 23, 1993, to return to work. Because his illness was not related to his job, Grissett was eligible for the disability benefits provided by EBA.

In order to file a claim for disability benefits, an EBA member is required to submit the claim on a particular form within a certain time. The version of the bylaws that was in effect when Grissett was disabled stated:

"4. DISABILITY BENEFITS.... To receive disability benefits, a member must file with [EBA] a claim on EBA Form # 1. Should this Form # 1 not be available at the member's place of employment, they may be obtained by writing the EBA office. No claim will be considered until the form has been completely and correctly submitted....

"5. COMPUTATION OF BENEFITS. There shall be paid to each member who is determined to be disabled a disability benefit during the period of disability in the amount of Fifteen Dollars ($15.00) per day or One Hundred Five Dollars ($105.00) per week. The period with respect to which disability payments are to be made shall commence on the eighth day of disability and shall continue during the period of the disability or for the period hereinafter specified, whichever period first expires. The number of weeks for which the Weekly Benefit is payable shall in no event exceed 26 weeks for any one period of disability....

". . . .

"7. REPORT OF ILLNESS OR INJURY.

"(a) Each disability of more than seven (7) days duration shall be immediately reported by sending a completed EBA Form # 1 to the Association office. Part 1 of the Form is to be completed by the member, Part 2 is to be completed by the member's supervisor, and Part 3 is to be completed by the attending doctor. If a member fails to complete and file a claim as herein provided at the time the disability first occurs, but shall file the claim for benefits later than 31 days after the start of the disability for which the claim is made, the member shall not be entitled to benefits prior to the time the claim is filed unless he shall present to the Association a reason, satisfactory to the Trustees, for the delay in filing the claim.

"If, after filing the first claim form (EBA Form # 1) it appears to the Association that the disability may continue, an additional claim form (EBA Supplemental Claim Form # 2) will be sent to the member with his first check. Form # 2 is to be completed by both the attending doctor and the member's supervisor and returned for each check to be issued. This need not be weekly, but should not exceed a four-week period. Incomplete or unsigned claim forms cannot be accepted."

(Emphasis added.)

Grissett testified that his employer did not have any claim forms, so his wife telephoned the EBA office and requested EBA Claim Form # 1. After the Grissetts received the form, he said, he had to mail it to his doctor in Birmingham and wait for the doctor to complete his portion of the form and return it and that his wife then had to take the form to his employer in Phenix City to have the employer's portion completed. Only then, Grissett said, could he complete his portion of the form and submit it to EBA. EBA received Grissett's initial claim form on January 11, 1993, which was 37 days after he had first become disabled. According to EBA's bylaws, if a member filed a claim later than 31 days after the start of his or her disability, no benefits would be paid for the period before the claim was filed, unless the trustees were satisfied with the reason for the delay. Even though Grissett's claim was late, however, EBA paid the claim in full the day after it was received. Grissett received a $345 check dated January 12, representing payment for 23 days of disability for the period December 14, 1992, through January 5, 1993.¹ With this payment, EBA enclosed its Form # 2 for supplemental claims.

EBA Form # 2 must be completed by the member's attending physician and by the employer. Grissett testified that he again went through the process of mailing the form to his physician and waiting for the physician to complete it and mail it back, then having his wife take the form to his employer, and finally submitting the form to EBA. EBA received Grissett's second claim on February 16, 1993. EBA also considered this form to be late because it was filed more than four weeks after Grissett had submitted his first claim. Nevertheless, EBA paid the second claim also, sending Grissett a $585 check dated February 16, representing payment for 39 days of disability for the period January 6 through February 13. With the check, EBA sent Grissett another Form # 2. EBA also included a letter containing reminders to its members about the procedure for filing their claims, including the following:

"How often you receive a check is up to you. We respond with a check each time we receive a claim form but it should not exceed 4 weeks."

Grissett testified that he thought the language in the reminder letter meant he could get a check whenever he wanted it. He also testified that he did not interpret either the bylaws or the reminder letter to contain a requirement that claims be filed within exactly four weeks.

EBA received Grissett's third claim on April 5, 1993. This time, Prehn denied Grissett's claim because, he said, it was late and because Grissett had not heeded the reminder letter sent to him with his second check. On April 6, Prehn sent a letter to Grissett informing him that his claim had been denied because its submission "substantially exceed[ed] the time limit allowed in Item 7 page 16 of your By-Laws." Prehn's letter also stated: "If you would care to present your reason for delay to the Board of Trustees which is satisfactory to them we can at that time process your claim." Grissett then wrote Prehn a letter, in which he stated: "I see no requirement that form # 2, for continuing disability, be filed in 31 days. It looks to me that form # 2 can be filed whenever I want another check for disability." Prehn responded with a letter in which he emphasized the importance of an EBA member's following the rules for submitting claims. In a reply, Grissett argued that the "rules" did not state that the second claim form "must be in within 31 days." (Emphasis in Grissett's letter.) Grissett also pointed out to Prehn that he had had neurosurgery and was taking strong medication.

On May 10, Prehn sent Grissett a letter responding to certain of his questions. The letter then stated:

"We have 6,000 members to deal with and what you have is group insurance. If you don't want to follow the rules like you agreed to you should find another insurance company to meet your needs. In group insurance you need a high degree of conformity to keep the costs down.... The pay period from February 13th to March 26th is

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