Fortis Ins. Co. v. Kahn

• Decision Date: 03 June 2009
• Docket Number: No. A09A0486.,A09A0486.
• Citation: Fortis Ins. Co. v. Kahn, 683 S.E.2d 4, 299 Ga. App. 319 (Ga. App. 2009)
• Parties: FORTIS INSURANCE COMPANY et al. v. KAHN.
• Court: Georgia Court of Appeals

683 S.E.2d 4

299 Ga. App. 319

FORTIS INSURANCE COMPANY et al. v.KAHN.

No. A09A0486.

Court of Appeals of Georgia.

June 3, 2009.

Reconsideration Denied July 23, 2009.

Burr & Forman, Gregory F. Harley, Atlanta, for appellants.

Freeman, Mathis & Gary, Philip W. Savrin, Jacob E. Daly, Roy E. Barnes, John R. Bevis, Atlanta, for appellee.

MIKELL, Judge.

In this civil action, Daniel Kahn sued Fortis Insurance Company("FIC"), Assurant, Inc. d/b/a Assurant Health f/k/a Fortis Health ("Assurant"), Fortis Benefits Insurance Company("FBIC"), and Rogers Benefit Group, Inc.("RBG")(hereinafter collectively referred to as "appellants"),¹ individually and on behalf of a class of similarly situated persons, alleging that appellants engaged in an illegal and fraudulent scheme to defraud customers.Specifically, Kahn argues that appellants misrepresented their insurance policies to be group insurance policies when the policies were, in fact, individual policies, which upon renewal, were adjusted on the basis of an illegal rating scheme that considered a certificate holder's individual claim experience and health conditions, in violation of Georgia's small group pooling laws, OCGA §§ 33-30-12and33-6-4.Appellants appeal from the certification of the class, arguing that the trial court abused its discretion in certifying the class under OCGA § 9-11-23.We affirm.

In Georgia, an action may be certified as a class action if the following factors are satisfied:

(1) The class is so numerous that joinder of all members is impracticable; (2) There are questions of law or fact common to the class; (3) The claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) The representative parties will fairly and adequately protect the interests of the class.²

The plaintiff has the burden of establishing the right to class certification."Certification of a class action is a matter of discretion with the trial judge, and, absent abuse of that discretion, we will not disturb the trial court's decision."³

The record shows that in 1995, Kahn contacted Phoenix and its insurance agent Nelson in order to procure insurance for himself and his family, including his wife Jill and their two children.Kahn testified that Nelson told him he was purchasing a "group policy based on certain geographic area" and that his group included people in Georgia.Kahn understood that he was not purchasing employer-sponsored group insurance.On or around May 1, 1996, FBIC issued to Kahn and his family an Upper Midwest Employer Group Individual Members Plan ("UMEG IMP"), providing "individual major medical insurance" coverage.Upon issuing the policy to Kahn, appellants provided several written documents, including a Certificate of Group Insurance, a Group Insurance Premium Statement, a UMEG IMP policy, claim instructions, an IMP Supplemental Group Transmittal form, and a UMEG insurance card, which designated Kahn as the Employer and Employee.⁴At the time appellants issued his policy, Kahn's quarterly premium was $833.55.

In July 1996, Kahn was diagnosed with a brain tumor, resulting in his complete disability.During the period from May 1, 1996, to May 1, 2004, Kahn's quarterly premiums increased, forcing him to drop his family from the plan in 2001, increase his deductible, and reduce his available benefits.After removing his family from the insurance plan, Kahn's quarterly premium was $688.77.In 2004, Kahn's quarterly premium rose to $1,736.43, and his existing plan was cancelled and replaced by a new plan issued by FIC.The parties agree that in 1996, there were 5,757 Georgia policyholders with the same type of insurance issued to Kahn.By 2004, all policyholders in Georgia with Kahn's type of insurance had either allowed their policies to lapse or were migrated to other plans.

Kahn filed his complaint on November 24, 2004, asserting a private right of action for breach of statutory duty, OCGA §§ 33-30-12,33-6-4(b)(8)(A)(ii), and other claims, including breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment/money had and received, conspiracy, and fraud through uniform, written misrepresentations.Kahn alleges that because he and the putative class members were each issued a UMEG IMP certificate of "Group Coverage,"appellants were not allowed to base the UMEG IMP renewal premiums on the health status, claims experience, medical condition, and length of time the policy had been in force for any one particular group, but instead, were required by law to pool the groups together when setting renewal premiums.Appellants contend that the UMEG IMP issued to Kahn and others is not subject to Georgia's small group pooling law, OCGA § 33-30-12, because it is limited to small groups of at least two to no more than fifty employees, members, or enrollees; the IMP at issue here covered more than 5,000 individual Georgia enrollees.Moreover, the policy documents do not mention "small group" coverage, and there is no evidence that Kahn or any other putative class member was ever advised that their IMP coverage was subject to the "small group" requirements of OCGA § 33-30-12.

On December 28, 2005, Kahn filed a motion for class certification, seeking to pursue his claims against appellants on behalf of

[a]ll persons or entities of all persons, residing in Georgia, who purchased or were sold a "UMEG IMP" certificate of group health insurance coverage (or type of coverage purchased by Danny Kahn) by or through [appellants] from January 1, 1993[,] to the date of class certification and who paid unlawfully increased renewal premiums as a result of [appellants'] illegal and discriminatory tier rating scheme.

The motion identified the appellants as follows: FBIC, provided insurance under UMEG Trust to employers and individuals; FIC, provided insurance in individual small employer group markets; Assurant, owns 100 percent of FBIC and FIC; RBG, company that marketed Fortis insurance products, including UMEG IMP product at issue in this case; and Phoenix (now known as Suburban General Agencies, Inc.), Marcus, and Nelson, insurance agents/agency responsible for selling to Kahn and others the UMEG IMP product at issue here.Following a hearing, the trial court entered a detailed written order certifying the class.

1.Appellants contend that the trial court erred by shifting the burden to them to disprove the class certification factors.The trial court's order provides that

[i]n determining whether an action satisfies OCGA § 9-11-23, the [c]ourt is obliged to presume and accept the substantive allegations of the complaint as true and may consider the merits of the litigation only to the degree necessary in determining whether the requirements are satisfied....A well-pleaded complaint generally constitutes a prima facie showing for class certification, thereby shifting the burden to a party opposing the class.A. Conte, Newberg on Class Actions, § 7.23 (4th Ed.2002).

Appellants further contend that the trial court erred by uncritically accepting the allegations of Kahn's complaint, thus undermining the "rigorous analysis" required in assessing class certification.

Pretermitting the question of whether the trial court's statement is an accurate recitation of the law, we find no merit in this argument.Appellants provide no citations or specific examples to support their assertion that the trial court uncritically accepted the allegations of Kahn's complaint, and we will not cull the record on their behalf.Regardless, it is abundantly clear from reviewing the trial court's very detailed order and the record in this case that the court did not merely "accept the allegations of Kahn's complaint."The trial court presided over a two-day hearing on class certification and obviously reviewed — and incorporated into its order — the voluminous record in this case; the trial court looked well beyond the complaint in reaching its decision.

2.Appellants contend that the trial court abused its discretion in certifying the class under OCGA § 9-11-23, arguing that individual issues predominate over issues common to all class members.

"Under OCGA § 9-11-23, a class action is authorized if the members of the class share a common right and common questions of law or fact predominate over individual questions of law or fact.The character of the right sought to be enforced may be common although the facts may be different as to each member of the alleged class."⁵

(a) In this regard, appellants argue that Kahn did not rely upon any common document, but instead relied on the oral explanations of his agent.Kahn cites Life Ins. Co. of Ga. v. Meeks⁶ for the proposition that fraud claims based on oral misrepresentations are not appropriate for class treatment precisely because reliance must be proved for each individual class member.⁷In its analysis, the trial court recognized this principal, but ruled that "circumstantial evidence of reliance common to the whole class may be used so that such common evidence would predominate and therefore not defeat class certification."The trial court held that the uniform written misrepresentations that the policy was group coverage, coupled with the class-wide circumstantial evidence that class members continued to renew their policies demonstrated reliance, but qualified its holding by noting that if such common circumstantial evidence is not forthcoming, it would reexamine the issue upon motion by appellants to decertify the class.

"In general, claims of fraud based upon oral misrepresentations are not appropriate for class treatment because the reliance element must be proved factually for each individual class member."⁸The fact that reliance is an element in a cause of action, however, is not a complete bar to class certification.⁹"In claims of fraud based upon written representations, the reliance element may sometimes be presumed."¹⁰Here, a...