Hazelett v. Blue Cross and Blue Shield of Indiana

Decision Date21 February 1980
Docket NumberNo. 2-278A38,2-278A38
PartiesRuth B. HAZELETT, Appellant (Plaintiff Below), v. BLUE CROSS AND BLUE SHIELD OF INDIANA, Mutual Hospital Insurance, Inc., and Mutual Medical Insurance, Inc., Appellee (Defendant Below).
CourtIndiana Appellate Court

Allen C. Mattson, Ford & Mattson, Hartford City, for appellant.

Donald C. Trigg, Indianapolis, for appellee.

BUCHANAN, Chief Judge.

CASE SUMMARY

Ruth B. Hazelett (Hazelett) appeals the dismissal of her suit against Blue Cross and Blue Shield of Indiana, et al (Blue Cross), claiming she was not required to exhaust any administrative remedies prior to bringing her action.

We reverse.

FACTS

The facts are not in dispute:

Hazelett had health insurance coverage under Blue Cross and Blue Shield personal protection plan certificates of membership, which had previously been approved by the Indiana Insurance Commissioner (Commissioner). Under Article I(O) of the certificates, major medical benefits were payable only after payment from other insurance coverage had been deducted. Clearly stamped on the outside of the major medical certificate of membership was the following notice:

NOTICE

MAJOR MEDICAL BENEFITS will be paid only after other insurance payments covering this loss are first deducted as by POLICY PROVISIONS. See Article I, Paragraph "N" and "O".

Hazelett obtained "other coverage" through the Colonial Penn Franklin Insurance Company (Colonial Penn).

Hazelett made claim for $6,070.40 to Blue Cross for surgical and hospitalization charges incurred from June 6 through June 30, 1976. Blue Cross paid $4,614.44 to the hospital. The outstanding balance of $1,456.00 1 was submitted to Blue Cross under Hazelett's major medical policy. Because she received a check from Colonial Penn for $210.00, Blue Cross deducted the Colonial Penn payment, and tendered 80% of the remaining balance $996.80. 2

Hazelett filed suit in the Grant Circuit Court alleging that the "other insurance" provision in the Blue Cross policy violated public policy. Hazelett sought $168.00 in actual damages and one million dollars in punitive damages. She also sought certification to proceed with the suit as a class action.

On Blue Cross' motion, the trial court dismissed the suit on the grounds that Hazelett had failed to exhaust her administrative remedies by challenging the disputed provision before the Indiana Insurance Commissioner.

Hazelett appeals.

ISSUE

Hazelett raises but a single issue on appeal:

Did the trial court properly dismiss the suit because of failure to exhaust administrative remedies?

PARTIES' CONTENTIONS Hazelett contends that she need not exhaust her administrative remedies because they are inadequate. As she was seeking actual damages, punitive damages, and attorneys' fees via a class action suit, items which the Commissioner did not have the power to award, she claims that resort to the administrative agency would have been a meaningless step.

Blue Cross replies that before challenging an insurance policy provision in the courts as being against public policy, Hazelett was required to exhaust any administrative remedies available to her, and that Ind.Code 27-8-5-1 required her to first challenge the provision before the Insurance Commissioner.

DECISION

CONCLUSION The trial court improperly dismissed Hazelett's action as there was no administrative remedy for Hazelett to exhaust.

Of necessity, the requirement of exhaustion of administrative remedies is contingent upon the existence of a remedy.

Blue Cross sees an administrative remedy for Hazelett in Ind.Code 27-8-5-1 (the Statute):

No policy of accident and sickness insurance shall be issued or delivered to any person in this state nor shall any application, rider or endorsement be used in connection therewith until a copy of the form thereof and of the classification of risks and the premium rates, or, in the case of assessment companies the estimated cost pertaining thereto, have been filed with the commissioner. This section shall be applicable also to assessment companies and fraternal benefit associations or societies.

No such policy shall be issued, nor shall any application, rider, or endorsement be used in connection therewith, until the expiration of thirty (30) days after it has been so filed unless the commissioner shall sooner give his written approval thereto.

The commissioner may within thirty (30) days after the filing of any such form, disapprove such form (1) if in the case of an individual accident and sickness form the benefits provided therein are unreasonable in relation to the premium charged, or (2) if in the case of an individual, blanket, or group accident and sickness form it contains a provision or provisions which are unjust, unfair, inequitable, misleading, deceptive or encourage misrepresentation of such policy. If the commissioner shall notify the insurer which has filed any such form that it does not comply with the provisions of this section, it shall be unlawful thereafter for such insurer to issue such form or use it in connection with any policy. In such notice the commissioner shall specify the reasons for his disapproval and state that a hearing will be granted within twenty (20) days after request in writing by the insurer.

The commissioner may at any time, after a hearing of which not less than twenty (20) days' written notice shall have been given to the insurer, withdraw his approval of any such form on any of the grounds stated in this section. It shall be unlawful for the insurer to issue such form or use it in connection with any policy after the effective date of such withdrawal of approval. The notice of any hearing called under this paragraph shall specify the matters to be considered at such hearing and any decision affirming disapproval or directing withdrawal of approval under this section shall be in writing and shall specify the reasons therefor. (emphasis supplied)

Specifically, Blue Cross maintains that a health insurance policy provision must first be challenged before the Insurance Commissioner before it can be challenged in court as being against public policy. This is not the purpose of this statute, and no Indiana case, nor any case we have found in any other jurisdiction, has required an exhaustion of administrative remedies before challenging an insurance policy provision in court. See, e. g., Pinkus v. Southern Farm Bureau Casualty Ins. Co. (E.D.Ark.1968), 292 F.Supp. 141; M.F.A. Mutual Ins. Co. v. McKinley (1968), 245 Ark. 326, 432 S.W.2d 484; Furguson v. Phoenix...

To continue reading

Request your trial
3 cases
  • Huffman v. Office of Environmental Adjudication, 49S02-0311-CV-578.
    • United States
    • Supreme Court of Indiana
    • June 30, 2004
    ...standing of the Podiatrists' Association was not required to put the issue of the policy provision before the Commissioner. 400 N.E.2d 1134, 1136 (Ind.Ct.App.1980). 4. The legislature is always free to amend AOPA, and may enlarge the class of persons who may seek administrative 5. "Indiana ......
  • Anderson Federation of Teachers, Local 519 v. Alexander
    • United States
    • Court of Appeals of Indiana
    • March 4, 1981
    ...meaning in law shall be understood according to their technical import." I.C. 1-1-4-1(1) (Burns 1980); Hazelett v. Blue Cross & Blue Shield of Indiana (1980), Ind.App., 400 N.E.2d 1134; State v. Bress, (1976), 169 Ind.App. 397, 349 N.E.2d 229. Statutes are to be construed as a whole, Hazele......
  • Golden Rule Ins. Co. v. McCarty, 49A02-0010-CV-672.
    • United States
    • Court of Appeals of Indiana
    • September 17, 2001
    ...Trustee's Office of Marion County, 742 N.E.2d 515, 518 (Ind.Ct.App.2001). 2. Golden Rule also points to Hazelett v. Blue Cross and Blue Shield of Ind., 400 N.E.2d 1134 (Ind.Ct.App. 1980), in which this Court considered the propriety of a trial court's dismissal of a suit under this statute ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT