Leahy v. The Bon, Inc., Civ. No. 89-NC-83B.

• Decision Date: 31 August 1992
• Docket Number: Civ. No. 89-NC-83B.
• Citation: 801 F. Supp. 529
• Parties: Mary C. LEAHY, Plaintiff, v. THE BON, INC.; Allied Stores Corp.; and CIGNA Insurance Co., Defendants.
• Court: U.S. District Court — District of Utah

801 F. Supp. 529

Mary C. LEAHY, Plaintiff, v. THE BON, INC.; Allied Stores Corp.; and CIGNA Insurance Co., Defendants.

Civ. No. 89-NC-83B.

United States District Court, D. Utah, C.D.

August 31, 1992.

COPYRIGHT MATERIAL OMITTED

Brian R. Florence, Ogden, Utah, for plaintiff.

Deno G. Himonas, James S. Lowrie, Gary L. Johnson, Salt Lake City, Utah, for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

BENSON, District Judge.

1. The above-captioned matter came before the court for trial on June 5, 1992, at 8:30 a.m. Plaintiff was present and was represented by Mr. Brian Florence. Defendant CIGNA Insurance Co. was represented by Mr. Gary Johnson. Defendants Allied Stores Corporation and The Bon, Inc., (jointly "The Bon") were represented by Mr. James S. Lowrie and Mr. Deno G. Himonas.

2. The court heard evidence from the witnesses presented by the parties and all parties rested at the close of the day. No evidence was presented on liability for or amount of attorney's fees because the parties agreed to bifurcate attorney's fees issues.

3. Each party has submitted proposed Findings of Fact and Conclusions of Law to the court. The parties have waived their right to closing arguments. The court, being fully apprised in the premises, now enters the following:

FINDINGS OF FACT

1. Mary Leahy started her employment with The Bon at its Layton location on March 12, 1986.

2. As part of the consideration for her employment, Mrs. Leahy received from The Bon certain benefits including the opportunity to enroll in optional employee benefit plans.

3. At the time Mrs. Leahy started her employment, a spouse and dependent children sign-up form was prepared for her designating her spouse as John T. Leahy and her dependent children as Maureen B. Leahy and Kathy A. Leahy. Mr. and Mrs. Leahy had other children, all of whom were emancipated.

4. Shortly after Mrs. Leahy started her employment, her daughter Kathy married. On May 15, 1986, Mrs. Leahy filled out an AETNA request record card designating her eligible dependents as John T. Leahy and Maureen B. Leahy.

5. Six months after her employment starting date, Mrs. Leahy became eligible for additional benefits referred to as "in-hospital cash" and "voluntary group accident" ("VGA") insurance. In this regard, Mrs. Leahy was given a letter generally explaining the benefits (Exhibit P-2) and a circular describing the VGA plan (Exhibit P-3) and the in-hospital cash benefits (Exhibit P-22).

6. The VGA plan was offered by Allied Stores Corp., the owner of The Bon. The retirement committee of Allied Stores serves as Plan Administrator. The insurance policy was issued by the Life Insurance Company of North America, a CIGNA company.

7. The VGA Plan entitled the employee to enroll in and purchase through payroll deductions, accident insurance which had coverage provisions for the employee, and at the employee's election, the employee's spouse and family. The coverage amounts ranged from $14,370 to $287,500 with premiums ranging from $.50 to $15 per month. (Exhibits P-2 and P-3.) Under the terms of the plan, 50% of the coverage amount would be paid in the event of the accidental death of a spouse.

8. The amount of coverage for which Mrs. Leahy originally applied is disputed in this action. Mrs. Leahy claims she originally subscribed to coverage in the amount of $215,620. Defendants claim that the Mrs. Leahy originally applied for coverage in the amount of $21,560.

9. Plaintiff submitted into evidence a copy of a CIGNA VGA Insurance Application Form. (Exhibit P-1). The original of this form cannot be located. In a box entitled "Amount of Principal Sum," a figure of $107,810 is crossed out with $215,620 written above it. On the line entitled "Monthly Premium," a figure of $5.63 is crossed out, with $11.25 written next to it. The form is signed by Mary C. Leahy and dated October 17, 1986.

10. There is conflicting evidence as to when this form was prepared. Mrs. Leahy testified that she filled out the form on October 17, 1986. She explained that in filling out her application, she used the information circular for guidance. Using the amounts contained in an example on page 3 of the circular, Mrs. Leahy first filled in the amount of $107,810 insurance coverage with a monthly premium of $5.63. After reading further and seeing a variety of alternatives described on page 4 of the circular, Mrs. Leahy changed her mind. She underlined on page 4 a principle sum insurance of $215,620 with a family plan monthly premium of $11.25 and changed her application to correspond to those figures. (Exhibit P-3).

11. On that same day, Mrs. Leahy also filled out the "in-hospital cash" benefits application. In reviewing the information circular, Mrs. Leahy underlined on the in-hospital cash information sheet, a daily benefit coverage of $70 for a family plan at a monthly premium of $23.73. (Exhibit P-22). She correspondingly filled out an application for those amounts. (Exhibit P-16).

12. Diane Doelfs, The Bon's store personnel assistant, testified that the VGA form was not prepared until 1988. She explained that Mrs. Leahy came to her in early 1988 complaining about a mistake that had appeared on her Benefits Profile sheet. At that point, Ms. Doelfs testified, Mrs. Leahy filled out a new application form, listing $215,620 as the coverage amount. The new form, it is alleged by Ms. Doelfs, was backdated to October 17, 1986. Ms. Doelfs further testified that Mrs. Leahy's file contained the original application form which showed a coverage amount of less than $215,620.

13. The court is persuaded by the testimony of Mrs. Leahy. Her explanation is the more credible. Her testimony as to how she filled out the VGA form, underlining the amounts in the circular, and then filling them in on the form, is consistent with how she filled out the in-hospital insurance form on the same day. Her testimony as to why she crossed out the original amounts on the VGA application is plausible in light of the way the information circular was written.

14. The court does not find the testimony of Ms. Doelfs to be convincing. If Ms. Doelfs was under the belief that there had been a mistake in the amount withheld from Mrs. Leahy's checks, why was a new application form necessary? Why wouldn't the original application be used to determine the correct amount? Why wouldn't Ms. Doelfs merely prepare a new computer input form consistent with the original application? Why did Ms. Doelfs allow Mrs. Leahy to backdate the application form to 1986? Why would she allow Mrs. Leahy to retroactively increase her coverage to $215,620, if, as Ms. Doelfs testified, the original form showed a lower amount of coverage?

15. The evidence and testimony presented persuade this court that Mrs. Leahy filled out a VGA application form on or about October 17, 1986, requesting insurance coverage in the amount of $215,620.

16. Beginning January 17, 1987, premium deductions for the VGA insurance were withheld from Mrs. Leahy's check in the amount of $1.13 per month. The $1.13 figure does not reflect a coverage amount of $215,620. Rather, it corresponds to coverage in the amount of $21,560.

17. The evidence presented does not establish conclusively why this discrepancy occurred. It was apparently due to a clerical error. From other evidence presented, (Exhibit P-8), apparently a second Mary C. Leahy was employed by The Bon in another location which had also resulted in some confusion with Mrs. Leahy's (the plaintiff's) retirement. This may have been the cause of the error in insurance coverage.

18. Defendants maintain that Mrs. Leahy was aware that her premium deduction was less than what was required for coverage of $215,620. The evidence showed that the premium deduction amount appeared on every other paycheck from January 1987 through February 1988. Furthermore, testimony was presented to show that Mrs. Leahy may have received "Benefits Profile" sheets detailing the amount of coverage to which Mrs. Leahy was entitled. The evidence showed that The Bon, in the normal course of operations, periodically generates Benefit Profile sheets and distributes them to its employees. The Benefit Profiles generated during 1987 show that Mrs. Leahy was entitled to VGA coverage of $21,560 at a premium of $1.13 per month. The Profiles also list Kathy A. Leahy as Mrs. Leahy's only dependent, despite the fact that Mrs. Leahy had designated her daughter Maureen as her only dependent in May of 1986.

19. Although defendants have shown Mrs. Leahy may have had an opportunity to discover the lower premium amounts, the evidence does not establish that Mrs. Leahy had actual knowledge of the lesser amount. Mrs. Leahy testified that she did not know about the coverage discrepancy until 1988. The VGA deduction was one of several categories listed on Mrs. Leahy's paycheck. At one point, she inquired of Ms. Doelfs about the purpose of the $1.13 deduction on her paycheck stubs. She received a general explanation that it was apparently tied to some of her life insurance benefits. Other than that, Mrs. Leahy testified that she paid no particular attention to the amounts or purposes of the premium deductions for that insurance or any of the others designated on her paycheck stubs.

20. Furthermore, although The Bon may have generated multiple Benefit Profile sheets during 1987, there is no evidence that Mrs. Leahy received these sheets, or that she looked at them and was aware of their contents. This is supported by the fact that Mrs. Leahy did not attempt to correct the beneficiary designation, replacing her daughter Kathy with Maureen, until February 1988 (see paragraph 24 below). Had Mrs. Leahy seen the Benefit Profiles before that time, she presumably would have made the correction earlier.

21. Thus, in spite of the fact that Mrs. Leahy received regular check stubs and may have received Benefit Profile sheets, the court finds that Mrs. Leahy did not know that her VGA premium...