MACON-BIBB CTY. HOSP. AUTH. v. Georgia Kaolin Co.

• Decision Date: 15 September 1986
• Docket Number: Civ. A. No. 83-140-2-MAC.
• Citation: 646 F. Supp. 90
• Parties: MACON-BIBB COUNTY HOSPITAL AUTHORITY d/b/a Medical Center of Central Georgia, Plaintiff, v. GEORGIA KAOLIN COMPANY, INC. and Washington National Insurance Company, Defendants.
• Court: U.S. District Court — Middle District of Georgia

646 F. Supp. 90

MACON-BIBB COUNTY HOSPITAL AUTHORITY d/b/a Medical Center of Central Georgia, Plaintiff, v. GEORGIA KAOLIN COMPANY, INC. and Washington National Insurance Company, Defendants.

Civ. A. No. 83-140-2-MAC.

United States District Court, M.D. Georgia, Macon Division.

September 15, 1986.

John A. Draughon, Sell & Melton, Susan S. Cole, Anderson, Walker & Reichert, Macon, Ga., for plaintiff.

William C. Harris, Harris, Watkins, Davis & Chambless, Macon, Ga., for defendants.

FITZPATRICK, District Judge:

This case is before the court on cross-motions for summary judgment. Plaintiff Macon-Bibb County Hospital Authority brought suit against Georgia Kaolin, Inc., and Washington National Insurance, Inc., Georgia Kaolin's insurer, for payment for services rendered to Mr. Ben Dock White. Mr. White, a former Georgia Kaolin employee, entered the Medical Center of Georgia (represented in this suit by the hospital authority), on March 8, 1979, and remained there until his death on April 12, 1979. Upon entering the hospital, Mr. White told hospital employees that he did not have insurance, and the hospital categorized him as a "self-pay" patient. However, on April 6, 1979, an employee in the Social Services Department of the Medical Center of Georgia (MCG) telephoned Georgia Kaolin to see whether Mr. White might be covered under their hospitalization insurance policy.

The parties do not dispute that one of Georgia Kaolin's employees advised MCG on April 6 that Mr. White was its employee, and that he was fully covered by their group hospitalization policy. The policy, according to Georgia Kaolin personnel, would pay all hospital charges at semi-private room rates and all miscellaneous charges for 70 days with a $25.00 deductible. The Georgia Kaolin employee told MCG that the policy contained a $250,000 aggregate major medical benefit. On April 12, 1979, an MCG employee verified this same insurance coverage with Georgia Kaolin's Director of Personnel.

After Mr. White died, MCG sent Georgia Kaolin a bill for his hospitalization totalling $76,009.45. Washington National paid $2,970 on the bill, but refused to pay the remainder. Washington National and Georgia Kaolin decided, after examining Mr. White's records, that he was not entitled to full coverage under the group hospitalization plan. Instead, he was entitled to reduced coverage due to his status as a retired employee at the time of his hospitalization.

MCG admits that it received the information as to Mr. White's reduced coverage on June 26, 1979, from an unidentified employee in Georgia Kaolin's personnel department. If MCG had filed for reimbursement from the Medical Assistance Program of the State of Georgia by July 31, 1979, it could have received payment for approximately 69% of Mr. White's hospital bill. However, MCG chose not to rely on the information of reduced coverage for Mr. White, asserting that it was relayed to them by an "unknown, unidentified employee" at Georgia Kaolin. Instead, MCG let the July 31 deadline for filing for Medicaid pass, while waiting for confirmation of Mr. White's reduced coverage from Georgia Kaolin's Director of Personnel.

Subsequently, MCG contacted Georgia Kaolin's Personnel Director who told them unequivocally that Mr. White was considered a retired employee during the period of hospitalization, and that Washington National would not pay the remainder of the bill. Approximately one year later, on September 11, 1980, MCG applied for medical assistance from the state. The assistance was denied because of MCG's failure to timely file an application by July 31, 1979.

Plaintiff brought suit in the Superior Court of Bibb County on March 11, 1983, alleging that Georgia Kaolin had fraudulently represented that Mr. White was fully covered, and that MCG had detrimentally relied on this misrepresentation by failing to file for Medicaid. Because of the alleged misrepresentation, MCG contends that Georgia Kaolin is estopped from denying coverage, and claims that it is entitled to recover the amount of the hospital bill in an independent action in tort arising from the fraud. The case was removed to this court pursuant to 28 U.S.C. § 1332 (1984).

During the course of discovery, plaintiff added a second claim to the suit. A dispute arose as to whether Georgia Kaolin's conclusion that Mr. White was not fully covered was correct. After taking the deposition of a Washington National agent, plaintiffs learned that, at one other time subsequent to Mr. White's last day as a Georgia Kaolin employee, Georgia Kaolin paid for Mr. White's hospitalization as if he were an active employee. Therefore, MCG claims that Mr. White was fully covered under the terms of the policy, and that Georgia Kaolin's later representation of reduced coverage was fraudulent.

The policy itself specifically provides that no action can be brought on the policy within three years and ninety days after expenses are incurred by the insured. Mr. White's last day of hospitalization was on April 12, 1979, and suit was not brought to recover for the expenses of his hospitalization until March 11, 1983. In addition to considering the merits of plaintiff's allegations of fraud, this court must consider the question of whether either or both of plaintiff's claims are barred by the statute of limitations set forth in the policy.

A. Plaintiff has failed to put forth evidence to show that Georgia Kaolin's representation of full coverage for Mr. White was fraudulent.

Plaintiff claims that Georgia Kaolin and Washington National are equitably estopped from denying coverage for Mr. White's hospital bills. Plaintiff's original complaint requests punitive damages for the fraud itself and compensatory damages for payment of Mr. White's hospital bill.

This court concludes that plaintiff has failed to adequately prove the elements of fraud (either actual or constructive) to withstand defendant's motion for summary judgment, as there is no issue of material fact, and defendant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). "Questions of fraud, bad faith, and materiality of misrepresentation are normally for the jury." Grizzle v. Guarantee Ins. Co., 602 F.Supp. 465, 467 (N.D.Ga.1984), aff'd 755 F.2d 174 (11th Cir.1985); Adkins v. Lee, 127 Ga.App. 261, 193 S.E.2d 252 (1972). However, to survive a motion for summary judgment, plaintiff must show evidence of the existence of an issue of material fact:

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleadings, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial ...

Fed.R.Civ.P. § 56(e) (emphasis added).

Plaintiff may not merely allege the existence of a typical jury question, such as fraud, in an attempt to create an issue of fact to escape summary judgment. See generally Celotex Corp. v. Catrett, ___ U.S. ___, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Plaintiff in this case has failed to prove that an issue of material fact exists with respect to each of the elements of actual fraud.

The elements of actual fraud, each of which must be satisfied for plaintiff to recover in tort for fraud, include: that the defendant made false representations; that the defendant knew of the falsity of the representations; that the defendant made the representations with the purpose and intention of deceiving the plaintiff; that the plaintiff reasonably relied on the representations; and that the plaintiff sustained losses as a result of the representations by the defendant. Brown v. Ragsdale Motor Co., 65 Ga.App. 727, 16 S.E.2d 176 (1941); C.P.D. Chemical Co. v. National Car Rental Systems, 148 Ga.App. 756, 252 S.E.2d 665 (1979). The record must disclose a genuine issue of material fact as to each of these elements for plaintiff to withstand a motion for summary judgment. Reeves v. Habersham Bank, 254 Ga. 615, 331 S.E.2d 589 (1985).

Plaintiff has satisfied the first requirement, as Georgia Kaolin has admitted that it told MCG employees on two occasions that Mr. White was fully covered. However, plaintiff has put forth no evidence to create an issue of material fact as to whether defendant knew of the true nature of Mr. White's coverage and deceived the plaintiff through its oral statement that Mr. White was fully covered. Scienter, and an intentional deceitful purpose, are essential to an action for actual fraud. Penn Mutual Life Ins. Co. v. Taggert, 38 Ga.App. 509, 144 S.E. 400 (1928). While plaintiff alleges that Georgia Kaolin knowingly intended to deceive plaintiff, there is no evidence whatsoever in the record to support this assertion. Additionally, there is no conceivable explanation as to why Georgia Kaolin would have any reason to intentionally represent to MCG that Mr. White was fully covered if in fact Georgia Kaolin knew that he was not.

Plaintiff has also failed to show an issue of material fact with regard to its reasonable reliance on Georgia Kaolin's initial representations. Plaintiff was given notice on June 26, 1979, that Georgia Kaolin was retracting its original statement as to full coverage for Mr. White. Plaintiff had until July 31, 1979 to file for Medicaid assistance. MCG's failure to investigate the matter shows a lack of due diligence, negating any issue of reasonable reliance. See Reeves, 331 S.E.2d 589; Blanchard v. West, 115 Ga.App. 814, 156 S.E.2d 164 (1967). The courts in both Reeves and Blanchard granted summary judgment where the plaintiffs failed to show that their reliance on defendant's statements was justified. "The party seeking the benefit of estoppel must not only have been free from fraud, but must have acted in good faith and reasonable diligence, otherwise no equity will arise in his favor." Tybrisa Co. v. Tybeeland Co., Inc., 220 Ga. 442, 139 S.E.2d 302 (1964).

Even assuming that pl...