Phelps v. Elgin Academy

• Decision Date: 13 July 1970
• Docket Number: Gen. No. 69--197
• Citation: 260 N.E.2d 864,125 Ill.App.2d 364
• Parties: William A. PHELPS, Plaintiff-Appellant, v. The ELGIN ACADEMY, Hospital Service Corporation (Blue Cross, an Illinois medical service), Blue Shield, Defendants, Hospital Service Corporation (Blue Cross), Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 864

260 N.E.2d 864

125 Ill.App.2d 364

William A. PHELPS, Plaintiff-Appellant, v. The ELGIN ACADEMY, Hospital Service Corporation (Blue Cross an Illinois medical service), Blue Shield, Defendants Hospital Service Corporation (Blue Cross), Defendant-Appellee.

Gen. No. 69--197.

Appellate Court of Illinois, Second District.

July 13, 1970.

Sidney Z. Karasik, Chicago, for plaintiff-appellant.

Miller, Gorham, Wescott & Adams, Chicago, for defendant-appellee.

DAVIS, Presiding Justice.

William A. Phelps, plaintiff, filed a two-count complaint to recover benefits under a group medical and surgical expense insurance contract issued to his former employer, The Elgin Academy, by Hospital Service Corporation (Blue Cross) and Illinois Medical Service (Blue Shield). In Count II of the complaint, the two insurance companies were made defendants. Blue Cross filed a motion for summary judgment in its favor on this count and the plaintiff filed a similar counter-motion. The trial court entered summary judgment on behalf of Blue Cross and expressly found that there was no just cause for delaying an appeal of the judgment. The plaintiff has prosecuted this appeal.

In Count II of the complaint, the plaintiff alleged that prior to April 1, 1968, he was employed by The Elgin Academy, and was covered as a 'subscriber' under the insurance contracts with the defendant insurance companies. He alleged that premiums were paid by a deduction from his wages; that he assumed, at all pertinent times, that he was covered by such insurance; that he terminated his employment on April 1, 1968, the same date on which the subscription certificates evidencing his membership and insurance coverage became effective; that the business manager of The Elgin Academy assured him that his insurance would be maintained until he could become eligible for new insurance under a group plan of a new employer; that on September 15, 1968, he entered the Aurora hospital and incurred a hospital bill in the sum of $509.85 and a doctor bill in the sum of $69.00; that at such time he had not been notified of any cancellation of his insurance and had assumed that he still had coverage; and that it was not until after he submitted these bills that he received notice of the retroactive cancellation of his coverage.

Blue Cross, in its motion for summary judgment and supporting affidavit, asserted, in essence, that the plaintiff had ended his employment no later than April 1, 1968--the date that the certificates were issued and delivered; that no premiums were paid by him after that date; that the subscription certificates provided for their automatic termination upon the cessation of employment, or failure of premium payment; and that the plaintiff was not thereafter entitled to any benefits under the plan. Blue Cross further asserted in its motion and affidavit that subsequent to April 9, 1968, it was advised by The Elgin Academy of the termination of Phelps' employment.

In his counter-motion for summary judgment, the plaintiff stated that there was no genuine triable issue of fact; that the defendant took no action to terminate or cancel the coverage until the hospital and medical bills had been incurred; and that the attempt thereafter to give notice of retroactive cancellation constituted a waiver on the part of Blue Cross to assert any defenses it might have to the policy.

In this appeal, the plaintiff contends that The Elgin Academy induced him to believe that he had policy coverage when in fact he did not, and that Blue Cross is estopped by this conduct from denying coverage, notwithstanding the certificate provision for the termination of benefits on the cessation of employment.

The plaintiff has cited numerous cases, but relies most heavily on Neider v. Continental Assur. Co., 213 La. 621, 35 So.2d 237, 2 A.L.R.2d 846 (1948). In that case, the deceased employee was insured under a group policy which provided that the insurance would cease at the due date of the premium to which the employee failed to make the required contribution, the premiums to be paid monthly in advance. The employer would deduct the monthly premium contributions currently from the insured's payroll earnings; and in event the insured had no earnings, he had to pay his monthly contributions to the employer in cash. Under the accounting procedure used by the employer, wages were paid twice a month, two weeks after they had been earned. When the deceased, because of illness, was dropped from the payroll February 19, he received pay on March 15 for the time he had worked since February 15. However, since the monthly deductions for the...