Prudential Insurance Co. v. Superior Court

• Decision Date: 17 May 2002
• Docket Number: No. H022025.,H022025.
• Citation: 98 Cal.App.4th 585,119 Cal.Rptr.2d 823
• Court: California Court of Appeals Court of Appeals
• Parties: PRUDENTIAL INSURANCE COMPANY OF AMERICA, INC., et al., Petitioners, v. The SUPERIOR COURT of Santa Cruz County, Respondent; Michelle L. Dunniway, Real Party in Interest.

119 Cal.Rptr.2d 823

98 Cal.App.4th 585

PRUDENTIAL INSURANCE COMPANY OF AMERICA, INC., et al., Petitioners, v. The SUPERIOR COURT of Santa Cruz County, Respondent; Michelle L. Dunniway, Real Party in Interest.

No. H022025.

Court of Appeal, Sixth District.

May 17, 2002.

Beckman, Davis, Smith & Ruddy, Jeffrey P. Smith, Cheryl A. De Bari, for Petitioners.

No appearances for Respondent.

Bailey & Kornblum, Guy Kornblum & Associates, Guy O. Kornblum, San Francisco, Walter G. Crump, for Real Party in Interest.

WUNDERLICH, J.

I. INTRODUCTION

In this insurance coverage action, defendants Prudential Insurance Company of America and Prudential Health Care Plan of California, Inc.¹ petition for extraordinary relief from the order of respondent court denying their motion for summary judgment. To determine whether extraordinary relief is warranted, we consider an issue of first impression in California insurance law concerning the interpretation of the phrase "enrolled as a full-time student in a school" in a group health policy that provides medical coverage to employees' dependents aged 19 to 24 who meet that description. The courts of other jurisdictions have determined that the plain meaning of the word "enrolled" is that the dependent is registered at an academic institution, and that the phrase "full-time student" plainly means that the dependent spends a substantial amount of time attending classes. We find these decisions persuasive. Therefore, because it is undisputed that at the time of her catastrophic accident in November 1994 plaintiff Michelle Dunniway was not registered at an academic institution and was not attending any classes, as a matter of law she did not qualify for dependents medical coverage under defendants' group health policy. Defendants therefore have no obligation to provide her with lifetime medical coverage for her accident-related medical expenses.

Accordingly, we will grant extraordinary relief as requested and issue a writ of mandate directing respondent court to grant defendants' motion for summary judgment.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. The Prudential Group Health Policy

Michelle's father William Dunniway (William) was an employee of the Mt. Hermon Association.² From September 1, 1993, to September 1, 1995, the employees of the Mt. Hermon Association had medical coverage under a Prudential Health Care Group Contract (the Plan). The Plan provides medical coverage for "qualified dependents," who include employees' unmarried children under the age of 19. Additionally, the Plan provides qualified dependents coverage to children aged 19 to 24 if certain eligibility requirements are met: "(1) The age 19 limit does not apply to a child who: [¶] (a) is wholly dependent on you [the employee] for support and maintenance; and [¶] (b) is enrolled as a full-time student in a school; and [¶] (c) is less than the Student Age Limit. [¶] Student Age Limit: 25."

The Plan requires the employee to notify the employer "promptly" when "a Qualified Dependent becomes ineligible." Additionally, the Plan states, "Your Dependents Coverage for a Qualified Dependent will end when that person: (1) moves his or her permanent address outside the Service Area; or (2) ceases to be a Qualified Dependent." The Plan also includes options for the continuation of medical coverage when coverage under the Plan ends, including Group Health Care Continuation (under COBRA³), Extension of Group Health Care Protection (for disabled persons), and a Conversion Privilege (for an individual health care coverage contract).

To obtain qualified dependents coverage for Michelle, William submitted to Prudential an overage dependent student verification form stating that Michelle was a fulltime student at the University of California, Santa Barbara (UCSB) as of August 12, 1993. Michelle's qualified dependents coverage became effective on September 1, 1993.

B. Michelle's Student Status At UCSB

The following facts appear to be undisputed. Michelle attended UCSB as a freshman during the 1993-1994 school year. For a variety of personal reasons, her freshman year did not go well and her grade-point average fell below UCSB's required minimum. In a letter dated June 23, 1994, the Acting Dean of Undergraduate Studies advised Michelle that she was "subject to academic disqualification" and was "not eligible to continue at UCSB" unless she was "reinstated to the college." The Acting Dean further advised Michelle that she could not be reinstated unless she submitted a written appeal. Michelle did so. In a letter dated August 22, 1994, UCSB advised Michelle that her appeal had been reviewed and that she had been "reinstated on probation for the Fall 1994 quarter." The letter also states, "If you prefer to delay your return to UCSB for one or more quarters, you should file a Notice of Intent to Cancel Registration with the Office of the Registrar and you should not pay your fees for fall. When you feel ready to resume your studies here, you must file an application for readmission and reinstatement after absence with the Office of the Registrar several months before your planned return. We will examine your record and your new appeal at that time and, in the absence of any negative factors, we will reinstate you on probation."

In response to the letter of August 22, 1994, Michelle filed a Notice of Intent to Cancel Registration. The notice stated, "I am notifying the Office of the Registrar that I will not be returning for Fall quarter." In an accompanying letter Michelle wrote, "I need to take a quarter break to tend to personal problems and work full time for money for tuition." In another letter to UCSB, dated September 20, 1994, Michelle stated, "I am requesting that my records and status here at UCSB be put on hold and that I will be able to return and appeal for reinstatement. I also would like the proper application for readmission at Winter of 1995." According to Michelle's mother, Crystal Dunniway, Michelle made the decision to take fall quarter off on the advice of her college counselor.

On October 4, 1994, UCSB entered Michelle's cancellation of registration into its official records. Michelle did not attend any classes during Fall Quarter 1994. Unfortunately, Michelle never returned to college. On November 11, 1994, she sustained catastrophic injuries in an automobile accident. Michelle is now a totally disabled quadriplegic with brain damage and a claim for ongoing medical expenses in excess of $50,000 per year for the rest of her life.

C. Prudential's Termination of Michelle's Qualified Dependents Coverage

On October 18, 1994, prior to Michelle's accident, Prudential terminated Michelle's coverage as a qualified dependent effective October 30, 1994. According to Prudential, Michelle's coverage was terminated because William failed to return the overage student verification form which Prudential had sent to him in August 1994. William and Crystal deny ever receiving the August 1994 Over Age Student Verification Form. They assert that they did not know; that Michelle's coverage had been terminated until after her accident in November 1994.

To obtain medical coverage for Michelle after her catastrophic accident, William elected continuation coverage under CBRA. COBRA is federal legislation mandating that certain employees and their dependents be offered the option of paying premiums to continue medical coverage for a limited time period after the termination of coverage under a group health plan. (29 U.S.C. §§ 1161-1167, 42 U.S.C. § 300bb-1 through 300bb-8.) Prudential provided COBRA continuation coverage to Michelle retroactive to November 1, 1994. When William's employer switched its group health coverage from Prudential to Lifeguard in August 1995, Prudential's obligation to provide COBRA coverage ceased. However, Prudential provided Michelle with an additional 12 months of medical coverage pursuant to the Plan's provision for Extension of Group Health Care Protection to disabled persons. Michelle has not received any medical coverage benefits from Prudential since the extended coverage ended on August 31, 1996.

D. The Action Against Prudential

Through her mother and guardian ad litem Crystal, Michelle filed an insurance coverage action against defendants Prudential, Lifeguard Insurance Company and Lifeguard, Inc. (collectively, Lifeguard).⁴ The currently operative pleading is the first amended complaint. In the complaint, Michelle alleges that all premiums owed to Prudential for her medical coverage have been paid and that she was covered as a dependent insured on the date of her accident. Michelle also alleges that Prudential has refused to pay any of her ongoing accident-related medical expenses. Further, Michelle asserts that Prudential has failed to properly investigate or process her claim and has refused to respond to her parents' inquiries.

The complaint includes causes of action for breach of contract, declaratory relief, and breach of the covenant of good faith and fair dealing. As remedies, the complaint seeks unpaid benefits, a declaration that defendants have an obligation to pay Michelle's ongoing medical expenses, attorney fees, general damages for emotional distress, and punitive damages.

E. Prudential's Motion for Summary Judgment

Prudential filed a motion for summary judgment, or, in the alternative, summary adjudication on grounds that each cause of action in the complaint lacked merit as a matter of law. First, Prudential argued that it has not breached the insurance contract because the undisputed facts showed that Michelle has received all medical benefits under the Plan to which she was entitled after her eligibility for qualified dependents coverage ended, including COBRA continuation coverage and 12 months of extended coverage. Prudential further contended that it had no obligation to provide Michelle with lifetime coverage for her accident-related medical expenses, because the...