Time Ins. Co. v. Sams

Decision Date20 July 1988
Docket NumberCiv. A. No. EC 87-137-D-D.
Citation692 F. Supp. 663
PartiesTIME INSURANCE COMPANY, Plaintiff, v. James H. SAMS, M.D. and Columbus Anesthesia Affiliates, Inc., Defendants.
CourtU.S. District Court — Northern District of Mississippi

James E. Hughes, III, Kenna L. Mansfield, Jr., Wells, Wells, Marble & Hurst, Jackson, Miss., for plaintiff.

Thomas L. Kesler, Sams and Kesler, Columbus, Miss., for defendants.


DAVIDSON, District Judge.

This cause is presently before the court on the defendants' motion to dismiss. Having reviewed the parties' briefs and being otherwise fully advised in this matter, the court finds that the defendants' motion should be sustained.


This is a declaratory judgment action brought pursuant to the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202. The plaintiff, Time Insurance Company ("Time"), is an insurance company organized and existing under the laws of the State of Wisconsin, with its principal place of business located at Milwaukee, Wisconsin. Defendant James H. Sams, M.D. ("Sams") is an adult resident citizen of Lowndes County, Mississippi. Defendant Columbus Anesthesia Affiliates, Inc. ("the Clinic"), is a corporation organized and existing under the laws of the State of Mississippi.

This action was commenced by Time, seeking a declaratory judgment and other relief from the court concerning the extent of its liability, if any, under a group insurance policy issued to Sams and the Clinic. Coverage under the policy was afforded both Sams and his dependents. Time seeks a judgment declaring: 1) whether or not Time is entitled to deduct any amount paid under a separate policy of insurance from the amount to be paid under the Time policy, or whether Time is precluded from doing so by Regulation No. 84-102, as promulgated by the Commissioner of Insurance of the State of Mississippi; and, 2) whether Sams' coverage under the Time policy is voidable as a matter of public policy because public policy would not permit Sams to reap a profit as a result of overinsurance of medical expenses. Sams has answered with a counterclaim alleging bad faith delay by Time in the payment of claims made under the policy of insurance Time issued to Sams.

Prior to June 20, 1986, the Clinic carried a health insurance plan for its employees and their dependents with Shelter Insurance Company ("the Shelter policies"). The Shelter policies were applied for individually and were issued on an individual basis to each of the employees of the Clinic. The Shelter policies provided comprehensive medical insurance which included basic medical benefits and major medical coverage. These policies provided for the reimbursement to the insureds of most, if not all, of the medical expenses incurred by the insured. The Shelter policies were not limited benefit policies nor "daily indemnity" type policies fixing a maximum amount to be paid for each day an insured is hospitalized. The Clinic paid the premiums on these Shelter policies.

Sometime in June 1986, the Clinic reviewed its medical insurance plan and determined that medical insurance benefits could be provided for its employees and their dependents at less expense to the Clinic if it took advantage of lower group insurance premiums as opposed to the higher rates of individual premiums. On June 20, 1986, the Clinic applied to Time for coverage under a group insurance plan. The employees of the Clinic, including Sams and his wife, Lindsey O. Sams, became insured under the Time group policy as of July 1, 1986.

The evidence before the court indicates that the Clinic apparently paid the premiums on the individual Shelter policies up through June 30, 1986. At that time, the Clinic apparently ceased paying the premiums on the Shelter policies and began to make payments on the Time group policy. The Shelter policies, however, provided for a grace period for the payment of premiums of at least 30 days after the premium due date. The premium due date for the individual Shelter policies was July 1, 1986. When the Clinic failed to pay the premiums on the individual policies on that date, having initiated coverage under the Time policy, the individual Shelter policies entered the 30-day grace period.

On July 23, 1986, Lindsey O. Sams was attacked and received severe injuries while vacationing in Florida. Sams allegedly telephoned the Clinic at that time and instructed an employee of the Clinic to pay the premium due on the individual Shelter policy which insured Sams and his wife. This employee of the Clinic apparently remitted the premium to Shelter within the grace period, thereby maintaining Sams' individual policy in full force and effect.1

The Time policy, like the Shelter individual policies, is a comprehensive medical insurance plan which is designed to reimburse the insured for most, if not all, of the insured's medical expenses. Because both the Time policy and Sams' individual Shelter policy were in force and effect at the time Lindsey O. Sams sustained her injuries, she was covered under both policies. Sams has submitted claims under both policies for his wife's medical expenses. Sams asserts that he is entitled to collect the full amount of his wife's medical expenses under both policies and that the insurance companies should not be permitted to coordinate benefits so that Sams will be reimbursed only once for these expenses.

Time asserts that Sams should not be permitted to collect amounts under both policies, the total of which would be approximately double the amount of medical expenses actually incurred by his wife. More than $250,000 in expenses were incurred in treating Mrs. Sams. If Sams is permitted to collect full benefits under both policies, Time argues that he will be unjustly and improperly enriched by at least $200,000 above and beyond the actual expenses incurred in the treatment of his wife.2

The defendants have filed a motion to dismiss the complaint, asserting that the plaintiff does not state a claim upon which relief may be granted. Insofar as matters outside the pleadings are presented with the motion, the court treats the motion as a motion for summary judgment in accordance with Rule 12(b) of the Federal Rules of Civil Procedure.

The following language from Time's insurance contract with the Clinic is relevant to the court's ruling herein:

Section B. Definitions
1. "Plan" means any plan providing benefits or services by reason of medical or dental care or treatment, which benefits or services are provided by (i) group or blanket insurance coverage, (ii) group Blue Cross, group Blue Shield, group practice, and other group prepayment coverage, (iii) any coverage under labormanagement trusted plans, union welfare plans, employer organization plans, or employee benefit organization plans and (iv) auto no-fault coverage, if coordination of benefits with such coverage is allowed by law....
3. "Allowable Expense" means any necessary, reasonable and customary item of expense....
4. "Claim Determination Period" means a "calendar year."
Section C. Effect on Benefits
1. This provision shall apply in determining the benefits as to a person covered under this Plan for any Claim Determination Period....
2. As to any Claim Determination Period with respect to which this provision is applicable, the benefits that would be payable under this Plan in the absence of this provision for the Allowable Expenses incurred as to such person during such Claim Determination Period shall be reduced to the extent necessary so that the sum of such reduced benefits and all the benefits payable for such Allowable Expenses under all other Plans, except as provided in item (3) of this Section C, shall not exceed the total of such Allowable Expenses. Benefits payable under another Plan include the benefits that would have been payable had claim been duly made therefor.

See Exhibit A to Plaintiff's Brief in Response to Defendants' Motion to Dismiss.


The contract language set out above forms the basis of Time's argument that it is entitled to deduct from the amount payable under its policy those amounts that have been paid under the Shelter policy. Sams maintains that he is entitled to be paid full benefits under both the Time group policy and the Shelter individual policy.

As a general rule, insurance policies are to be construed in accordance with general principles of contractual construction. Western Line Consol. School Dist. v. Continental Cas. Co., 632 F.Supp. 295 (N.D. Miss.1986). Whether any ambiguity in the insurance contract exists is a question of law for the court to decide. Hicks v. Quaker Oats Co., 662 F.2d 1158, 1175 (5th Cir.1981). When an ambiguity exists, and as a rule of construction, each and every provision of an insurance contract is to be construed strongly against the drafter. Brander v. Nabors, 443 F.Supp. 764 (N.D. Miss.1978), aff'd, 579 F.2d 888 (5th Cir. 1978). Time drafted the language in the coordination of benefits provision of the insurance contract in question here; thus, any ambiguities in those provisions will be construed against the insurer and in favor of the insured, Sams. Cf. Williams v. Life Ins. Co. of Georgia, 367 So.2d 922 (Miss. 1979).

A. Is Coordination of Benefits Available Under the Time Policy?

A coordination of benefits provision is a usual and typical provision seen in most, if not all, group insurance policies. The purpose of a coordination of benefits provision is to insure that the person insured under the policy will be completely reimbursed or indemnified for his expenses, but that the insured will not be unjustly enriched or allowed to reap a profit as the result of being insured under multiple policies of insurance. See generally, Blue Cross and Blue Shield of Mississippi, Inc. v. Larson, 485 So.2d 1071 (Miss.1986); Blue Cross and Blue Shield of Kansas, Inc. v. Riverside Hosp., 237 Kan. 829, 703 P.2d 1384 (1985); 15...

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