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Bain v. Benefit Trust Life Insur. Co.





Appeal from the Circuit Court of Jefferson County; the Hon. Donald E. Garrison, Judge, presiding.


Rehearing denied May 25, 1984.

Charles R. Bain, a former employee of Fruit Growers Express Company (FGE), seeks recovery of disability benefits under an insurance policy issued by Benefit Trust Life Insurance Company (Benefit) to FGE on behalf of FGE's employees. Bain appeals from the judgment of the circuit court of Jefferson County granting summary judgment to Benefit because Bain had failed to satisfy the master contract's eligibility requirement of "six consecutive months of actual full time employment" with FGE.

Bain started to work for FGE on September 4, 1979. On October 24, 1979, he completed and signed a group enrollment card as part of the application procedure for coverage under the contract between Benefit and FGE. The enrollment card, which was sent to Benefit, listed Bain's occupation as project engineer. Bain described his duties as designing and supervising the building of freight cars. FGE said his work entailed "traveling to and from job sites on r.r. yard-loading & unloading r.r. cars at remote sites." Bain was unable to work on January 8, 1980, and it is undisputed that he was absent from his employment from that date until March 17, 1980. During that period he was hospitalized for treatment of arteriosclerosis obliterans, and his right leg was amputated below the knee. On January 26, 1980, a second operation was performed to close off the stump.

Bain returned to FGE on March 17, 1980. The record provides no evidence that FGE notified Benefit of Bain's absence or return. On April 25, 1980, FGE paid the first premium to Benefit on Bain's behalf. Bain's group enrollment card in Benefit's files noted that the certificate of coverage was sent on May 5, 1980. Bain worked until May 14, 1980, when a heart attack and pulmonary blood clots forced him to stop working. In response to an interrogatory concerning the performance of his duties, Bain stated, "I also performed duties from bedside during my different illnesses." He talked on the phone and was consulted about the making of freight cars.

When Bain returned to FGE on March 17, 1980, he found on his desk a group insurance identification card and a certificate of coverage issued by Benefit. The identification card stated that Bain's disability coverage was effective as of March 4, 1980. The certificate stated that "the Insured named in the Identification Card * * * is insured * * * and is covered by" the contract. The certificate also contained a provision captioned "EFFECTIVE DATE OF INSURANCE" which referred to the date on the card as "[t]he effective date of insurance." The same provision explained that there would be a delay in coverage if the employee were absent on the day his insurance would ordinarily become effective. If he were absent from work on that day because of a disability, leave of absence or temporary layoff, his insurance would become effective when he recovered or returned and resumed full-time employment.

A single sentence within the paragraph describing the "EFFECTIVE DATE OF INSURANCE" stated that "[a]ll benefits described herein are governed by and subject in every respect to the provisions of the Group Insurance Contract referred to above which alone constitutes the agreement under which payments are made." Part IV of the certificate provided that the contract "will be kept on file at the principal office of the Assured and may there be inspected by any Insured during the regular business hours of the Assured, [FGE]." As late as January 19, 1983, when Bain filed his amended complaint, he alleged that the contract had not been "made available to or delivered to [him] * * *."

On May 14, 1980, Bain was hospitalized for treatment of a heart attack, pulmonary blood clots and related conditions. His doctor considered it unlikely he would ever return to work. In December 1980, Bain filed his claim for long-term disability benefits under the contract between Benefit and FGE. After Benefit denied Bain's claim, FGE stopped paying premiums for Bain. In January and July 1981, Benefit sent letters to FGE explaining its denial of Bain's claim on the ground that his disability was the result of a condition existing prior to the effective date of his insurance, March 4, 1980. Arthur J. Fischer, writing on behalf of Benefit in July 1981, said, "[n]o one is contending that the man never became eligible for insurance * * *." Fischer expressed difficulty in understanding the issues raised by Bain's attorney at that time and pointed out to FGE that Benefit's information was "based upon that provided by your company * * *." It is not clear when Bain received a copy of Fischer's letter to FGE or a letter from FGE advising Bain of a review of his eligibility.

Failing to receive benefits for his disability, Bain sought a declaratory judgment that he was covered by the insurance contract between Benefit and FGE because the certificate and identification card established an effective date of March 4, 1980. He also sought damages and an adjudication of his right to receive benefits until he was 70 years old.

Benefit admitted that Bain had been furnished an identification card and certificate by FGE but denied that Benefit knew of Bain's absence from work at the time it issued these items. As the first of three affirmative defenses, Benefit cited Part I, Paragraph C of the contract, which stated that an employee became eligible for insurance "on the date he completes six consecutive months of active full time employment for the Employer." Benefit pointed out that Bain had failed to satisfy this requirement. The other two affirmative defenses are based on exceptions from coverage which are not at issue here. Thus the parties joined issue on whether the contract or the certificate was controlling in a determination of Bain's right to disability benefits.

Each party moved for summary judgment. Bain contended that there was no genuine issue of fact concerning his coverage under the contract between Benefit and FGE because the identification card and certificate of coverage stated that the insurance was effective on March 4, 1980. He reasoned that a conflict on the issue of coverage arose because the contract stated a requirement of six consecutive months of employment and the certificate and card declared his insurance effective on March 4, 1980. He asked the court to find an ambiguity arising from this conflict between the documents and to apply the rule that ambiguities in the meaning of insurance contracts are resolved in favor of the insured, thus giving effect to the terms of the certificate and identification card. Bain also raised the question of whether Benefit had waived the contract requirement or could be estopped from asserting it because Benefit issued the card and certificate.

Benefit argued that the contract was not in conflict with the certificate because the certificate was silent on the requirements for eligibility, that Bain may have been an "insured" and that a contract may have been "in effect" or "effective," but nonetheless to be eligible for benefits, he must have satisfied the six-month requirement of the master contract. Benefit considered the contract to be controlling and that there was no factual dispute that Bain had never become eligible under the contract because he had not worked full time for six consecutive months. Benefit also argued that it had not waived the contract requirement nor did its issuance of the card and certificate estop it from asserting the eligibility requirement because when it issued the card and certificate it had no knowledge of Bain's absence from work. Bain conceded that he had no evidence that Benefit knew of his absence from work. Benefit asserted that the letters sent by its employees in 1981 established neither waiver nor estoppel because they were also based on Benefit's lack of information.

At the hearing on the motions for summary judgment, Bain conceded that he could not prove he had worked full time for the six months required, unless taking phone calls at his hospital bed could be construed to satisfy the requirement. In argument to this court, Bain again conceded "[t]here is no dispute that the plaintiff never completed six consecutive months of active full-time employment for his employer * * * [and] that the plaintiff never became eligible for insurance * * *." Bain has consistently recognized that he could not prevail if the contract were controlling.

As the case was presented to the trial court, there were no genuine issues of fact concerning the major events leading to Bain's claim for disability benefits. All parties agreed that Bain could not satisfy the contract requirement, that the card and certificate issued before Benefit knew of Bain's absence, and that Bain found them on his desk when he returned to work on March 17, 1980. The trial court found no facts sufficient to raise a genuine issue of waiver or estoppel. Although the trial court found that Benefit had failed to ...

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