Opinion
No. CV02-0515373S
May 19, 2003
MEMORANDUM OF DECISION
The plaintiff, Gwendolyn Brophy, has commenced this action against the defendant, Anthem Insurance Companies, Inc. ("Anthem") seeking payment of sums allegedly due to her as a "member" on the "demutualization" of Anthem on November 2, 2001. Anthem has now moved for summary judgment.
The pleadings and affidavits of the parties show as follows. Anthem, an Indiana mutual health insurance corporation, decided in 2001 to demutualize, a process that results in the extinguishment of membership rights and the institution of stock ownership. Title 27, Article 15 of the Indiana Code regulates this process. The board of directors must adopt a plan of conversion. § 27-15-2-1. The plan is to include provisions for the distribution to "eligible members" of "consideration equal to the fair value of the convening mutual." § 27-15-2-2(3). An "eligible member" is a "member of the converting mutual on the date the converting mutual's board of directors adopts a resolution proposing a plan of conversion and an amendment to the articles of incorporation; and . . . continues to be a member of the converting mutual on the effective date of the conversion." § 27-15-1-7. The member may receive "cash, stock or other consideration in the event of a conversion to a stock insurance company . . ." § 27-15-1-10.
The Indiana Code then provides that the converting mutual must file an application with the commissioner of insurance to approve the plan. § 27-15-3-1. The commissioner holds a public hearing within forty-five days. § 27-15-4-1. Notice must be given to the members of the converting mutual insurance company of the public hearing. § 27-15-4-4. After the public hearing, the insurance commissioner is to issue a determination of approval or disapproval of the plan of conversion, § 27-15-4-7, taking into account that the plan of conversion is "fair, reasonable, and equitable to the eligible members." § 27-15-4-8. "After the proposed plan of conversion and amendment to the converting mutual's articles of incorporation are approved by the commissioner and approved by the members . . . the converting mutual may proceed to CT Page 7034-h consummate the plan . . ." § 27-15-6-1.
Pursuant to these provisions of the Indiana Code, Anthem's board of directors approved a plan of conversion from a mutual insurance company to a stock corporation on June 18, 2001. On June 21, 2001, Anthem filed its plan with the Indiana insurance commissioner. After notice, the required public hearing was held on October 2, 2001. The insurance commissioner issued its final decision approving the plan on October 25, 2001. Anthem's members approved the plan on October 29, 2001. On November 2, 2001, Anthem filed the articles of incorporation for the new stock corporation.
Under the Anthem plan of conversion § 13.2, a "statutory member" is a person who, "in accordance with the records, articles of incorporation and by-laws of Anthem Insurance, is the Holder of an In Force Policy." An "eligible statutory member" was defined in § 13.2 of the plan as "a Person who (a) is a Statutory Member of Anthem Insurance on the Adoption Date and continues to be a Statutory Member of Anthem Insurance on the Effective Date, and (b) has had continuous health care benefits coverage with the same company during the period between those two dates under any Policy or Policies without a break of more than one day." By § 12.2(a) a policy was to be considered "in force" on any date if Anthem's records indicated the effective date of the policy occurred on or prior to such date, the required premium had been received and the policy had not expired or otherwise been terminated; "provided that a Policy will be deemed to be In Force during any applicable grace period for non-payment of premiums as administered by Anthem Insurance."
The adoption date is given in the first paragraph of the plan as June 18, 2001 and the effective date by § 13.2 is the date on which the conversion took place, namely November 2, 2001.
When the plan of conversion became effective, payments of cash or stock were made to the eligible statutory members within the six-week period mandated in the plan, ending on December 14, 2001. The plaintiff did not receive any compensation under the plan however. According to Anthem's records, the plaintiff was mailed a quarterly payment bill on August 8, 2001 with a thirty-day grace period for payment. On October 6, 2001, the payment had not been received, and Anthem thereupon cancelled the plaintiff's policy as of August 31, 2001.
In December 2001, the plaintiff, who held an Anthem policy for several years, realized that she had not received her August or November 2001 quarterly bills from Anthem. She asked her son to contact Anthem to investigate the status of her policy. On December 5, 2001, the plaintiff's son learned that the plaintiff's policy had been cancelled for non-payment. Anthem advised him to remit two payments due at that time; the payments were mailed later that day and were received by Anthem on December 7, 2001. Anthem thereupon reinstated the plaintiff's health CT Page 7034-i insurance policy effective September 1, 2001. The plaintiff has made demand for the compensation allegedly due her under the plan of conversion. She has now sued for damages on the ground that she was a "Statutory Member on June 18, 2001, and remained as such until the date of demutualization in Connecticut, and beyond that date." (Complaint, paragraph 6.)
Anthem has moved for summary judgment on the ground that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. Practice Book § 17-49. It simply claims that the plaintiff was not an "eligible statutory member" as defined in the plan of conversion.
To resolve the issue raised by Anthem, the court must engage in a process similar to statutory interpretation. The plan of conversion, adopted pursuant to Indiana law, must be reviewed "as a whole and not in parts or sections . . . construed with every other part or section so as to produce a harmonious whole . . ." Connecticut Light Power Co. v. Texas-Ohio Power, Inc., 243 Conn. 635, 650, note 13 (1998), quoting 2A J. Sutherland, Statutory Construction (5th Ed. 1992) § 46.05, p. 103. The court's interpretation should be "consistent with the meaning of its plain language." Tracy v. Allstate Ins. Co., 76 Conn. App. 329, 337 (2003).
Here the plain language of the plan of conversion required the plaintiff, who was admittedly a "statutory member" of Anthem, to also hold a health insurance policy with Anthem continuously from June 18, 2001 to November 2, 2001. Otherwise, she was not an "eligible statutory member." The plan of conversion required the member's policy to be in force during the entire period and the Insurance Commissioner's order required payment to those statutory members who were on the books of Anthem as of November 2, 2001. (October 25, 2001 order, paragraph 24, pp. 6-7.) The plaintiff did not meet these requirements, using the definition of "continuous" as set forth in Webster's New International Dictionary — an uninterrupted extension. See also Ulmer v. Harsco Corp., 884 F.2d 98, 102 (3d Cir. 1989); Robin v. Blue Cross Hospital Service, Inc. (Mo. 1982) ("continued membership"). Further the plaintiff did not hold an "in force" policy on the effective date of demutualization.
In Bulkowski v. Cadets of St. Casimir, 179 A. 790 (Pa.Super. 1935), a non-profit corporation received funds from the county's condemnation of certain real property owned by the corporation. The corporation voted to distribute these funds to its members. The plaintiff did not receive a share and brought suit. The corporation claimed that the plaintiff was no longer a member, but the plaintiff successfully relied upon the CT Page 7034-j constitution of the organization to protect his membership status. He had contracted a "lingering illness," a situation excusing the organization from paying him of sick benefits after one year at the same time the organization's constitution provided that he was not obliged to pay dues and was still recognized as a "member." Bulkowski contrasts with the plaintiff's case, because the Anthem plan of conversion excludes members whose coverage was formally cancelled between July 18 and November 2, 2001.
The plaintiff argues that there is a "genuine issue of material fact" here. She refers to the provisions of General Statutes § 38a-483 (a) (4) and (8) that must be included in every Connecticut health insurance policy. Subsection (8) provides that cancellation must be accomplished by written notice and subsection (4) provides that reinstatement will result in the receipt of the same rights under the policy as one had immediately before defaulting on the premium. The plaintiff argues that the reinstatement eliminated any gap in "continuity," as she was reinstated as of September 1, 2001.
The point raised by the plaintiff is not one of "material fact." Stokes v. Lyddy, 75 Conn. App. 252, 257 (2003). Anthem has, regardless of whether it correctly cancelled the plaintiff's policy, reinstated her to her rights under the policy. Therefore there is no need for a fact-finder to determine whether she was properly cancelled. Rather, the question here is whether the plaintiff has raised a "genuine issue," that is a "real issue." Krevis v. Bridgeport, 64 Conn. App. 176, 180 (2001) (purpose of summary judgment is to eliminate unnecessary trial of matter).
"In ruling on a motion for summary judgment, the court's function is not to decide issues of material fact, but rather to determine whether any such issues exist." Nolan v. Borkowski, 206 Conn. 495, 500 (1988). "[T]he `genuine issue' aspect of summary judgment requires the parties to bring forward before trial evidentiary facts, or substantial evidence outside the pleadings, from which the material facts alleged in the pleadings can warrantably be inferred . . . A material fact has been defined adequately and simply as a fact which will make a difference in the result of the case." (Citation omitted; internal quotation marks omitted.) Buell Industries v. Greater New York Mutual Ins. Co., 259 Conn. 527, 556 (2002).
"A `genuine' issue has been variously described as a `triable,' `substantial' or `real' issue of fact . . . and has been defined as one which can be maintained by substantial evidence." (Citation omitted.) United Oil Co. v. Urban Redevelopment Commission, 158 Conn. 364, 378 CT Page 7034-k (1969). "`Issues of fact' encompasses not only evidentiary facts in issue but also questions as to how the trier would characterize such evidentiary facts and what inferences and conclusions it would draw from them." Id. 379.
"A genuine issue of material fact must be one which the party opposing the motion is entitled to litigate under his pleadings and the mere existence of a factual dispute apart from the pleadings is not enough to preclude summary judgment." (Internal quotation marks omitted.) New Haven Savings Bank v. LaPlace, 66 Conn. App. 1, 15 (2001). "The applicable rule regarding the material facts to be considered on a motion for summary judgment is that the facts at issue are those alleged in the pleadings." Id.
The court cannot agree that the plaintiff has raised a genuine issue that a reinstated member of Anthem is an "eligible statutory member." The mere fact that the plaintiff was reinstated to the same rights under her policy does not mean that she is entitled to restoration to "eligible member" status under the plan of conversion. See State Life Ins. Co. v. Spencer, 62 F.2d 640 (5th Cir. 1933) (reinstatement of life insurance policy did not affect provisions on policy loans that are separate and distinct).
The demutualization process that leads to the payment of funds to members of a mutual insurance company may not cover every aspect of membership or former membership. It may legitimately omit reinstated members (reinstated either because the outstanding premiums have now been paid or because the required notice had not been given), and still be considered fair and reasonable. See In Re MIIX of New Jersey, 746 A.2d 25, 33 (N.J. App. 2000) (challenge to omission of long-term members); Tierney v. John Hancock Mutual Life Insurance Company, No. 000087BLS (Suffolk, December 18, 2000) (12 Mass.L.Rptr. 596) (former members). Here the decision on who was an "eligible statutory member" was determined by the Indiana Code. As the case of Ashurst v. Preferred Life Assurance Society, 209 So.2d 403 (Ala. 1968) stated, when considering a challenge to a plan of conversion: "[t]he conversion was effectuated in every detail in exact accordance with the provisions of [the Alabama statutes] . . . Subject to constitutional limitations, the Legislature of this state has full authority to regulate the insurance business and once the Legislature has established a constitutional statutory procedure for conversion and that procedure has been complied with, the matter is at any end."
Under § 38a-483 (a) (4), reinstatement may happen at any time that past-due premiums are paid. If the plaintiff had remitted her past-due premium in December 2002, instead of December 2001, would she contend that she was then an eligible member? The plan of conversion as approved by the Indiana insurance commissioner required distribution within six weeks of the effective date. The interpretation of the plan of conversion cannot produce illogical results. Maciejewski v. West Hartford, 194 Conn. 139, 151 (1984).
The plaintiff suggests that to deny her the status of an eligible statutory member would defeat the Connecticut public policy of requiring CT Page 7034-l notice before cancellation of a health insurance policy and the further goal of retroactive restoration. The requirement of notice before cancellation has been held a matter of public policy in some instances. See State Farm Mutual Automobile Insurance Co. v. Mundorf, 659 A.2d 215 (Del. 1995) (since insurer failed to give notice, the insured's assigned risk automobile insurance policy could not be cancelled; to rule otherwise would violate public policy requiring coverage for uninsured motorists). Here, however, the plaintiff was retroactively re-instated to her health benefits and it is only the sums due under Anthem's plan of conversion that she is seeking. In this instance there is also a counterbalancing policy of following the directives of the Indiana legislature in establishing a process for demutualization, as well as complying with the order issued by the Indiana insurance commissioner.
That is not to say that the plaintiff may not pursue other remedies through the insurance departments of Indiana or Connecticut. The plaintiff may additionally address through court action whether Anthem negligently failed to invoice the plaintiff for her premium when due in August. See State Farm Mutual Automobile Insurance Co. v. Bockhorst, 453 F.2d 533 (1972) (insurance policy still in effect due to computer error); Donnelly v. Washington National Insurance Company, 422 N.E.2d 424 (Ill.App. 1985) (damages properly awarded for failure of insurance company to give notice of conversion rights).
For example the Indiana insurance commissioner's order of November 25, 2001, page 21, paragraph 4 provides as follows: "Anthem . . . shall promptly advise the Department in writing concerning its resolution [,] in connection with the Conversion[,] of any dispute as to the identity of the holder of a policy, the right to receive consideration, the amount of consideration to be paid or whether a policy is in force. Unless the Commissioner objects to Anthem['s] . . . resolution of a dispute within ten business days of the Department's receipt of Anthem['s] statement as to its resolution of the dispute, such resolution shall be deemed approved by the Commissioner." There is no indication in the file as to whether Anthem provided a statement on the plaintiff's matter to the commissioner.
The court finds only that the plaintiff cannot prevail on her claim that she was a statutory member of Anthem such that she was entitled to money or stock on Anthem's demutualization. Therefore the defendant's motion for summary judgment is granted.
So ordered.
Henry S. Cohn, J.