FILED
Jan 04 2018, 10:11 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
David F. McNamar Sally Franklin Zweig
McNamar & Associates, P.C. Kristopher N. Kazmierczak
Westfield, Indiana Katz Korin Cunningham, P.C.
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
John Pelliccia, M.D., January 4, 2018
Appellant-Plaintiff, Court of Appeals Case No.
49A02-1705-PL-1080
v. Appeal from the Marion Superior
Court
Anthem Insurance Companies, The Honorable Cynthia Ayers,
Inc., Judge
Appellee-Defendant. Trial Court Cause No.
49D04-1512-PL-41123
Barnes, Judge.
Case Summary
[1] Dr. John Pelliccia appeals the trial court’s grant of summary judgment in favor
of Anthem Insurance Companies, Inc. (“Anthem”). We reverse and remand.
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Issue
[2] The restated issue before us is whether Anthem properly cancelled Dr.
Pelliccia’s personal health insurance policy for nonpayment of premiums and
refused to pay claims incurred by him during the policy’s premium payment
grace period.
Facts
[3] In December 2013, Dr. Pelliccia purchased a personal health insurance policy
from Anthem to cover him and his wife for the year 2014. The premiums were
in the monthly amount of $649.77. Dr. Pelliccia made the first payment of
$649.77 on December 27, 2013, and arranged for his premiums to be paid by
automatic debit from his bank account. This first premium payment apparently
was not recorded by Anthem until January 17, 2014.
[4] Thereafter, Anthem sent Dr. Pelliccia monthly billing invoices. The first such
invoice in the record, dated January 29, 2014, listed a due date of February 1,
2014, and requested payment in the amount of $1,299.54, and indicated that
such a payment would cover from February 1, 2014 to April 1, 2014. Each
subsequent invoice listed the same premium amount due, and indicated that
payment of that amount would provide coverage for two months. These
invoices remained the same through November 2014.
[5] For some reason, apparently related to Dr. Pelliccia’s change of banking
institutions, the second premium payment of $649.77 was not made until
March 6, 2014. Another such payment was made on March 31, 2014;
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subsequent payments were regularly made at the end of each following month,
and the last payment was made on December 2, 2014. It seems a total of eleven
payments were made for the 2014 policy instead of the required twelve
payments.
[6] Each billing invoice stated in part, “Please make your payment within 31 days
of the premium due date. Your failure to do so will result in retroactive
termination of your policy due to the nonpayment of premium. Your coverage
will terminate on the date through which your premiums are paid.”
Appellant’s App. Vol. III p. 164. The insurance policy itself stated, “The
Member’s coverage will terminate if . . . The Member fails to pay his or her
Premium, and the grace period has been exhausted.” Id. at 92. The policy also
provided, “In the case of a termination for non-payment of Premium, and the
Member is not receiving Advance Payments of the Premium Tax Credit, the
last day of coverage is the last day for which Premium payment is made
consistent with existing State laws regarding grace periods.” Id. The policy
contained the following language defining and explaining the “grace period” for
payment of premiums:
If the Subscriber does not pay the full amount of the Premium by
the Premium due date, the grace period is triggered. The grace
period is an additional period of time during which coverage
remains in effect and refers to either the 3-month grace period
required for individuals receiving Advance Payments of the
Premium Tax Credit (APTC) or for Individuals not receiving the
APTC, it refers to any other applicable grace period.
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If the Subscriber does not pay the required premium by the end
of the grace period, the Contract is cancelled. The application of
the grace period to claims is based on the date of service and not
on the date the claim was submitted.
*****
If the Subscriber is not receiving an APTC, this Contract has a
grace period of 30 days. This means if any Premium payment,
except the first, is not paid on or before the date it is due, it may
be paid during the grace period. During the grace period, the
Contract will stay in force unless prior to the date Premium
payment is due You give timely written notice to Us that the
Contract is to be cancelled. If you do not make the full Premium
payment during the grace period, the Contract will be cancelled
on the last day of the grace period. You will be liable to Us for
the Premium payment due including those for the grace period.
You will also be liable to Us for any claims payments made for
services incurred after the grace period.
Id. at 94.
[7] On April 5, 2014, Anthem sent Dr. Pelliccia the first of several letters entitled,
“Important Information Regarding Your Premiums Notice of Grace Period.”
Appellant’s App. Vol. IV p. 3. It stated in part, “As of the date of this Notice,
which is required by Federal Law, our records indicate we have not received
your full premium payment.” Id. It continued:
You have a 31 day grace period from 4/05/2014 to pay your
premium in full in order to avoid cancellation. In addition, full
premium payment must be received by the end of the grace
period for claims to be paid beyond the last date through which
premiums have been paid. If we do not receive your full
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premium payment on or before the last day of your grace period,
your coverage will be cancelled as explained in your policy. The
reason for cancellation will be non-payment of premium and
your health status or need for health care services will not be
considered. Any partial payment of the total amount due will
not be sufficient to remove your coverage from the grace period
and prevent cancellation.
*****
Anthem will not provide benefits for any services received on or
after the date your coverage ends. Any claims paid for services
received after coverage ends will be denied and you will be
responsible for the charges, unless otherwise required by law.
Id. Anthem sent identically-worded letters to Dr. Pelliccia on June 2, July 3,
September 2, October 3, and November 3, 2014.
[8] Sometime in the fall of 2014, Dr. Pelliccia discovered that he needed surgery.
On November 11, 2014, Anthem preapproved the surgery, which was
scheduled for December 10, 2014. The preapproval letter stated in part, “You
are covered for this service provided that . . . [t]he premiums have been paid to
the date the service is rendered.” Id. at 43-44.
[9] On December 3, 2014, Anthem sent Dr. Pelliccia a letter that differed from the
previous six letters it had sent regarding being behind on his premium
payments. This letter was entitled, “You may be in danger of losing your plan
coverage.” Id. at 28. It continued in part:
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Did you know your health plan premium is late? Your premium
for Medical coverage was due on 12/01/2014. To avoid losing
your policy, you should pay the full amount listed right away. If
you have already paid your full premium, you can ignore this
letter and don’t need to do anything more.
*****
To give you a chance to keep your coverage, you have a 31 day
grace period to pay. That period ends on 01/03/2015. If we
don’t receive your full payment on or before that date, your plan
says that your coverage will be cancelled.
Claims payment during your grace period
Claims will not be paid during your grace period. The grace
period gives you time to bring your coverage up to date, but any
medical claims you have during this time will be your
responsibility.
Id. at 28-29.
[10] Anthem also sent Dr. Pelliccia an invoice on December 5, 2014, indicating that
a premium payment of $649.77 was due immediately and would cover the
period from December 1, 2014, to January 1, 2015. Anthem then sent Dr.
Pelliccia another invoice on December 20, 2014, which listed a premium due
date of January 1, 2015, in the amount of $733.00, and that such payment
would cover January 1, 2015, to February 1, 2015. It did not indicate that any
payment still was due and owing for Dr. Pelliccia’s calendar year 2014
coverage.
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[11] Dr. Pelliccia underwent his surgery in December 2014 as planned and incurred
substantial medical bills. He did not send any premium payments to Anthem in
response to the December 3 letter or December 5 invoice, nor did he contact
them. On January 9, 2015, Anthem sent Dr. Pelliccia a letter stating in part,
“We are sorry to tell you that your Anthem Blue Cross and Blue Shield Medical
coverage was cancelled on December 1, 2014 because your premium was not
paid.” Id. at 33. Anthem refused to pay any claims related to Dr. Pelliccia’s
surgery. It also refused to accept a belated premium payment tendered by Dr.
Pelliccia and denied his appeals.
[12] On September 4, 2015, Dr. Pelliccia filed a complaint against Anthem alleging
that it had improperly retroactively cancelled his health insurance policy in
violation of Indiana law and in bad faith. Dr. Pelliccia subsequently moved for
partial summary judgment on the issue of whether Anthem was liable for his
December 2014 medical claims.1 Anthem responded and filed a cross-motion
for summary judgment against Dr. Pelliccia on all of his claims. On December
20, 2016, the trial court granted Anthem’s motion for summary judgment. Dr.
Pelliccia filed a motion to correct error, which the trial court denied on April
25, 2017. Dr. Pelliccia now appeals.
1
The motion indicated that Dr. Pelliccia would leave the bad faith claim for further litigation.
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Analysis
[13] We review a summary judgment ruling de novo. Hughley v. State, 15 N.E.3d
1000, 1003 (Ind. 2014). We must draw all reasonable inferences in favor of the
non-moving party, and summary judgment is appropriate only “‘if the
designated evidentiary matter shows that there is no genuine issue as to any
material fact and that moving party is entitled to judgment as a matter of law.’”
Williams v. Tharp, 914 N.E.2d 756, 761 (Ind. 2009) (quoting Ind. Trial Rule
56(C)). “A fact is ‘material’ if its resolution would affect the outcome of the
case, and an issue is ‘genuine’ if a trier of fact is required to resolve the parties’
differing accounts of the truth, or if the undisputed material facts support
conflicting reasonable inferences . . . .” Id. (citations omitted). Cases that turn
upon interpretation of an insurance policy generally are appropriate for
summary judgment because they present a question of law. FLM, LLC v.
Cincinnati Ins. Co., 27 N.E.3d 1141, 1143 (Ind. Ct. App. 2015), trans. denied.
The fact that the parties filed cross-motions for summary judgment does not
alter the standard of review, and each motion is considered separately to
determine whether the moving party is entitled to judgment as a matter of law.
Reed v. Reid, 980 N.E.2d 277, 285 (Ind. 2012).
[14] Dr. Pelliccia’s argument has essentially three components: first, that Anthem
could not retroactively terminate his insurance coverage as a matter of Indiana
law; second, that it could not do so under the terms of the insurance policy; and
third, that Anthem failed to give him adequate notice that it intended to cancel
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his policy for nonpayment of premiums.2 We conclude that the policy itself did
not permit Anthem’s conduct in this case and so largely limit our discussion to
the policy language.
[15] Insurance contracts are governed by the same rules of construction as other
contracts. Bradshaw v. Chandler, 916 N.E.2d 163, 166 (Ind. 2009). We interpret
policies from the perspective of an ordinary policyholder of average
intelligence. Id. If a policy’s terms are unambiguous, we give them their
ordinary meaning. Id. If an ambiguity does exist, meaning reasonably
intelligent people could interpret the policy’s language differently, we construe
the language strictly against the insurer. Id. This is especially true with respect
to a policy’s exclusion of coverage. Id. However, if possible we should
harmonize the policy’s provisions rather than place them in conflict. Id.
[16] We strictly construe ambiguous insurance policies against the insurer because
of the disparity in bargaining power typical of parties to insurance contracts. Id.
“The insurance companies write the policies; we buy their forms or we do not
buy insurance.” Wagner v. Yates, 912 N.E.2d 805, 811 (Ind. 2009) (quoting Am.
States Ins. Co. v. Kiger, 662 N.E.2d 945, 947 (Ind. 1996)). “Nevertheless, we
2
Dr. Pelliccia also suggests that Anthem was estopped from cancelling his policy when it did because of its
past practice of routinely sending notices of cancellation but never actually cancelling. Anthem contends Dr.
Pelliccia waived this argument by not presenting it to the trial court. We need not resolve whether Dr.
Pelliccia waived this argument, and we will not address it.
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enforce limits on coverage where the policy unambiguously favors the insurer’s
interpretation.” Bradshaw, 916 N.E.2d at 166.
[17] The policy directly addresses the question of when nonpayment of premiums
will result in termination of coverage. It states in part, that if the policy is to be
terminated because of nonpayment of premiums, “and the Member is not
receiving Advance Payments of the Premium Tax Credit,[3] the last day of
coverage is the last day for which Premium payment is made consistent with
existing State laws regarding grace periods.” Appellant’s App. Vol. III p. 92.
The relevant state law here is found in Indiana Code Section 27-8-5-3(a)(3),
which requires every accident and sickness policy issued in Indiana to contain a
“grace period” provision stating:
A grace period of (insert a number not less than “7” for weekly
premium policies, “10” for monthly premium policies and “31”
for all other policies) days will be granted for the payment of each
premium falling due after the first premium, during which grace
period the policy shall continue in force.
(Emphasis added). There is no Indiana statute or case explaining the phrase
“during which period the policy shall continue in force.”
[18] Dr. Pelliccia contends the phrase should be construed to mean that the policy
remains in effect throughout the grace period and claims incurred during the
grace period must be paid, regardless of whether the insured makes a premium
3
Dr. Pelliccia apparently was not receiving such advance payments.
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payment during the grace period, which position is supported by a case from
Texas. See First Bankers Ins. Co. v. Newell, 463 S.W.2d 745, 747 (Tex. Civ. App.
1971), aff’d, 471 S.W.2d 795 (Tex. 1971) (addressing statute and policy
language nearly identical to Ind. Code § 27-8-5-3(a)(3) and holding, “any loss of
the insured occasioned by a sickness originating during the grace period is
covered whether or not the premium is paid during the grace period in
accordance with the clear language used in the statute and the policy.”).
[19] Anthem, on the other hand, argues that the statutory language should be
construed to mean that an insured’s claims during the grace period will be paid
only if the insured does in fact make the belated premium payment during the
grace period, citing a case from New York. See Zaitschek v. Empire Blue Cross &
Blue Shield, 632 N.Y.S.2d 434, 436 (N.Y. Civ. Ct. 1995), aff’d, 662 N.Y.S.2d
171 (N.Y. App. Div. 1997) (addressing statute identical to I.C. § 27-8-5-3(a)(3)
and holding insurer could deny claims incurred during grace period where
insurer never made belated premium payment and stating, “A grace period is
not intended as a free bonus month of insurance coverage added to every
contract.”). Suffice it to say, given the unclear language of the relevant statute,
the dearth of authority interpreting the phrase at issue, and the existence of two
diametrically opposed interpretations in the scant caselaw that is available, we
cannot conclude that the policy’s invocation of “existing State laws regarding
grace periods” clearly resolves the controversy between Dr. Pelliccia and
Anthem.
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[20] On the other hand, we need not definitively weigh in on whether we believe
Texas or New York was more correct in interpreting their “grace period”
statutes. Our statute, and others listing certain required provisions for accident
and sickness insurance policies, clearly are intended to provide certain
minimum benefits for insureds. See I.C. § 27-8-5-3(a) (stating that statutorily-
required insurance policy provisions may be substituted with other terms if the
substituted terms are approved by the insurance commissioner and are “no less
favorable in any respect to the insured or the beneficiary.”). An insurance
company would be free to go beyond those minimum benefits. To that end, we
believe a plain reading of Anthem’s policy here indicates that, even if the New
York court’s interpretation of the grace period statute was correct, Anthem’s
policy actually addresses policy termination in a manner consistent with the
Texas court and in a way that is more beneficial to insureds.
[21] The Anthem policy provides for a thirty-day grace period.4 During the grace
period, “coverage remains in effect.” Appellant’s App. Vol. III p. 94.
Crucially, the policy further explains:
During the grace period, the Contract will stay in force unless
prior to the date Premium payment is due You give timely
written notice to Us that the Contract is to be cancelled. If you
do not make the full Premium payment during the grace period,
the Contract will be cancelled on the last day of the grace period. You
4
The length of the grace period also seems to go beyond what is required by Indiana law; Dr. Pelliccia was
paying his premiums monthly, and in such a case the grace period required by Indiana Code Section 27-8-5-
3(a)(3) is ten days.
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will be liable to Us for the Premium payment due including those
for the grace period. You will also be liable to Us for any claims
payments made for services incurred after the grace period.
Id. Additionally, “[t]he application of the grace period to claims is based on the
date of service and not on the date the claim was submitted.” Id.
[22] We conclude this language is clear and unambiguous. It provides for policy
termination on the last day of the grace period in the event a premium payment
is missed. Anthem, essentially, wants to be permitted to retroactively terminate
a policy effective on the first day of the grace period, but there is no language to
that effect in the policy.5 Additionally, the policy expressly requires an insured
to reimburse Anthem for claims payments for services incurred after the grace
period and is silent with respect to claims payments for services incurred during
the grace period. The reasonable inference to be made is that an insured does
not have to reimburse Anthem for any claims payments made for services
incurred during the grace period. Furthermore, by clarifying that “[t]he
application of the grace period to claims is based on the date of service and not
on the date the claim was submitted,” the policy implies that claims for services
provided during the grace period will be paid and those for services provided
after the grace period ended will not be paid. Even if we were to conclude that
5
Arguably, some of the premium payment notices Anthem sent Dr. Pelliccia indicated that it could
retroactively cancel his insurance coverage, but those notices were not part of the contract between Anthem
and Dr. Pelliccia.
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there was any ambiguity in these policy provisions, we would construe them
against Anthem as the drafter of the policy.
[23] In sum, Anthem was required to honor its contract to pay Dr. Pelliccia’s claims
for services provided during the grace period even though he did not make a
final premium payment during the grace period. Pursuant to the policy’s plain
terms, Dr. Pelliccia’s coverage terminated on the last day of the grace period, or
January 3, 2015. As for Anthem’s concern that Dr. Pelliccia received a “free”
month of insurance coverage, he directs us to Indiana Code Section 27-8-5-
3(b)(7), which states that an insurance company that is owed an unpaid
premium and pays a claim for an insured may deduct the amount of the unpaid
premium from the claim payment. Anthem has incorporated this statutory
provision in its policy, stating, “Upon the payment of a claim under this
Contract, any premium due and unpaid . . . may be deducted therefrom.” Id. at
122. Thus, Anthem may deduct Dr. Pelliccia’s unpaid premium amount from
any claims it pays for his December 2014 medical expenses.
Conclusion
[24] The language of Anthem’s policy clearly provides that the effective date of the
termination of Dr. Pelliccia’s health insurance coverage for nonpayment of one
premium was January 3, 2015. We reverse the grant of summary judgment in
favor of Anthem. Also, we direct that Dr. Pelliccia’s motion for partial
summary judgment be granted and hold that Anthem was required to abide by
its policy with respect to covered medical expenses he incurred before January
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3, 2015. Dr. Pelliccia’s bad faith claim against Anthem remains pending. We
reverse in part and remand for further proceedings.
[25] Reversed and remanded.
May, J., and Bradford, J., concur.
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