Court Opinion

ID: 8915355
Source: CourtListenerOpinion
Date Created: 2022-11-27 04:47:55.089756+00
Date Added: 2024-06-11T17:08:55.842768
License: Public Domain

POSNER, Circuit Judge,
dissenting.
This case was fought out below on the understanding that the issue was whether Matthew Sur was (or by principles of estop-pel should be held to be) entitled to major medical benefits under the provisions of the group policy relating to extended coverage, that is, coverage that continues after the employee (who in this case was Matthew’s father) ceases to be employed. The case is decided today on a different theory: that Mr. Sur was misled, by his employer (SCM) and the insurer (Prudential), concerning his right to convert to an individual policy. The employer’s liability is based on the failure of its benefits officer, Wolfe, to explain to Sur the details of coverage of the individual policy. This is, I shall argue, a threadbare theory, but at least it was presented to the trial court, if halfheartedly-
The insurer’s liability, however, is based on a theory of this court’s invention: that Sur was misled by the conversion clause in the booklet explaining the group policy. Sur was asked at his deposition, “With respect to whatever portion of the booklet you indicated caused you to determine that coverage would be the same, could you examine the booklet and identify whatever section of the book you relied upon.” Sur dep. 14-15. In response, Sur read several paragraphs, all related to extension of benefits, but did not mention the conversion clause. See id. at 15-17. Nowhere in the appellate record is there a reference by any of the parties to that clause. The plaintiffs have repeatedly cited the provisions of the pamphlet that they allege to be misleading, but have never suggested that the conversion clause is one of them. It is an abuse of our power of appellate review to reverse a trial court on the basis of a claim that was not presented to that court. It only magnifies the abuse that the claim was not argued to us either.
On the merits, I can find no basis either in the pamphlet or in any of the alleged *500oral representations and omissions for giving the plaintiffs a shot at the jury against either defendant. Wolfe told Sur that he “would have coverage by converting after [he] quit” (Sur dep. 10), but the scope of coverage on conversion was not discussed. In Sur’s words, “nothing was discussed as that I thought it would be the same. That is what I thought all the way through.” Id. He expressly acknowledged that no one had ever told him “that the policy on conversion provided exactly the same benefits as the group policy which covered [him] during the term of [his] employment.” Id. at 13. Upon then being asked on what he had based his assumption of identical coverage, Sur answered, “By reading the policy thoroughly. It stated in one part of there where the coverage would be extended to me.” Id. This answer confuses conversion to an individual policy with extension of benefits under the group policy, but in any event makes clear that if there is any basis for misrepresentation or estoppel in this case it must be somewhere in the pamphlet rather than in what Wolfe said or failed to say. All he said was, yes, Sur could convert.
Nor did Sur say or fail to say anything to Wolfe that might have implied that Sur thought the coverage of the individual policy would be identical to that of the group policy. As Wolfe therefore had no reason to think Sur was under any misapprehension concerning the coverage of the individual policy, he had no duty to volunteer an explanation of what that coverage was and specifically whether it included major medical benefits. Sheller-Globe Corp. v. Sheller, 413 N.E.2d 318 (Ind.App.1980), is not in point. That was a case of misrepresentation — of the employer telling the employee that he had no conversion right, when he did. See id. at 320 n.3. There was nothing like that in this case.
Nevertheless, Sur’s simple question about conversion might have required a fuller answer than Wolfe gave if the conversion clause in the pamphlet was misleading; for then Wolfe may have had a duty to anticipate and correct Sur’s misapprehension. This means that Sur’s case both against SCM and against Prudential depends on our concluding that a reasonable trier of fact could have found that the pamphlet promised identical coverage if the employee converted to an individual policy.
The pamphlet is entitled “Group Insurance Plan.” The Foreword states that the plan has two parts. Part I is entitled “Death Termination and Maternity Expense benefits provided by SCM Corporation.” There is no suggestion that Sur thought he would be getting any of this coverage when he converted. Part II is entitled “Life, Hospital Expense, Surgical Expense, Diagnostic X-Ray and Laboratory Expense and Major Medical Expense Insurance.” This listing is significant because it includes at least one item — life insurance— that Sur could not possibly have thought embraced by the conversion clause applicable to health insurance. For that clause is entitled “Change to an Individual Hospital and Surgical Expense Insurance Policy,” and reads, so far as is pertinent to this case: “The Insurance Company makes available an Individual Hospital and Surgical Policy, subject to established rules, to an employee whose Hospital Expense Insurance is terminated through termination of employment.” Both title and text indicate that the coverage of the individual policy is narrower than that of the group policy — narrower even than the coverage of Part II. It is limited on its face to hospital and surgical expense, thereby excluding several other components of the group plan — including major medical benefits, as in MacDonald v. Penn Mut. Life Ins. Co., 276 So.2d 232 (Fla.App.1973), where the court found for the insurer on facts similar to those here.
In addition, all that the pamphlet here offered was “an” individual policy — not the same policy as the group policy. There is no suggestion that the individual policy is as comprehensive as the group policy and as I have suggested the opposite inference is the more natural one to draw from the title and description of the individual policy. Finally, the offer is “subject to established rules,” which are not specified but which could hardly be assumed to be unrelated to coverage.
*501Only a careless reader — and Sur claims to have read the pamphlet “thoroughly,” with specific reference to his rights after he left SCM — would think he was being given the right to buy the identical coverage that he had under the group policy. No precedent from Indiana or any other state supports reading such a right into the pamphlet; and no recitation of the clichés of insurance-contract construction can fill the void. One is not surprised that Sur has never claimed to have been misled by the conversion clause. That claim is the invention of this court.
Now there is of course a tendency to cry wolf in judicial dissents and to utter prophecies of doom that become self-fulfilling by drawing attention to and then exaggerating the scope of the majority opinion. But I cannot subdue my concern that the majority opinion opens up breathtaking vistas of liability. Ordinarily this would be of little significance in a diversity case, where the last word on liability is the state courts’ rather than ours. But since most insurance companies in Indiana are (I assume) nonresident corporations, and since most claims against them based on allegedly misleading coverage probably will exceed $10,000, it may be many years before the Indiana appellate courts have a chance to set us straight, though the Indiana legislature could do so at any time. Meanwhile I can see no limits under today’s decision to the power of juries to read into group insurance policies and booklets promises that although not made or implied are not expressly negated either. As insurance companies are not popular defendants in jury trials, today’s decision may impel them to rewrite their literature rather than take their chances with jury interpretation of the present language. The insurance-buying public will not be better off if efforts to explain group insurance policies become encumbered with the kind of hedges and caveats that are found in prospectuses for new issues of securities.
I do not want to sound the alarm too shrilly, however, so I shall end by noting a significant hurdle that the plaintiffs will have to leap when this case is tried: they will have to prove causation. The plaintiffs have been harmed by the defendants’ failure to specify the coverage on conversion only if, but for this failure, Matthew would have been entitled to major medical benefits. There are two ways in which this might have come about. The first, which is very unlikely, is that Sur would have changed his mind about quitting SCM if he had known that his conversion privilege did not include major medical benefits. The second possibility is that he would have bought a broader policy than Prudential offered. But that would depend on availability, price, and the importance of major medical benefits' in Sur’s thinking before Matthew was born with terrible defects. The plaintiffs will have the burden of proving that Sur would have bought a policy with major medical benefits for dependents and they may find it a difficult burden to carry.
Despite this qualification, the majority’s decision is potentially as far-reaching as it is an unjustified expansion of the liability of insurance companies. But above all, I deprecate our blindsiding the trial court.