                                                                                        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.




      Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018                        Page 1 of 15
                                                       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;

      Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018   Page 2 of 15
      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.



      Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018   Page 3 of 15
              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

      Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018   Page 4 of 15
              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:




      Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018   Page 5 of 15
               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.

       Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018   Page 6 of 15
[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.


       Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018                            Page 7 of 15
                                                     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



       Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018    Page 8 of 15
       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.

       Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018                       Page 9 of 15
       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.


       Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018   Page 10 of 15
       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.




       Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018   Page 11 of 15
[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.

       Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018                    Page 12 of 15
               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.

       Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018                     Page 13 of 15
       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


       Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018   Page 14 of 15
       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.




       Court of Appeals of Indiana | Opinion 49A02-1705-PL-1080 | January 4, 2018   Page 15 of 15
