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ASSOCIATION LIFE INS. CO. v. JENKINS

May 22, 1992

ASSOCIATION LIFE INSURANCE COMPANY
v.
RAYMOND L. JENKINS and HUGH R. STARTUP, JR.



The opinion of the court was delivered by: JOHN T. NIXON

 Having held a trial without a jury in the above styled action, the Court makes the following findings of fact and conclusions of law. *fn1"

 I. FACTS

 On April 20, 1987, Murfreesboro Truck Sales closed its doors at its original place of business. That location was then leased to a plumbing supply company. At the same time, Murfreesboro Truck Sales moved into a warehouse nearby that had been constructed for the purpose of housing the parts that could not be returned to the dealers from which they were purchased. A sign was erected at the warehouse that indicated the new location of Murfreesboro Truck Sales. Since then, Jenkins has sold parts out of the warehouse in a long process of liquidating his business. Although Murfreesboro Truck Sales' corporate charter was administratively dissolved on September 15, 1989, Jenkins has continued to sell parts as a sole proprietorship.

 In March, 1988, Association Life received a disability claim form signed by Startup. An Association Life employee noted that the form did not contain information about when the disability originated. As a matter of company procedure, the employee undertook to call the doctor and the employer in order to determine the disability date. The doctor indicated that Startup's disability date was March 15, 1987. When the Association Life employee called the employer listed on the partial disability claim form, Murfreesboro Truck Sales, a woman answered the telephone and informed the employee that Murfreesboro Truck Sales had been out of business for months. This prompted further inquiry by Association Life, including an investigation by Equifax to determine whether Murfreesboro Truck Sales was still in business. The Equifax investigator produced a deposition of Jenkins taken in a state court action in which Jenkins testified that he had closed the doors of Murfreesboro Truck Sales on March 15, 1987.

 After receiving the Equifax report, Association Life notified Murfreesboro Truck Sales that its group insurance was terminated retroactively as of March 31, 1987, since that was the last day of the month which Association Life determined Murfreesboro Truck Sales went out of business. Association Life requested that the benefits paid after that date be returned. Neither Jenkins or Startup responded. Shortly thereafter, Association Life filed this lawsuit which seeks recovery of the benefits paid after March 31, 1987, totalling approximately $ 59,473.30, and, as a basis for recovery, alleges that the benefits were mistakenly paid due to the defendants' fraudulent misrepresentations regarding Startup's eligibility for benefits and Murfreesboro Truck Sales' eligibility for group insurance coverage.

 The insurance policy, under which Startup's benefits were paid, states in part:

 
All of Your coverage will terminate on the earliest of: a) the last day of the month for which the premium is paid for Your coverage; or b) the last day of the month in which You cease to be an active full-time Employee; or c) the date the Policy terminates; or d) the date the coverage of the Participating Employer Unit and its Employees terminates.
 
However, coverage will continue during: a) Total Disability ; and b) layoff or approved leave of absence; until premium payments for the Insured are discontinued by the Employer or until expiration of the Maximum Continuation Period or until the date the Policy terminates, or until the date the particular coverage of the Participating Employer Unit terminates, whichever is earliest.

 The policy defines an employee as a person actively working for the employer on a full time basis, at least thirty hours per week, forty-eight weeks per year.

 At trial, the plaintiff, Association Life, attempted to prove that no employee of Murfreesboro Truck Sales worked the requisite thirty hours a week, forty-eight weeks a year after April, 1987, and therefore, Murfreesboro Truck Sales, was not eligible for group insurance coverage. *fn2" The plaintiff presented evidence which established that the company made only seven invoices, six bank deposit slips and forty-four receipts after March 31, 1987. Association Life introduced exhibits such as the deposition from the state court action in which Jenkins testified that Murfreesboro Truck Sales had closed its doors, a letter dated June 11, 1987 from Jenkins to the Tennessee Department of Revenue advising that Murfreesboro Truck Sales desired to surrender its tax number, and Murfreesboro Truck Sales' final Business Tax Act and License and Tax Report that was submitted on August 3, 1987 and indicated a final reporting date of March 31, 1987.

 Association Life also presented checks, drawn on Murfreesboro Truck Sales' account and Jenkins' personal account, showing that Murfreesboro Truck Sales continued to pay premiums after March 31, 1987. The plaintiff admitted, however, that none of the information on the checks was incorrect. The plaintiff's witnesses testified that the premium payments go straight to the bank and Association Life employees never see the payments.

 Additionally, the plaintiff pointed out that several of the insurance claim forms signed by Startup after March 31, 1987 indicated, by a check in a box, that he was "employed and covered by [the] employer health plan." However, most of the claim forms introduced at trial, of which there were over sixty, were incomplete in that over half the questions on the forms were left unanswered, and the space provided for the patient's signature contained only the typed phrase "patient's request for payment on file." The plaintiff's witnesses also testified that, when ...


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