RONALD GOLD, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED v. GOVERNOR JOHN G. ROWLAND et al., SC 19585
Judicial District of Hartford
Insurance; Demutualization; Whether Insureds Entitled to Demutualization Compensation when Insurer Converted from Mutual Insurance Company to Stock Corporation. In 1989, Blue Cross and Blue Shield of Connecticut, Inc. (Blue Cross), contracted with the state of Connecticut to provide a group health insurance policy known as Care Plus for the state’s retired employees. Blue Cross later merged with an Indiana mutual insurance company, Anthem Insurance Companies, Inc. (Anthem), which subsequently approved a plan of conversion from a mutual insurance company to a stock corporation under Indiana law. Under the plan, members of Anthem were entitled to receive stock or cash in exchange for the extinguishment of their membership interests. At the time of the demutualization, the state’s employees and retirees held certificates of coverage under a group policy that the state had procured from Anthem in 1999, which ultimately replaced the Care Plus policy. Anthem distributed 1.6 million shares of stock to the state on the ground that it was an eligible member under the 1999 group policy, but it made no distribution to the individual state employees and retirees covered under the policy. The plaintiffs brought this class action on behalf of themselves and all other similarly situated state employees and retirees, alleging that they were members of Anthem based on the 1999 group policy and that Anthem breached its contractual obligations by failing to pay them for their membership interests in the company. The trial rendered judgment for the defendants, finding that the plaintiffs failed to prove that Anthem had breached any contractual obligation. The court first noted that pursuant to § 7.6 (c) (1) of the articles of incorporation that were in effect at the time of the demutualization, each holder of a certificate of coverage under a group insurance policy issued after the merger became a member of Anthem. Applying Indiana law, the court determined that the plain language of § 7.6 (c) (1) supported the plaintiffs’ claim that they were members of Anthem and entitled to demutualization compensation because they became holders of certificates of coverage after the merger under the 1999 group policy. It opined, however, that the title of § 7.6 (c), “New Members Under Post-Merger Policies,” suggested that the provisions of that section were not meant to apply to the plaintiffs because the state was a premerger member by virtue of its Care Plus policy, which was replaced by the 1999 group policy. It also emphasized that while the plain language of § 7.6 (c) (1) would have the effect of diluting the value of the state’s premerger membership interests in Anthem, other provisions of the articles of incorporation preserved the full value of the state’s interests. In light of this internal conflict, the court examined extrinsic evidence and found that § 7.6 (c) was intended to apply only to Anthem’s postmerger customers and that where a preexisting group policyholder remained covered by Anthem after the merger pursuant to a policy that replaced the preexisting policy without a lapse in coverage, the group policyholder would have membership interests in Anthem, not the individual certificate holders such as the plaintiffs. It further found that Anthem’s membership determination was presumptively correct because it acted in good faith. The plaintiffs appeal, and the Supreme Court will decide whether the trial court’s conclusions were proper.