Jeffrey W. Shelton v. Annuity Board of the Southern Baptist Convention and Prudential Service Bureau, Inc.

Citation: 109 F.3d 466Docket: 96-1796

Court: Court of Appeals for the Eighth Circuit; July 10, 1997; Federal Appellate Court

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Jeffrey W. Shelton appeals the district court's summary judgment in favor of the Annuity Board of the Southern Baptist Convention and Prudential Service Bureau, Inc., arguing his eligibility for coverage under an insurance plan and the applicability of waiver and estoppel principles. Shelton was employed by Immanuel Baptist Church from October 1985 to September 1986, during which he joined a health insurance plan administered by Aetna, later transitioning to Prudential in 1991. He incurred significant expenses for Lyme disease treatment and sought reimbursement from the defendants.

The district court applied Texas law, as agreed by both parties, interpreting the insurance contract collectively to fulfill the parties' intentions. Under the Aetna plan, eligibility required being a salaried employee working at least 20 hours per week, with coverage terminating when eligibility ceased. The plan allowed extended coverage for individuals who were "totally disabled" when their coverage ended, defined as those unable to work due to injury or disease. 

Shelton contended he was eligible for extended coverage since he was totally disabled when he ceased working. However, the court found that his coverage could only extend until September 1987, well before his medical expenses were incurred. Although Shelton argued for an exception that considered his employment to continue due to his disability, the court upheld the district court's ruling that he was not entitled to reimbursement for costs incurred after his coverage had ended. The appellate court affirmed the district court's decision.

The plan indicates that 'employment may be considered to continue' without specifying who makes this determination. Mr. Shelton claims that this responsibility lies with him, but the context suggests it could be assigned to Aetna, the Annuity Board, or the church that employed him, not Mr. Shelton himself. Citing Chen v. Metro. Ins. Annuity Co., the text asserts that an interpretation must be reasonable, and concludes that Aetna's provisions do not cover Mr. Shelton's medical expenses post-1987. For immediate coverage eligibility under Prudential, one must have worked at least 20 hours per week for a Southern Baptist entity as of January 1, 1991; Mr. Shelton did not meet this criterion. Coverage can be delayed if the 'Active Work Requirement' is not fulfilled, which necessitates being actively employed by an affiliated organization. Since Mr. Shelton hasn't worked in such a capacity since January 1, 1991, he is not eligible for coverage under Prudential's administration.

Mr. Shelton argues that a provision suggesting he may still be considered employed during certain absences is ambiguous and should favor him, citing Southern Life and Health Ins. Co. v. Simon. He claims to be the 'Purchaser' since he paid premiums until January 1, 1994, despite his employment ending in 1986. However, this interpretation is deemed unreasonable, as it would allow him to self-determine eligibility, which is not supported by the plan's language. The term 'Purchaser' has a distinct meaning from 'Participant', the latter clearly referring to church employees like Mr. Shelton. The use of different terms suggests they are meant to refer to different parties, reinforcing that he cannot be considered the 'Purchaser' in this context.

The drafters' choice of terminology indicates that "you" and "Participant" refer specifically to Mr. Shelton, while "Purchaser" must denote a different entity, likely the Annuity Board, since "you" is defined as "a covered Participant" within the plan. The plan’s language clarifies that "The Employer" encompasses churches affiliated with the Southern Baptist Convention, contrasting with the term "Purchaser," which does not apply to these entities. The interpretation aligns with standard legal principles, emphasizing the ordinary meaning of terms as understood by the public. The court rejects Mr. Shelton’s interpretation of the plan's coverage, asserting that the doctrines of waiver and estoppel cannot create coverage where it does not exist in the policy terms. Texas law firmly establishes that these doctrines cannot alter the risks outlined in an insurance policy or create new contractual obligations regarding coverage. Furthermore, coverage typically requires the insured to be actively employed within the specified group at the time of loss, reinforcing the exclusion of Mr. Shelton from coverage under the policy.

Mr. Shelton's reliance on waiver and estoppel principles is deemed misplaced as only two cited cases—Northeastern Life Ins. Co. v. Gaston and Travelers Indem. Co. v. Holman—are relevant, both of which support the defendants. These cases illustrate that waiver and estoppel apply to preserve existing insurance coverage, not to alter or expand the risks covered by a policy. The context of this case does not involve contract forfeiture but rather a bid to expand coverage. Mr. Shelton does not possess a binder from the defendants, and thus any attempt to apply waiver and estoppel would improperly extend coverage beyond the original contract terms. Texas law consistently holds that these principles cannot create new coverage. Consequently, the court affirms the district court's summary judgment favoring the defendants.