Ronald Mell, Sr. v. Anthem, Inc. ( 2012 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 12a0230p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
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RONALD D. MELL, SR.,
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Plaintiff,
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No. 10-3440
ESTATE OF FRIEDA M. WILMES; ROBERT K.
,
>
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ESPEL; and JAMES C. MATACIA, on Behalf of
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Themselves and All Others Similarly
Plaintiffs-Appellants, --
Situated,
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v.
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ANTHEM, INC., nka WellPoint, Inc.; ANTHEM
INSURANCE COMPANIES, INC.; COMMUNITY -
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Mutual Insurance Company; and THE CITY OF -
INSURANCE COMPANY, fka Community
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CINCINNATI, OHIO,
Defendants-Appellees. N
Appeal from the United States District Court
for the Southern District of Ohio at Cincinnati.
No. 08-00715—S. Arthur Spiegel, District Judge.
Argued: January 20, 2012
Decided and Filed: July 25, 2012
Before: SILER, CLAY, and ROGERS, Circuit Judges.
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COUNSEL
ARGUED: Eric H. Zagrans, ZAGRANS LAW FIRM, LLC, Elyria, Ohio, for
Appellants. Peter R. Bisio, HOGAN LOVELLS US LLP, Washington, D.C., Terrance
A. Nestor, CITY SOLICITOR’S OFFICE, Cincinnati, Ohio, for Appellees. ON BRIEF:
Eric H. Zagrans, ZAGRANS LAW FIRM, LLC, Elyria, Ohio, Alphonse A.
Gerhardstein, GERHARDSTEIN & BRANCH CO., L.P.A. for Appellants. Peter R.
Bisio, Craig A. Hoover, Adam K. Levin, HOGAN LOVELLS US LLP, Washington,
D.C., Glenn V. Whitaker, VORYS, SATER, SEYMOUR and PEASE LLP, Cincinnati,
Ohio, Paul A. Wolfla, BAKER & DANIELS LLP, Indianapolis, Indiana, Robert N.
Webner, VORYS, SATER, SEYMOUR and PEASE LLP, Columbus, Ohio, Terrance
A. Nestor, CITY SOLICITOR’S OFFICE, Cincinnati, Ohio, for Appellees.
1
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 2
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OPINION
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CLAY, Circuit Judge. Plaintiffs, the Estate of Frieda M. Wilmes through its
appointed fiduciary, Claudette Schenck, Robert K. Espel, and James C. Matacia
(collectively “Plaintiffs”), on behalf of themselves and all other similarly-situated
employees and retirees, appeal the district court’s order granting summary judgment to
Defendants Anthem, Inc., Anthem Insurance Companies, Inc., Community Insurance
Company, and the City of Cincinnati (collectively “Defendants”) pursuant to Fed. R.
Civ. P. 56. Plaintiffs seek to recover funds they alleged were owed to them when
Anthem Insurance Companies, Inc. demutualized in 2001 and issued 870,021 shares of
stock to the City of Cincinnati, Plaintiffs’ employer, instead of to Plaintiffs.
For the reasons set forth below, we AFFIRM the decision of the district court.
BACKGROUND
I. Procedural History
On October 15, 2008, Plaintiffs filed a complaint to recover on behalf of
themselves and all other similarly-situated employees and retirees of the City of
Cincinnati, Ohio (the “City”) the current value of the 870,021 shares of Anthem common
stock that the City received from the demutualization of Anthem Insurance.1 In their
complaint, Plaintiffs asserted eight claims for breach of contract and four tort claims
against Anthem, Inc. n/k/a WellPoint Inc., Anthem Insurance Companies, Inc. (“Anthem
Insurance”) and Community Insurance Company (“CIC”) (collectively, “Anthem”).2
1
Demutualization refers to the process of converting an insurance company from mutual
ownership to stock ownership. 3 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 39:43 (3d ed.
2005). In the case of Anthem, the company demutualized in 2001, converting Anthem Insurance from an
Indiana mutual insurance company to an Indiana stock company.
2
In 2004, Anthem, Inc. merged with WellPoint, Inc.
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 3
In addition, Plaintiffs brought three breach of contract claims and four tort claims against
the City.
On September 1, 2009, Plaintiffs filed a motion for class certification. The
district court granted Plaintiffs’ motion and certified the proposed class. The class
consists of 2,536 employees and retirees of the City who were named as insured persons,
or former members of a group of insured persons, covered under a health care group
policy from June 18, 2001 through November 2, 2001. The class includes two subsets:
“Class A” members were defined as individuals who had an insurance policy with
Anthem prior to the merger between Community Mutual Insurance Company (“CMIC”)
and Anthem in 1995; and “Class B” members were defined as individuals who received
a health insurance group policy after the 1995 merger. The district court designated
Schenck, Espel, and Matacia to serve as the class representatives of both classes.
The parties proceeded to discovery, after which they filed cross motions for
summary judgment. On March 3, 2010, the district court denied Plaintiffs’ motion for
summary judgment; granted Anthem’s cross-motion for summary judgment; granted in
part the City’s cross-motion for summary judgment; and dismissed the case. Plaintiffs
timely appealed.
We have jurisdiction pursuant to the Class Action Fairness Act of 2005, which
extends the diversity jurisdiction of the federal courts to certain class actions.3 See
28 U.S.C. § 1332(d). We also have appellate jurisdiction under 28 U.S.C. § 1291.
3
Under the Class Action Fairness Act of 2005, a federal district court may have original
jurisdiction of:
any civil action in which the matter in controversy exceeds the sum or value of
$5,000,000, exclusive of interests and costs, and is a class action in which—(A) any
member of a class of plaintiffs is a citizen of a State different from any defendant;
(B) any member of a class of plaintiffs is a foreign state or a citizen or subject of a
foreign state and any defendant is a citizen of a State; or (C) any member of a class of
plaintiffs is a citizen of a State and any defendant is a foreign state or a citizen or subject
of a foreign state. Pub. L. No. 109-2, 119 Stat. 4 (2005).
In this case, the amount in controversy exceeds $5,000,000 and the parties are citizens of diverse states.
See (R.1: Compl. ¶¶1–3.)
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 4
II. Factual Background
A. The City of Cincinnati’s Group Health Care Benefits
In 1986, the City of Cincinnati entered into a Master Group Contract for various
group health care benefits with CMIC, a mutual insurance company licensed by Ohio
Blue Cross/Blue Shield (“BC/BS”). The Master Group Contract covered both active
and retired employees and included such benefits as medical, hospitalization, and, in the
case of firefighters, dental coverage. According to the declaration of Andrea Schell,
Regional Vice President of Group Underwriting for CMIC, the Master Group Contract
granted the City mutual company membership interests (voting and equity rights) in
CMIC. Section 1.01 of the CMIC bylaws defined the members of the group insurance
plan and stated in relevant part:
Every policyholder of the corporation, except the holder of a policy or
contract of reinsurance, is a member of the corporation while the policy
is in force, and is entitled to one vote, and no more, regardless of the
amount of insurance held by such policyholder, the number of policies
in force in the name of such policyholder or the amount of premiums
paid by such policyholder. Policyholder means the person or group of
persons identified as the named insured in the declarations page of a
policy of insurance of the corporation. . . . In the case of a master
contract for group insurance, the member shall be the holder of the
master policy, and the holder of any certificate or contract issued
subordinate to such master policy shall not be a member unless it makes
specific provision of such membership. . . .
(R.32-2: Ex. B. CMIC Bylaws § 1.01.) Schell stated that the City’s group contract was
“renewed each year between 1986 and 1999.”
B. The Formation of Anthem Insurance
Anthem Insurance’s predecessor was Associated Insurance Companies, Inc.
(“Associated”), an Indiana mutual insurance company. In the early 1990s, Associated
began acquiring BC/BS licenses in Kentucky (1993) and Ohio (1995). The Ohio BC/BS
licensee that was acquired on October 1, 1995 was CMIC. At the time of the
1995 merger between CMIC and Associated, CMIC members received the following:
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 5
(A) An assumption certificate from [CIC] . . . that shall provide to
[CMIC members] the same medical and health benefits in effect
immediately prior to the Effective Time under the terms and conditions
of the [CMIC’s] insurance policy or health care benefits contract, as the
case may be; and
(B) A new Associated guaranty insurance policy/membership certificate
which shall grant to that [CMIC member] the following rights:
(1) voting rights on all matters that come before the members of
an Indiana domestic mutual insurance company under the Indiana
Insurance Law . . . ;
(2) insurance benefits which shall guarantee the benefits granted
under the insurance policy or health care benefits contracts
assumed by CIC; and
(3) rights in the events of liquidation, merger, consolidation, or
demutualization of Associated as set herein, therein and in
Associated’s Second Amended and Restated Articles of
Incorporation, which rights are intended to be equivalent to the
rights such [CMIC member] would have had if such [CMIC
member] had owned an insurance policy, issued directly by
Associated. . . .
(R.31-23: PTX-20, Page ID # 1560.)
CMIC and Associated jointly petitioned the Ohio Department of Insurance
(“Ohio DOI”) for approval of the merger. Both companies disclosed to the Ohio DOI
that the employers that previously purchased group policies, and not the employees
receiving benefits under those policies, were CMIC members. Associated incorporated
into the merger agreement a “grandfather” clause which allowed former CMIC members
to maintain their membership rights as long as each “grandfathered group” renewed,
amended, or replaced its group policy without a lapse in coverage. New customers or
those who entered into the contract after the merger would not become members. The
joint petition between CMIC and Associated stated the following:
Group policyholders of [CMIC] . . . are members of [CMIC] and are
entitled to one vote on all matters submitted to a vote of the members of
CMIC. Group policyholders of [CMIC] also possess certain proprietary
rights in CMIC. The holders of certificates of benefits issued under
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 6
[CMIC’s] group polices are not members of [CMIC], are not entitled to
vote and do not have proprietary rights in [CMIC].
In order to preserve the existing voting and proprietary rights of
[CMIC’s] group policyholders, Associated general practice regarding
voting and other membership rights relating to group policies will not
apply to holders of group polices issued by [CMIC]. Instead, group
holders of Guaranty Policies issued as part of the Merger will be treated
as members of Associated and will have membership rights in
Associated. . . .
(R.31-16: PTX-12, Page ID # 1497) (emphasis added).
According to the terms of the merger agreement, the City received a Group
Guaranty Policy, which confirmed that it was a member of Associated, and the policy
also indicated that City employees who obtained coverage as enrollees in the City’s
group policy were not members of nor had equity rights in Associated. The Ohio DOI
approved the merger and the agreement became effective on October 1, 1995. After the
merger, Associated changed its name to Anthem Insurance Companies, Inc.
C. The Demutualization of Anthem Insurance
In 2001, Anthem developed a Plan of Conversion to convert Anthem Insurance
from an Indiana mutual insurance company to an Indiana stock insurance company in
accordance with Indiana demutualization law under Indiana Code §27-15-1-1, et seq.
Anthem decided to demutualize in order to increase the company’s financial flexibility
through improved access to capital. Under the Indiana Demutualization Law, Anthem
was required to provide consideration, either in the form of cash or stock, to its eligible
statutory members in exchange for their membership interests. During this process,
Anthem retained both financial and legal advisors as well as other experts to provide
assistance in executing the conversion plan.
On May 18, 2001, Anthem notified the Ohio DOI, as required under Ohio Rev.
Code § 3941.38, of its plan to convert to an Indiana stock insurance company. Anthem
also submitted a Form D Filing to the Ohio DOI, which notified the Ohio DOI of its
intent to (1) “discontinue the issuance of any new Guaranty Policies after the effective
date of Conversion;” and (2) “cause all issued Guaranty Policies to expire at their
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 7
anniversary next following the effective date of the Conversion,” which would
extinguish all membership interests. (R.32-18: Ex. A. Dec. of Marjorie Maginn.) On
September 14, 2001, the Ohio DOI approved Anthem’s demutualization request.
Anthem Insurance’s board of directors approved a conversion plan in accordance
with Indiana demutualization law on June 18, 2001. See Ind. Code Ann. § 27-15-2.
Anthem submitted its plan for approval to the Indiana Department of Insurance
(“Indiana DOI”). The Indiana DOI conducted a full review of Anthem’s proposed
demutualization, which included a determination of whether particular group
policyholders were eligible to retain their membership interests under a “grandfather”
clause and therefore become classified as statutory members of Anthem Insurance.
Anthem also participated in a public hearing on October 2, 2001 to discuss its
conversion plan. Anthem explained at the hearing that individual enrollees in group
polices issued by Anthem’s Ohio subsidiary prior to the 1995 merger were not eligible
statutory members and therefore were not entitled to Anthem’s demutualization
proceeds. Article XIII of Anthem’s Plan of Conversion defined both Statutory and
Eligible Statutory members as follows:
“Statutory Member” shall mean as of any specified date any Person who,
in accordance with the records, articles of incorporation and by-laws of
Anthem Insurance, is the Holder of an In Force Policy.
“Eligible Statutory Members” shall mean a Person who (a) is a Statutory
Member of Anthem Insurance on the Adoption Date and continues to be
a Statutory Member of Anthem Insurance on the Effective Date,4 and (b)
has had continuous health care benefits coverage with the same company
during the period between those two dates under any Policy or Policies
without a break of more than one day.
(R.32-11: Plan of Conversion, Page ID# 2676–77.) No objections to Anthem’s position
were raised at the public hearing.
On October 25, 2001, the Indiana DOI published its Findings of Fact,
Conclusions of Law, and Order, which found that Anthem complied with the
4
The term “Adoption Date” is defined in the Plan of Conversation as June 18, 2001. The
“Effective Date” of the Plan of Conversation was November 2, 2001.
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 8
requirements set forth under the Indiana demutualization law. The Indiana DOI
approved Anthem’s Plan of Conversion on October 29, 2001. That same day a majority
of Anthem’s Statutory Members also voted to approve and adopt the conversion plan.
Anthem’s demutualization became effective on November 2, 2001, and on that day,
Anthem issued 870,021 shares of its common stock to the City. Upon receipt of the
shares of the stock from the demutualization, the City disposed of its shares on the public
market and received $55 million. The City used the proceeds to fund a variety of city
projects.
On October 15, 2008, Plaintiffs filed this action claiming that the City was not
entitled to the $55 million demutualization proceeds and are now seeking to recover that
amount.
DISCUSSION
I. Standard of Review
We review a district court’s grant of summary judgment de novo. White v.
Baxter Healthcare Corp., 533 F.3d 381, 389 (6th Cir. 2008). Summary judgment is
appropriate “if the movant shows that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “[T]he
evidence and all reasonable inferences drawn therefrom are viewed in the light most
favorable to the nonmoving party.” Rodgers v. Monumental Life Ins. Co., 289 F.3d 442,
448 (6th Cir. 2002) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 476 U.S.
574, 587 (1986)).
II. The City was the policyholder of the Group Policy prior to the
1995 merger between CMIC and Associated and possessed
grandfather rights as the policyholder after the merger
Plaintiffs argue that the district court erred in concluding that the City obtained
rights and interests of the health insurance group policy (“Group Policy”) through a
“grandfather” clause placed in the pre-merger agreement between CMIC and Associated.
Plaintiffs contend that the City was therefore not entitled to receive any proceeds or
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 9
compensation from the 2001 demutualization of Anthem. Plaintiffs argue that under
Ohio insurance law, Ohio Revised Code §§ 3913.22(A) and 3913.20(B), the City was
not “named as the insured” or the “policyholder” of the Group Policy because, according
to Plaintiffs, “[a] municipality has no health of its own to insure.” Plaintiffs assert that
only active and retired employees and their dependents may serve as the “named
insureds” or “insureds” or policyholder under the Group Policy. We first address the
issue of whether the City was the policyholder of CMIC for purposes of obtaining
membership rights under the Group Policy.
The district court correctly held that the statutory definition prohibits Plaintiffs
from being classified as an owner of the Group Policy. Under Ohio insurance law
§ 3913.20(B), a policyholder is defined as the “person, group of persons, association,
corporation, partnership, or other entity named as the insured under a mutual policy of
insurance other than life . . . .” The district court interpreted the statute to mean that
policyholders are typically “owners” of the group policy. The district court therefore
found that Plaintiffs cannot be the owners of the group policy because as employees and
retirees Plaintiffs “had nothing to do with the choice of insurance carrier, nor with its
governance, and they received what they bargained with the City to get: insurance
coverage.” Mell v. Anthem, Inc., No. 1:08-cv-00715, 2010 WL 796751, at
*10 (S.D. Ohio Mar. 3, 2010). Moreover, the district court noted that the record
provides no evidence that the Group Policy named Plaintiffs as the policyholders of the
Group Policy.
Plaintiffs’ argument is also incompatible with CMIC’s bylaws, which adopted
the policyholder definition found under Ohio insurance law. According to CMIC’s
bylaws, a member was defined as “[e]very policyholder of the corporation” and the
“[p]olicyholder means the person or group of persons identified as the named insured in
the declarations page of a policy of insurance of the corporation.” In the case of the
Master Group Contract, the City as the member “shall be the holder of the master
policy.” CMIC’s By-Laws, art I. § 101. The plain language of the bylaws therefore
supports the conclusion that even prior to the 1995 merger between CMIC and
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 10
Associated, the City became a policyholder of the Group Policy by virtue of its contract
with CMIC. Under Ohio law, “[t]he words in a policy must be given their plain and
ordinary meanings, and only where a contract of insurance is ambiguous and therefore
susceptible to more than one meaning must the policy language be liberally construed
in favor of the claimant who seeks coverage.” Burris v. Grange Mut. Cos., 546 N.E.2d
83, 88 (Ohio 1989), overruled on other grounds by Savoie v. Grange Mut. Ins. Co.,
620 N.E.2d 809 (Ohio 1993). No ambiguity exists in the instant case. Based on a
straightforward reading of the statutory language and CMIC’s bylaws, Plaintiffs did not
possess, nor could they have possessed, any membership interests in Anthem.
Plaintiffs attempt to insert themselves into the contract by arguing that as
“named insureds” or “insureds” they became the “policyholders.” However, the Master
Group Contract in effect established a contractual agreement between the City and
CMIC, with Plaintiffs as mere beneficiaries. As beneficiaries, Plaintiffs enjoyed the
right to participate in the insurance provided, under the terms and conditions imposed
by the Group Policy. Thus, any references to the “named insured” or “insured” simply
meant a person covered under a group policy who is entitled to insurance as a benefit of
his/her employment. It does not signify the position of policyholder.5
To the extent that Plaintiffs argue that an agency relationship exists between
CMIC and the employees and retirees, Plaintiffs’ argument misconstrues the Ohio
statutory language and CMIC’s bylaws. Under Ohio law, “[a]n employer’s
administration of a group insurance plan does not create an agency relationship between
the employer and the insurance carrier since the employer is acting only for the benefit
of its employees and the employer’s own benefit in promoting better relations between
itself and its employees.” Kilbourn v. Henderson, 577 N.E.2d 1132, 1136 (Ohio Ct. App.
1989) (citing Hroblak v. Metro. Life Ins. Co., 79 N.E.2d 360, 364 (Ohio Ct. App. 1947)).
5
Plaintiffs also claim that the Ohio Health Insurance Guide has adopted the logic that an employer
may not be a policyholder. Plaintiffs highlight that the guide defines the term “certificate holder” as “[a]n
employee or other insured named under a group health insurance policy” to suggest that the policyholders
are the covered employees and insured retirees. (R.31-28: PTX-99 ODI Health Insurance Guide, Page ID
# 1683.) Plaintiffs misread the guide, which explicitly states that “your employer [i.e., the City] or trade
association is the master policyholder; you and your fellow employees [i.e., Plaintiffs] are certificate
holders.” (Id. at Page ID # 1634.)
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 11
Here, the language of the statute and the bylaws confers an unambiguous contractual
relationship between the City and CMIC, so the employee’s participation in the Group
Policy does not by itself create an agency relationship such that he becomes the
policyholder. Plaintiffs’ references to unreported Ohio cases and cases outside this
Circuit bear no relevance in our analysis and are not controlling authority.6 Therefore,
we are not bound by those decisions. However, the limited authority available on this
issue persuades us that the employer and not the employee is the policyholder of an
insurance policy. In Greathouse v. City of East Liverpool, the Ohio Court of Appeals
determined that since the City of East Liverpool purchased health insurance through
Anthem on behalf of its employees and exclusively contracted with Anthem, the City
and not its employees was therefore the owner of the policy. 823 N.E.2d 539, 544 (Ohio
Ct. App. 2004). The City was therefore the policyholder of the Group Policy prior to the
1995 merger between CMIC and Associated. And since the City was the policyholder
of the Master Group Contract prior to and through the 1995 merger, the City also
preserved and protected its rights as a policyholder through the grandfather clause issued
by CMIC before the merger.
III. Plaintiffs were not entitled to receive the proceeds from Anthem’s
demutualization
Plaintiffs argue that they should have received the proceeds from Anthem’s
demutualization in 2001. Plaintiffs identify “two paths”—Class A and Class B— to
show that they are entitled to the demutualization proceeds that are governed by the Ohio
demutualization statutes. As we previously stated, “Group A” consisted of the City
employees who had full insurance coverage from Anthem at the time of the 1995 merger
between Associated and CMIC. Under Plaintiffs’ argument that the employees are the
6
We also find unpersuasive Plaintiffs references to Ohio insurance statutes in support of their
determination that employees, rather than the employers, are the policyholders of the Group Policy. For
example, Ohio Revised Code § 3923.12 on group sickness and accident insurance states that the “insurer
will furnish to the policyholder, for delivery to each employee or member of the insured group, an
individual certificate.” Under this provision, CMIC as the insurer furnished to the City, the policyholder,
an individual certificate for the employer to furnish to the employee (Plaintiffs). The remaining Ohio
revised provisions cited by Plaintiffs also do not classify an “insured” as the policyholder of a Group
Policy, but rather the “insured” is defined as the person covered under the Group Policy. See Ohio Rev.
Code §§ 3923.13, 3912.121, 3923.123, 3923.381, 3923.38, 3923.44.
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 12
policyholders, Plaintiffs contend that the employees in Group A had “grandfathered”
rights preserved and guaranteed under Ohio law that would allow them to receive the
payments from the 2001 demutualization. Plaintiffs argue that Class members in Group
B, who obtained full-coverage from Anthem after the 1995 merger, were entitled to
demutualization compensation under Ohio law and Anthem’s membership rules where
the employee and not the employer is the member of the mutual company. Given our
finding that employees are not policyholders, Plaintiffs argument with respect to Group
A fails. Because Group A members were not policyholders, they accordingly were not
covered under the grandfathered clause exception and were not entitled to the
demutualization proceeds.
The analysis with respect to Group B members is more complicated. For Group
B members—employees who obtained full-coverage from Anthem after the
1995 merger—Plaintiffs claim that the provisions in the 1995 merger agreements and
related documents specified that Plaintiffs were entitled to equity rights at the time of the
merger, thereby granting them demutualization compensation. Plaintiffs also argue that
they are entitled to the stock proceeds by the addition of a fully-insured human organ
transplant (“HOT”) rider and Certificates of Membership, which triggered a Certificate
of Membership from the City that allowed Plaintiffs to receive the demutualization
proceeds.
The evidence in the record does not support Plaintiffs’ theory. The record
indicates that Anthem intended for the City to maintain membership rights. Anthem
prepared different documentation for CMIC grandfathered groups than it prepared for
group customers that contracted with Anthem for the first time after the merger.
Specifically, for CMIC grandfathered groups, Anthem prepared a Guaranty Policy that
confirmed that the policyholders had membership rights. Not only did this Guaranty
Policy differentiate between the employer “member” and the employee “enrollee” under
the employer’s policy, it also explained that “[n]o Enrollee or dependent of an Enrollee
shall receive any equity rights by virtue of being an Enrollee or dependent of an
Enrollee.”
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 13
In contrast, Anthem did not make a distinction between “members” and
“enrollees” in the guaranty policies prepared for Plaintiffs’ Group B members. Rather,
those guaranty policies defined a “member” as “each person who has enrolled for
insurance of health care benefits and who was eligible to enroll for such benefits under
the Community Contract because of the person’s status as an employer of the
Policyholder, if the Policyholder is an employer.” Post-merger enrollees received a
Certificate of Membership for purposes of defining the enrollees whereas the
grandfathered groups received a Summary of Benefits. However, the presence or
absence of a certificate does not change the underlying facts that dictated the
membership determinations made in connection with the CMIC/Associated merger and
the Anthem demutualization. The record established that the Certificates of Membership
did not by themselves create membership rights and are not relevant for membership
determinations. See, e.g., Talley v. Teamsters, Chauffers, Warehousemen, and Helpers,
Local No. 377, et al., 357 N.E.2d 44, 46 (Ohio 1976) (“It is generally held that the
certificate of coverage merely evidences the employee-member’s right to participate . . .
[and] [c]onsequently, the provisions of the group policy are controlling over the
provisions of the certificate, and the rights of the parties in a group insurance enterprise
are dependent upon the group contract.”).
The district court properly concluded that Plaintiffs’ interpretation of the merger
document for Class B members is incorrect. The district court found that the merger
document does not state that new insurance is the “triggering event.” Mell, 2010 WL
796751, at *10. The merger document states in pertinent part:
The Associated guaranty insurance policy/membership certificate shall
continue in effect as long as (a) the insurance policy or health care
benefits contract assumed by CIC pursuant to Clause (A) of this Section
3.1 is in effect, or has been renewed, amended, or replaced, without a
lapse in coverage, by any CIC insurance policy or health care benefits
contract and (b) the membership fees required . . . are paid when due . . .
(Id.) Accordingly, by virtue of the process of demutualization we are compelled to
conclude that Plaintiffs are precluded from recovering any of the proceeds from
Anthem’s demutualization. Based on the reading of the merger documents, it is clear
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 14
that Anthem did not create new membership rights for employees enrolled post-merger.
Therefore, the Class B members were not eligible policyholders under the Anthem plan
and were thus not entitled to receive Anthem’s demutualization proceeds.
IV. Indiana law governs the demutualization of Anthem
Plaintiffs also improperly apply Ohio law when the demutualization process was
governed by Indiana law.7 Anthem was an Indiana mutual insurance company at the
time of demutualization in 2001 and conducted the demutualization process in
compliance with the provisions of Indiana Code § 27-15, which governs the
demutualization of Indiana mutual insurance companies. See Ormond v. Anthem, Inc.,
799 F. Supp. 2d 910, 912 (S.D. Ind., 2011) (stating that Indiana law allows “an Indiana
mutual insurance company to convert to a stock company through a plan of
conversion”); see also 3 Russ & Segalla, Couch on Insurance § 39:43 (3d ed. 2005). As
required by Indiana law, Anthem submitted documentation of its plan to demutualize and
also held a public hearing. Anthem’s demutualization process was then approved by the
Indiana DOI, which recognized that the City was an “eligible member” to receive the
proceeds from the demutualization. See Ind. Code Ann. § 27-15-2-2.
To now apply Ohio law would disrupt the entire demutualization process in
which the Indiana demutualization law vested exclusive authority in the Indiana DOI to
approve the conversion plan. If this Court were to adopt Plaintiffs’ argument that Ohio
demutualization law applied, Anthem’s entire application for conversion would be
discredited. It also would undo the 1995 merger agreement. Under the 1995 agreement,
Anthem, an Indiana based mutual insurance company, acquired CMIC, which was an
Ohio insurance company. At no point did Anthem become subject to Ohio law. As a
result of the merger, all of the mutual company members of the Ohio company became
mutual company members of the Indiana company with voting and equity interests in
the Indiana company. After the merger, what remained in Ohio was an Ohio stock
insurance company, not an Ohio mutual insurance company. Under Indiana
7
We also note that Plaintiffs’ attorney conceded at oral argument that Indiana law governed the
demutualization of Anthem in 2001.
No. 10-3440 Mell, et al. v. Anthem, Inc., et al. Page 15
demutualization law, however, the City, as the eligible statutory member, was entitled
to the demutualization proceeds. See Ind. Code Ann. § 27-15-1-7.
CONCLUSION
Despite Plaintiffs’ multiple theories suggesting that they are entitled to the
Anthem demutualization proceeds, Plaintiffs cannot recover any of the demutualization
compensation. The evidence in the record indicates that the City was the policyholder
prior to the 1995 merger between CMIC and Associated. The documents also clearly
establish that the City maintained its policyholder rights post-merger through a
grandfather clause, including any rights to the demutualization proceeds. The
2001 demutualization process did not disrupt the City’s membership interests nor did it
confer any equity rights to Plaintiffs. Thus, Plaintiffs are not entitled to the
demutualization proceeds.
For the foregoing reasons we AFFIRM the district court’s order granting
summary judgment to Defendants.