The elements of equitable estoppel under federal common law are as follows:
1) the party to be estopped misrepresented material facts; 2) the party to be estopped was aware of the true facts; 3) the party to be estopped intended that the misrepresentation be acted on or had reason to believe the party asserting the estoppel would rely on it; 4) the party asserting the estoppel did not know, nor should it have known, the true facts; and 5) the party asserting the estoppel reasonably and detrimentally relied on the misrepresentation.
National Companies Health Benefit Plan v. St. Joseph's Hospital of Atlanta, 929 F.2d at 1572 (11th Cir. 1991) citing Heckler v. Community Health Services of Crawford, 467 U.S. 51, 59, 104 S. Ct. 2218, 2223, 81 L. Ed. 2d 42 (1984); see also City of Yonkers v. Otis Elevator Co., 844 F.2d 42 (2d. Cir. 1988).
Other courts have addressed this issue and have held that insurers may be equitably estopped from denying coverage.
For example, in Coleman v. Nationwide Life Insurance Co., 748 F. Supp. 429 (E.D. Va. 1990), an employee participated in a group health insurance plan provided by her husband's employer. The employer switched to Nationwide Life Insurance Company and agreed to pay 100% of the premiums due on the policy. The plaintiff made inquiries to Nationwide regarding her coverage. Nationwide and its cost containment organization advised the plaintiff that her hospitalization was approved. When plaintiff submitted her hospital bills for payment, Nationwide refused to pay because the employer had failed to pay the premiums after making the initial deposit. The court in Coleman held Nationwide liable under the principles of estoppel. It found that:
First, the evidence clearly shows that Nationwide--through a letter and telephone conversations--represented to Coleman that her hospitalization expenses would be covered. It is undisputed that Coleman reasonably relied on these representations, that she changed her position in reliance (i.e., by not switching coverage), and that she incurred a detriment as a result.
Coleman, at 433 (citations and footnote omitted).
Similarly, in Swint v. Protective Life Insurance Co., 779 F. Supp. 532 (S.D.Ala. 1991), the court found that the insurer had waived its right to deny coverage and that it should be estopped from denying coverage. The insurer in Swint had initially represented that it would provide health insurance coverage for the plaintiff's stepson who had suffered a catastrophic injury. Then following further investigation the insurer terminated additional payments under the policy. The court found that the insurer had waived its right to deny coverage. It stated that:
Where an insurer, with knowledge of facts vitiating a policy leads an insured to believe that he or she is protected under the policy, such acts, transactions, or declarations operate as a waiver of the forfeiture and preclude the insurer from relying thereon as a defense to a suit on the policy.
Id. at 560.
The Court believes that there are several material questions of fact as to whether BCS should be estopped from denying coverage. First, the December 20, 1989 letter from WTR to December reveals that December may have misrepresented to WTR that BCS would pick up employees who were disabled on the effective date of the BCS policy. This representation was conveyed to Dr. Paroski who may have died believing that BCS was providing him with life insurance coverage. Second, there is a material question of fact as to whether December acted as BCS's agent. Although December appears to be an employee of Blue Cross/Blue Shield and not BCS, he conducted all the negotiations with Woodhull's on behalf of BCS. Where there is a genuine issue of fact in regard to the scope of an agency relationship, it is inappropriate to grant summary judgment. DiLorenzo v. Edward Holle Insurance Agency, 735 F. Supp. 571, 575 (S.D.N.Y. 1990).
Accordingly, BCS's motion for summary judgment and Woodhull's motion to dismiss plaintiff's Second Cause of Action are denied. Woodhull's motion to dismiss plaintiff's First Cause of Action is hereby granted.
Sterling Johnson, Jr.
UNITED STATES DISTRICT JUDGE
Dated: Brooklyn, New York
October 13, 1992