United American Insurance Co. v. Smith

2010 Ark. 468, 371 S.W.3d 685, 2010 Ark. LEXIS 571
CourtSupreme Court of Arkansas
DecidedDecember 2, 2010
DocketNo. 10-9
StatusPublished
Cited by13 cases

This text of 2010 Ark. 468 (United American Insurance Co. v. Smith) is published on Counsel Stack Legal Research, covering Supreme Court of Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United American Insurance Co. v. Smith, 2010 Ark. 468, 371 S.W.3d 685, 2010 Ark. LEXIS 571 (Ark. 2010).

Opinions

JIM GUNTER, Justice.

|[This is an interlocutory appeal from an order of the Saline County Circuit Court certifying a class action entered on September 9, 2009. Appellants assert on appeal that the circuit court erred in certifying the class pursuant to the requirements provided in Arkansas Rule of Civil Procedure 28. Specifically, appellants contend that the circuit erred in finding that common issues of fact and law predominate over individual issues; that the circuit court erred in finding that the numerosity requirement was met where many of the class members’ claims were barred by the doctrine of res judicata; that the circuit court made improper findings on the merits; and that the class defined by the circuit court is overly broad. We affirm.

bln 2004, appellees Jean Smith and Lo-ria Ivie filed suit, individually and on behalf of all others similarly situated, against appellants United American Insurance Co. (“UA”), Heartland Alliance of America Association (“Heartland”), and Farm & Ranch Healthcare, Inc. (“F&R”). UA is an insurance company that issues limited health benefits policies, which provide capped or limited coverage for certain hospital, surgical, or other medical costs. Heartland issues membership providing discounts, sometimes called “repricing,” for medical and related products and services. F&R is an insurance agency whose agents sell UA policies, Heartland memberships, life insurance, and other insurance-related products.

In their second amended complaint, filed on July 22, 2008, appellees alleged that appellants sold UA health insurance policies to appellees and other class members by systematically misrepresenting the scope and nature of the policies. Specifically, appellees maintained that F&R agents advertised UA’s limited benefits policy as better than or equivalent to a major medical policy when coupled with a Heartland membership; misrepresented that a membership in Heartland and a life insurance policy were included free with a UA policy; and explained that a six-dollar charge was a one-time application fee when, in fact, it was charged monthly. Appellees asserted four causes of action in their complaint, including breach of contract, violation of the Arkansas Deceptive Trade Practices Act, unjust enrichment, and common law fraud.

On February 17, 2009, appellees filed a motion for class certification, requesting that the circuit court define the class as all persons who, between January 1998 to the present, |swere residents of Arkansas, Louisiana, Texas, Georgia, or California and purchased certain UA limited benefits policies coupled with Heartland memberships from F&R agents. Appellees maintained that for nearly a decade, F&R Area Marketing Director John Mills was responsible for recruiting, training, and supervising sales agents in the five indicated states and that he designed and implemented a sales presentation that was highly effective at perpetrating the alleged fraud. Appellees alleged that Mills distributed an instructive manual called “the Collage” that agents in his region were required to study and utilize and that F&R agents were repeatedly encouraged to implement Mills’s techniques in their sales presentations in order to be successful. The Collage included various sales presentation illustrations an agent could use to make a sale that appellees contend misrepresented the worth and benefits of the limited benefits policies, including “working the T,” “milking the cow,” the “calculator method,” and an “explanation of benefits” illustration to show the effect of a Heartland membership on a medical bill.

Appellees attached several exhibits to their motion for class certification, including the deposition testimony of F&R agents Glenn Bearden, Chris Bailey, and Ronnie Walthall. Also included were emails that Bearden and Bailey sent in 2004 to the F&R president, their regional manager, and their area marketing director. In his email, Bearden recalled that he had attended the required training school for new agents in Fort Worth, Texas, and that after being subjected to four days of “strenuous” training, he began to have doubts about the coverage of the UA limited benefits policy. He was concerned that new agents were not |4allowed to see an actual policy but were taught to sell it using the “milking the cow” and “caleulator method” illustrations. He explained that after selling for a couple of months, he finally saw a policy and realized that “the way we were taught how the policy pays out and what it actually does is a blatant misrepresentation.” He stated that when he realized this, he immediately ceased selling the policies the way he had been instructed and, consequently, was unable to make a sale.

In his email, Chris Bailey explained that he felt uncomfortable with the new-agent training he had received in Fort Worth, including the use of several illustrations that were designed to “put the customers’ mind at ease about the policy and explain to them why these hospital surgical policies were ‘better’ than major medical.” Bailey stated that when he returned from new-agent training, he had one “ride along” with his district manager, Barry Collinsworth. He felt Collinsworth misrepresented the policy to the client they met with that day. Bailey shared the same concern as Bearden regarding not being shown an actual policy, so he purchased one for himself. Once he read the policy, he realized that “all of the questions that we had were not being answered correctly and that the way we were taught was not a true representation of what the policy actually does.”

In his deposition testimony, Ronnie Walthall stated that during his new-agent training, he was never shown a UA policy and no agent he knew had seen an actual policy. He testified that the Collage was edited, updated, and distributed to agents regularly and that they were encouraged repeatedly to utilize it. Walthall stated that he was taught to sell UA limited | .^benefits policies by comparing them to major medical policies with the purpose of making “the [UA] policies look more attractive than major medical.” He explained that several of the illustrations contained in the Collage were intended to show how a customer could replace existing major medical coverage with a UA limited benefits policy, including the “working the T” illustration that he used regularly to make sales. He stated that he was told to instruct customers purchasing UA policies that they would receive a telephone call following their purchase explaining that it was not the same as major medical coverage. He testified that he was taught to tell those customers not to “let it freak you out.” He also testified that he was encouraged to bundle UA policies with a Heartland membership to receive his commission and bonus and that he was instructed not to let customers see the separate rates being figured for the items in the bundle. He testified that he sold UA limited benefits policies for four years using the training he was provided by appellants.

Smith and Ivie both live in Arkansas and purchased UA health insurance policies coupled with Heartland memberships and life insurance policies from F&R agents who had been trained by Mills. Smith and Ivie claim that the agents who sold those policies represented that the UA policies and Heartland memberships would provide more coverage than the major medical policies Smith and Ivie already owned.

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Bluebook (online)
2010 Ark. 468, 371 S.W.3d 685, 2010 Ark. LEXIS 571, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-american-insurance-co-v-smith-ark-2010.