MARIA TERESA BARENO, Plaintiff and Appellant, v. EMPLOYERS LIFE INSURANCE COMPANY OF WAUSAU et al., Defendants and Respondents.
L.A. No. 29930
In Bank
Sept. 11, 1972.
7 Cal.3d 875 | 103 Cal.Rptr. 865 | 500 P.2d 889
Schall, Butler, Boudreau, Gore & Stutz, Schall, Butler, Boudreau & Gore and W. J. Schall for Plaintiff and Appellant.
Coyle & Dunford, Richard B. Coyle and Henry F. Walker for Defendants and Respondents.
TOBRINER, J.-We must adjudicate another case involving ambiguous provisions in a certificate of insurance issued pursuant to a group insurance policy. On countless occasions we have inveighed against the careless draftsmanship of documents of insurance and have decried the evil social consequences that flow from lack of clarity. (E.g., Paramount Properties Co. v. Transamerica Title Ins. Co. (1970) 1 Cal.3d 562, 569-570 [83 Cal.Rptr. 394, 463 P.2d 746]; Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 269-274 [54 Cal.Rptr. 104, 419 P.2d 168]; Ensign v. Pacific Mut. Life Ins. Co. (1957) 47 Cal.2d 884, 888 [306 P.2d 448]; Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 437-438 [296 P.2d 801].) We have emphasized that the uncertain clause leaves in its murky wake not only the disillusioned insured and thе protesting insurer but also the anguished court.
We think that the responsibility for writing clear and simple policies lies with the insurance industry, and that the tremendous growth of insurance in this country enhances the need for such policies. The group insurance program, such as that presented here, a nation-wide development involving millions of customers,1 increases the importance of precision; these multitudes of insured persons and their beneficiaries, many of whom are unversed in the sophisticated ways of commerce, are utterly unable to decipher obscure and technical languagе. They are singularly dependent upon the good will and the good draftsmanship of the insurer.
These considerations of public policy have long led courts to insist that insurers draw clear policies or suffer adverse consequences; we have consistently held that ambiguities in such documents must be resolved against the insurer. (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 269 [54 Cal.Rptr. 104, 419 P.2d 168]; Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 437-438 [296 P.2d 801]; accord,
The uncontestеd facts are these: On January 6, 1967, Frederico G. Bareno commenced employment as a salesman of the Employers Mutual Liability Insurance Company. One month later he became eligible to, and did, enroll in the company‘s group life and permanent disability insurance program. At that time Bareno‘s employer provided him with an “employee certificate of insurance,” which the insurer had prepared in order to set forth the provisions of the program. The certificate described both life insurance and permanent disability benefits.
In November 1967, Bareno began to develop hеart trouble. On Christmas day of that year he experienced a serious convulsion, which required brief hospitalization. Within a week, after his doctors declared him fit to return to work, Bareno resumed his activities as a salesman. He did not notify the employing insurance carrier or his supervisor of the convulsive attack, but he did claim benefits under the carrier‘s group health plan for the expenses of treatment connected with that attack.
On February 1, 1968, Bareno‘s supervisor, receiving a copy of Bareno‘s claim for group health benefits, learned of his medical problems. The next day, Februаry 2d, the supervisor informed Bareno that he was being discharged because of a “communication problem,” namely, his failure to inform the company of his medical difficulties. In addition to this reason, another factor contributed to the decision to dismiss Bareno; he had not met the life insurance company‘s expectations for performance as a first-year salesman, obtaining only $5,000 of the $22,000 annual premium quota assigned to him.
In the days following his discharge Bareno completed the check-out procedures necessary to terminate his connection with the insurance company, and began to look for a new job. Two weeks after his notice of discharge, the company sent him his final paycheck, which included pay
On February 19, the same day that the employer mailed the last paycheck and the notice, Bareno suffered an acute heart seizure. His doctor advised him to undergo immediate intensive hospital care, but because of his lack of funds Bareno refused. The doctor then ordered that Bareno at least rest quietly at home.
In the following weeks Bareno‘s health further deteriorated and became so poor that on the 12th of March his wife took him to the hospital. There the attending physician diagnosed Bareno‘s condition as terminal and ordered him into hospitalization. On March 13th, Bareno, then 36 years old, died of heart failure.
Following Bareno‘s death, his widow demanded indemnity from the2
At the close of the trial without jury, the superior court, on the basis of the following conclusions, held that Bareno was not covered under the policy: the extension provisions in the insurance certificate and notice mailed February 19 extended only the life insurance, and not the disability, portion of the policy for 31 dаys after Bareno‘s termination as an employee; the employer terminated Bareno‘s employment on February 2 for “reasons” that were “justified and proper“; Bareno did not die within 31 days of the termination of employment, and enjoyed no life insurance benefits under the policy; and since Bareno was not an employee on February 19 or March 13, he could not claim permanent disability benefits for disabilities experienced on either of those dates.
On this appeal plaintiff attacks the superior court‘s interpretation of the certificate and its ruling that the defendants wеre not liable under the policy.3 Her contention raises an issue for the resolution of this court, since “it is the duty of the appellate court . . . to make its own independent determination of the meaning of the language used in the instrument under consideration.” (Schmidt v. Pacific Mut. Life Ins. Co. (1969) 268 Cal.App.2d 735, 738 [74 Cal.Rptr. 367]; accord, Faus v. City of Los Angeles (1967) 67 Cal.2d 350, 360 [62 Cal.Rptr. 193, 431 P.2d 849]; Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866 [44 Cal.Rptr. 767, 402 P.2d 839].)
We begin by noting that rather than an analysis of the company‘s master policy both parties seek an interpretation of the insurer‘s certificate that the employer issued to Bareno. Whatever the purported coverage of the policy, “the terms of the certificate are binding on the insurer.” (Humphrey v. Equitable Life Assur. Soc. (1967) 67 Cal.2d 527, 534 [63 Cal.Rptr. 50, 432 P.2d 746]; Evans v. Holly Corp. (1971) 15 Cal.App.3d 1020, 1023 [93 Cal.Rptr. 712]; John Hancock Mut. Life Ins. Co. v. Dorman (9th Cir. 1939) 108 F.2d 220; see 1 Appleman, Insurance Law & Practice (1965) § 46, at pр. 68-70.) “This result is easily justified
Thus, in order to determine liability we turn initially to the certificate. The provisions of the certificate as to termination are set оut under the heading “Individual Terminations.” The clause in substance provides that the coverage shall cease automatically upon either (1) the termination of the policy, (2) the cessation of premium payments, or (3) the termination of the employee‘s employment, and concludes as follows: “Note: In case the Employee ceases active work due to sickness, injury, retirement on pension, leave of absence or temporary layoff, the terms of the Group policy may provide for continuance of insurance for a limited period. The Employee should сonsult the Employer who is in a position to inform the Employee as to the terms of the policy in this respect.”4
Pursuant to the “Individual Terminations” clause of the certificate, the employer on February 19 mailed the notice of “Terminated Employee‘s Options” set forth in footnote 2. The employer‘s notice provides that the “insurance is continued, without further contribution, for 31 days after an employee is terminated.” Plaintiff contends that within 31 days after termination of Bareno‘s employment he became totally and permanently disabled, and was thus covered by the company‘s insurance program. The 31 days extended the policy until March 4th; Bareno claims that he was totally disabled as of that date and so remained until his death on March 13, 1968. We shall explain that Bareno could, indeed, reason-
The certificate instructs the employee as to insurance termination to “consult the employer who is in a position to inform the employee as to the terms of the policy in this respect.” No oral consultation occurred here; instead, thе employer advised the employee of the terms of the policy by a written notification. In so informing Bareno, the employing insurance carrier evidently determined that he fell within the category of employees who, because of termination due to “sickness” or “injury,” became eligible for the extension of their insurance benefits. Indeed, the notice itself was addressed to “terminated employees.” The position of the employer that Bareno was a terminated employee entitled to the specified options becomes all the more unassailable when we remеmber that the employer itself was a life insurance company, presumably aware of the meaning of policy provisions.
Although the defendant insurance carrier argues now that the employee had not been “terminated” due to “sickness” or “injury” and should not have been sent the notice of terminated employee‘s options, we cannot accept this belated defense. First, as we have set forth above, the employing insurance carrier deliberately took the position that its employee should enjoy those options; second, the employing insurance carrier was designated to serve in the role of the insurer‘s administrator of the group insurance plan. The certificate itself named the employer as one who could inform the employee as to the terms of the policy; our cases have uniformly recognized that in this situation the employer acts as the agent of the insurer and that the insurer is bound by such agent‘s acts. (Elfstrom v. New York Life Ins. Co. (1967) 67 Cal.2d 503, 512-514 [63 Cal.Rptr. 35, 432 P.2d 731]; accord, Pantzalas v. Superior Court (1969) 272 Cal.App.2d 499, 504 [77 Cal.Rptr. 354]; John Hancock Mut. Life Ins. Co. v. Dorman (9th Cir. 1939) 108 F.2d 220.)
The defendant insurance carrier, dissecting the language of the notice of terminated employee‘s options, seeks to constrict the notice‘s 31-day extension to life insurance only; we, believe, however, the reference is to the group insurance program, inclusive of the disability coverage. The very heading of the notice reads, “Terminated Employee‘s Options Under Employers Insurance of Wausau Group Insurance Programs.” Those programs were apparently set forth in separate certificates, policies, or “plans“: one program covered life insurance and disability insurance, another covered health and accidental death insurance, and a third covered retirement. The references to these specific programs in the notice itself took the form of subheadings: “Life Insurance,” “Health Insurance and
Moreover, the program for life and disability insurance as set forth in the certificate reads “Employee certificate of insurance” (italics added); the title of the certificate clearly does not exclude disability insurance. The content of the certificate contains one full page out of four devoted to “Total and Permanent Disability” and in other sections the life insurance and disability provisions are intertwined. The segregation of the two forms of protective insurance would involve cutting up the certificate into so many severed pieces; the company could hardly expect that Bareno would mentally execute any such gymnastics. By what alchemy was Bareno to be expected to distill the disability insurance from the life insurance? Bareno could reasonably believe that the notice‘s rеference was, as its heading stated, to the “Insurance program,” and that the subhead of “Life Insurance” did not exclude the disability provisions of that single program.5
Since the notice and certificate may be reasonably read to extend the permanent disability coverage, the insurer may not now seek refuge from extension in the ambiguity generated by its employer-agent in such agent‘s use of the “life insurance” heading in the notice of “terminated employees’ options.” (
The certificate‘s “total and permanent disability” clauses provide that some of the disability benefits shall vest if the insured becomes totally and permanently disabled “prior to the termination of his insurance under the aforesaid policy and before attaining the age of sixty.” The disability provisions also state that other benefits shall vest if the insured‘s disability comes “before cessation of his insurance in accordance with the provision hereof entitled ‘Individual Terminations.‘” Plainly, then, the certificate in these instances measures the duration of disability coverage by the termination of the other insurance provided for in the certificate-not by the termination of employment. Accordingly, the disability insurance runs in tandem with that of the other insurance-life insurance-described in the certificate; the permanent disability coverаge continues concurrently with the life insurance.
The remaining clauses of the certificate, including the “individual terminations” provision, however, create an ambiguity in the designation of the termination date of the life insurance. The “individual terminations” clause declares flatly that “[t]he insurance upon the life of the Employee under said Group Life Insurance policy shall cease automatically upon the occurrence of . . . the termination of his employment in the classes of Employees insured thereunder.” In contrast, the “extended death benefit” clause provides, as required by
overruled on other grounds, Jefferson v. Jefferson (La.App. 1963) 154 So.2d 645, expressly extended only life insurance; the court found no provision which could be read to extend аccidental death benefits. Finally, although Henderson v. Prudential Ins. Co. (E.D.Mich. 1965) 238 F.Supp. 862 interpreted a certificate and notice that bear similarities to those in the instant case, the court in that case refused to find an extension of permanent disability benefits unless “clear language” to that effect appeared in the documents; we cannot adopt this “clear language” approach in view of our precedents which require that the insurer-draftsman, and not the insured, suffer from its failure to define the policy benefits with precision.
The trial court, however, concluded that the 31-day extension did not apply to permanent disability benefits because the disability provisions in the certificate refer to “the Employee” and Bareno was not an employee during the 31-day extension period. The context of the certificate, however, reveals that the trial court erred in seizing upon the literal meaning of the word “employee” to narrow the coverage of the policy. Reading the certificate as a whole, we find that throughout the document the insurer-draftsman has used the word “employee” to mean “the insured,” regardless of his employment status.7 Accordingly, the trial court erred in failing to conclude that Bareno‘s permanent disability insurance continued in effect until March 4, 1968.
Because Bareno‘s certificate of insurance provided benefits if he became totally and permanently disabled on or before March 4, the crucial question remains whether or not Bareno did become so disabled. “According to overwhelming authority, the term ‘totаl disability’ does not signify an absolute state of helplessness but means such a disability as renders the
Plaintiff sought to establish that within the parameters of the standard of Erreca Bareno became totally disabled by March 4, 1968. Her evidence tеnded to show that Bareno could not remain out of bed for long periods of time; that he required the constant attendance of others to care for his basic personal needs; that he suffered from continual loss of sleep and inability to ingest food; that his doctor had prescribed intensive hospital care. The uncontroverted post-mortem medical analysis revealed that Bareno‘s heart condition, prior to the March 4 date, had become acute.
Despite this evidence and plaintiff‘s specific request to the trial court to find that Bareno was totally disabled оn March 4, 1968, and so remained until his death on March 13, 1968, that court did not enter findings on Bareno‘s disability as of March 4 and dates following.8 Accordingly, this cause must be remanded to the superior court for further findings as to Bareno‘s disability, which will establish or dispose of plaintiff‘s right to recovery under the provisions of the insurance certificate.9
The judgment of the superior court is reversed and the cause remanded for further proceedings consistent with this opinion.
Wright, C. J., Peters, J., Mosk, J., Burke, J., and Sullivan, J., concurred.
McCOMB, J.-I dissent. I would affirm the judgment for the reasons expressed by Mr. Justice Ault in the opinion prepared by him for the Court of Appeal, Fourth Appellate District, Division One (Bareno v. Employers Life Insurance Company, et al., 4 Civ. 10352, filed July 8, 1971, certified for nonpublication).