Forbau Ex Rel. Miller v. Aetna Life Insurance Co.

FORBAU, Edwadine as Next Friend Amy Miller, Petitioner, COMPANY,

AETNA LIFE INSURANCE

Respondent.

No. D-1235.

Supreme Court of Texas.

Jan. 1994.

Supplemental Dissenting Opinion on Rehearing

Motion for Jan.

Dissenting Opinion on Motion for

Rehearing May Griffin, Brock, Lubbock, Ralph

Alton R. H. Lord, Ray, C.L. Charles B. Law Offices of Austin, Ray, petitioner. C.L. LeVick, Jones, Jeffrey P. John B. Jones Wharton, Lubbock, Flygare Galey Brown & respondent. CORNYN, Justice, opinion delivered the Court, PHILLIPS, in which Chief Justice, GONZALEZ, HECHT, ENOCH, SPECTOR, Justices, join. rehearing Petitioner’s motion for is over- ruled. opinion May We withdraw our following opinion and substitute the place. this case we are called determine whether the insurance right issue created vested unlimited benefits, lifetime or restricted benefits to the recovery of medical incurred while was in effect. The trial court judgment jury’s rendered on a verdict Safeco, Petitioner, Forbau, Petitioner filed settling with as After of Edwadine favor Aetna, alleging breach of Amy against of The court this lawsuit next friend of -Miller. fiduciary duty, and violations judgment, and of the court’s contract appeals reversed trial Deceptive Practices-Con- of Trade holding unambiguous that under the terms of the Texas and the Insurance recovery limited Protection Act policy, Petitioner’s was sumer the claims Only while the of contract expenses incurred breach to those medical Code. jury. In accordance to the submitted Aetna’s was effect. 808 S.W.2d were verdict, unambiguous jury’s trial court award- Aetna’s agree We that with the $238,000 damages, mil- Amy past $2.5 not afford the claimed ed and does $500,000 damages, and attor- judgment thus of in future Petitioner. We affirm the lion appeals.1 neys’ fees. the court I. II. Amy fourteen-year In March of 1983 old contracts Interpretation of insurance serious, and dis- permanent,

Miller suffered governed by same rules as in Texas injuries a vehicle abling as result of a motor Upshaw v. interpretation of other contracts. time, father, Amy’s Mike At the accident. (Tex.1992); Cos., 631, Trinity 842 S.W.2d Miller, group insured an Aetna was under Meadows, Reserve Western Life policy (Group Policy) Af- issued to insurance (1953). Inc., Foods, grocery a cooperative filiated M, Triple employer, his E stores which construing a When Inc., premiums and was a member. Miller’s primary give effect to court’s concern is dependents, Amy’s, including of his those expression parties’ intent. of the the written paid by Triple eligible E were M. Miller was Serv., Amoco Prod. Ideal Lease Inc. v. plan, as as an “individual” under the defined (Tex.1983); P R & En 662 S.W.2d “employee who is store owner Kirk, LaGuarta, terprises v. & Gavrel plan;” Amy eligi- participant under this (Tex.1980). This court is “individu- dependent coverage ble for as an together parts all a contract to read bound years of unmarried child nineteen al's under agreement parties. to ascertain Policy at age.” Group Marshall, 388 Royal Indem. Co. v. accident, Am. Pan Amy’s paid her med- After Andrews, 30,1985, 161 Tex. April Ins. Co. v. ical incurred until (1960). must con- The contract be group Affiliated S.W.2d 787 when terminated Rangers Reilly v. pay as a whole. tract with Aetna. Aetna continued to considered (Tex. Inc., 1, 1986, May policy’s Management, 727 S.W.2d benefits until under the Coker, one-year extension of clause. After Coker benefits (Tex.1983). Moreover, date, part of the con each Petitioner claims submitted given Barnett v. be effect. See Company Insurance as Aetna’s tract should Safeco Life members. Aetna successor insurer Affiliated’s (Tex.1987). a contract eventually example, For when dispute Petition- A arose between general Safeco, makes a statement cov provision in a lawsuit which er and resulted specifically erage, and another settlement. action. contract agree appeals that available under state law with 1. We also the court Employee whether the Retirement ERISA are declarato- the issue of available under remedies Act, benefits, §§ Security 1001-1461 29 U.S.C. Income (1988) ry judgment in- on entitlement (ERISA), preempts state law Petitioner’s improper against plan junction administrator’s in this case is "immaterial.” claims benefits, fiduciary, removal of refusal to n. 2. at 665 attorneys’ fees. award of benefits due and and an note, however, although re- We do 1132(a)(3). § remedies are ERISA’s U.S.C. 29 exclusive, judgment favorable to Aetna—would sult—a do extracontractual not include case ERISA and state in this under the same punitive damages. See Pilot compensatory law, disapprove ap- of the court contract Dedeaux, U.S. suggests that it peals' extent that statement (1987). 1549, 1556, 95 L.Ed.2d 39 to those are identical the remedies coverage, together states the time limit for such these must be read with specific provision compre- more the other sections of the contract to will control. See 3 hensively obligations Corbin, address the §§ ÁRthur L. Contracts parties of all to the insurance contract. application This is but an of our long-established phrase, rule that one “[n]o urges policy af Petitioner sentence, or section a[of contract] should be right payment for forded her a to receive all setting apart isolated from its and considered any future acci medical services related provisions.” from the other Guardian Trust occurring during policy period. dent Bauereisen, interpretation following That is based on the (1938); Wynnewood see also State clause: (Tex. Embrey, Bank v. any apply If benefit ceases to to an individ- n.r.e.). Civ.App. writ refd — Dallas dependent, coverage ual or a that bene- for immediately prej-

fit will cease but without any rights udice to under the benefit es- III. by person coverage while the tablished operative language The in this was in force. pay states Aetna will for “covered medi Group Policy at 1850. Petitioner further cal incurred a calendar urges explic- that even if this clause does not year family treatment a covered mem itly provide coverage, her with it at least Group Policy ber." at 6210 add ambiguity creates an which must be inter- ed). contract, obligated Under the Aetna is However, preted coverage. in favor of member, is, family to a covered every interpretation difference in the of a dependent. person covered individual or A contract to an or insurance amounts ceases to be a covered individual when the ambiguity. Both the insured and the insurer policy has been discontinued or the individual likely conflicting to take views of cover- longer employed by policy’s is no spon age, conflicting expectations but neither nor occurs, dependent coverage sor. When this disputation ambigu is sufficient to create also terminates.2 ity. Ridge Tyler, See Preston Fin. Servs. v. The “[t]his also states that (Tex.App. — Dallas provide does not insurance for of the denied); writ Medical Towers v. St. Luke’s following: Charges incurred while he is not a Epis. Hosp., (Tex.App.— family unam- denied). covered member.” Under the Houston writ The [14th Dist.] biguous language of the Aetna’s by prejudice” “without clause its own terms obligation benefits under the contract preserves right “established benefits terminated Affili- discontinuance of ... was in force.” It while policy, ated’s unless some other not create new or benefits be- does coverage. extended As the con- yond those afforded the other provision,3 tract contains which ex- such policy. undisputed of the And it is paid tended Petitioner’s benefits for one addition- Aetna the benefits to which Petitioner year, al charges she was entitled to the additional incurred was entitled — paid period dependent benefits Aetna for this time and for while she was covered law, only.4 one-year basic tenets of contract extension. Under Coverage totally an individual when the continues to be disabled but not terminates policy is discontinued or when the individual’s Group 12 months from the termination date. employment Group Policy terminates. Policy at 6210. "Any Dependant Coverage an individual will applies only This section to claims made under ... when be in terminate the individual ceases to Dental, Medical, Major Comprehensive eligible Dependant a class of individuals for such Comprehensive of the contract. Benefit sections Coverage.” Group Policy at 6010. 1, 1985, May April 4.From until policy provides: 3. The paid nursing medical benefits and care claims for family ... If for a member terminates policy's one-year extension of cover- under the disabled, totally provid- he benefit while year age. passed, submitted After that Petitioner family will ed ... for that member continue proofs to Aetna. be available for incurred while he no further of loss Continuing to longer believe no the law. Accordingly, judgment we affirm the correct, I prior decision that this court’s appeals. court of Ap- opinion.1 fully in this See incorporate it A. pendix DOGGETT, Justice, joined by GAMMAGE, Justices, HIGHTOWER and rejects re- majority opinion our new Dissenting Supplemental delivered this cent determination Gorman Opinion Motion for on Petitioner’s Am., North Co. of Rehearing. (Tex.1991), body of federal and a substantial [January 1994] Amy Miller’s breach refusing to treat law2 relief, Amy’s plea rejecting again claim for benefits pleading as a of contract majority leaves all Texans without due under ERISA. very security be at of health that should core misapplication of the doc- This 863-864. insurance. is sufficient preemption3 trine federal con- victory and to create achieve an Aetna has today’s opinion

At substituted least Amy and others like majority’s pri- injustice the five of siderable abandoned footnote suggested ambiguities judgments writing, that already which secured her who have against resolved the insurer they not to be that have been on based determinations plan. Tex.Sup.Ct.J. See illegally health care benefits. Unfor- denied previously explained I have the n. 5. majority tunately enough for the this is not regressive rejecting rule. reasons for this can be accom- when even more mischief 860, 865-66, (Dog- See 36 by reaching address state law plished out to gett, J., dissenting). judgment. unnecessary to this totally issues First, minority the view dicta it embraces However, today the decision announced re- ambiguities plans are not in ERISA wrong mains for the other it now reasons coverage. See id. at before,” construed in favor of wrong specifically was the same having two Despite n. then inde- “sweeping alteration of our 864-865 5. anti-consumer interpreting insur- longstanding judg- method to render pendent upon which bases reason, policies.” at For I ance Id. 866. this Aetna, majority then moves on ment for the continue to dissent. sweeping a anti-consumer alteration to enact interpreting longstanding method for

of our policies. insurance ON MOTION OPINION DISSENTING REHEARING FOR writings Contrary repeated the Casualty court in v. Western Balderama [May ] (Tex.1991); Co., Ins. 825 S.W.2d Justice, DOGGETT, dissenting. v. Hudson Fire Ins. Co. National Union (Tex.1991); Energy rehearing, the of a vote on With the switch Co., 723 ago Barnett law in this case short while announced dissent, original Tex. nyn’s which is found (Nov. 6, 1992). S.Ct.J. A, Appendix 2. See infra preemp Overly interpretation the expansive employed approach by then Justice 1.This is the scope Employees’ Retirement Income tive change experienced a on when he similar Calvert (ERISA), substantially Security barred has Act Andrews, rehearing. Pan Am. Ins. Co. v. See group application law to insurance of state (Cal- (1960) Metropolitan policies. Cathey 387, Life (Doggett, vert, J., J., dissenting) ("My (Tex.1991) views of case and ("ERISA concerning proper 'quicksand' decision concurring) ... remain has become expressed preempt they expand the views were as same as when 'will continue ”) meandering path' (quoting majority opinion, everything and I in the attached in its dissent.”). F.Supp. opinion accordingly Jordan Reliable now file (N.D.Ala.1988)). My prior opinion reference to Justice Cor- makes others, many plan participant’s right terminates to obtain ambiguities against will now be construed particular re- attempts insurer after the court to re- sulting injury permanently disabling from a any ambiguity through manipulation move suffered term. Under general interpretation. rules of contract here, applicable the insurer Tex.Sup.Ct.J. at n. 5. While it has obligated remains to cover medical been, be, never nor it should the law of Texas resulting already from that that are that an ambiguity merely insured creates an being provided at the time of termination. suit, by filing any policy subject to reason- able, had, conflicting interpretations until to-

day, been ambiguous. considered But now I. that, majority declares if the insurer year-old Amy In March fourteen Mil- ambiguity by taking away creates an in spe- injuries ler suffered serious accidental print cific fine most of the accorded treatment, required extensive medical includ- policyholder big print, in the the fine ing lengthy hospital rehabilitation clinic print always will If control. courts look to disabled, stays. permanently was left a She the whole document and must read even spastic quadriplegic, twenty-four in need of directly conflicting provisions together “to supervision. injured, Amy hour When agreement par- ascertain the between the “Group insured under a Life and Accident ties,” 36 no insurance Policy” Health Insurance with Aetna Life policy will ambiguous, ever be held and indi- Company, through E Insurance obtained Tri- reasonably vidual that could M, Inc., ple grocery operated by a store provide read to uniformly will be father, Amy’s Michael. Aetna continued ignored. paying May her health care until Miller, Amy young a quadriplegic, now year being one after succeeded as nothing—without any leaves this court with group carrier Safeco Life Insurance Com- judge jury of the means that and in Lub- pany. pay- At that time Safeco commenced bock, thought meeting Texas essential to her benefits, group policy, ment of under its lifetime medical needs over the course of her which was later converted to individual now bleak future. But even more far-reach- Amy. subsequent for non- Safeco’s ing today’s previously is evisceration of well litigation resulted in been has designed provide established state law separately resolved. protection policy- reasonable to insurance impact today’s opinion holders. The is brought against This action Aetna on potentially devastating to the of Tex- mother, Amy by behalf of her Edwadine rightly expect premiums ans who their Forbau,1 alleging breach of bad paper poli- for more than the on which their faith, Deceptive and violations of the Trade I cies written. dissent. Act, §§ Practices Tex.Bus. & Com.Code 17.- 41—17.826, and the Insurance Code. HIGHTOWER, GAMMAGE and granted art. 21.21. The trial court Ins.Code SPECTOR, JJ., join opinion. in this Aetna’s motion for instructed verdict on all of A APPENDIX Amy’s except of contract. claims breach upon jury finding damages Based verdict We consider whether cancellation of a com- $283,000 past for medical in the prehensive group accident and health insur- $500,000 $2,500,000 future, for the as well as subject policy, Employee ance to the federal fees, attorney’s the trial court rendered Security Retirement Income Act of 1974 (“ERISA”), (1988), judgment Amy. appeals §§ 29 1001-1461 The court U.S.C. appeal the trial

1. Not at issue in this court’s summary judgment in favor of another defen- dant, Foods, through cooperative Affiliated group poli- Triple which E M obtained the Aetna cy. 137 state law actions authorized courts that have ERISA, despite under proceed as claims judg- nothing a take reversed and rendered Reese, F.2d preemption. See Kuntz ment. 808 S.W.2d 664. (9th Cir.1985), other vacated on curiam), (9th Cir.) (per grounds, F.2d 1410 II. denied, 916, 107 479 U.S. S.Ct. rt. ce 318, preempts contends (1986); Kelly Pan- 93 L.Ed.2d Amy’s contract action under state breach of Co., F.Supp. Am. Ins. Life plead law and that because she did not (W.D.Mo.1991); Downes Powell v. Bob ERISA, totally her action is barred. ERISA Inc., F.Supp. Chrysler-Plymouth, preempts state law actions that “relate to (E.D.Mo.1991); Alden Davis v. John any employee plan,” a term that en- benefit (D.Kan. Co., F.Supp. Ins. compasses pension plans pro- those both Rapids Trustees Cedar Board 1144(a), viding §§ insurance. See 29 U.S.C. Clinic, P.A., Pension Plan v. Con Pediatric 1002(1). 1002(3), By paying part F.Supp. tinental Assurance Aetna, E Tri- premiums employees of its- (W.D.Ark.1988). claiming that Aetna was ple employee M welfare bene- maintained Amy damages prejudiced because asked ERISA, plan fit see Me- terms rather than “benefits for breach of contract Hosp. Sys. v. morial Northbrook ERISA, ignores these the dissent due” under (5th Cir.1990), 904 F.2d approved es- federal authorities which have Amy’s preempted “relating claim to” adopted sentially approach that we the same plan governed by federal statute. See preemptive effects of While the Gorman. Cathey Metropolitan farreaching, are not inevita- ERISA are Pilot Life urges, to con- bly compelled, as the dissent Dedeaux, 41, 45, 481 U.S. every against law in case whomever strue the (1987); 95 L.Ed.2d address due. We therefore seeks benefits Lines, Inc., 85, Shaw v. Delta Air 463 U.S. of Amy’s claim in the context the merits of 96-97, 2890, 2900, 490, 103 S.Ct. 77 L.Ed.2d ERISA. ERISA’s civil enforcement section autho- III. beneficiary plan participant rizes a or law of contracts While the federal common bring an action “to recover benefits due to interpreting policy in terms applied must be plan, him under the terms of the to enforce ERISA, Ins. purposes for of see Pilot Life rights plan, his under the terms of the or to Dedeaux, 41, 56, 107 S.Ct. 481 U.S. Co. clarify his to future benefits under the 1557-58, (1987), we do so 95 L.Ed.2d plan.” terms 29 U.S:C. extent it is by drawing from state law to the 1132(a)(1)(B). § concur- State courts have purposes policies un- consistent with the jurisdiction rent with federal courts over derlying v. Marine ERISA. See Woodfork 1132(e). § such actions. Id. The effect of Union, 966, 973 642 F.2d Cooks & Stewards applying ERISA was considered Gorman (5th Cir.1981) (allowing interpretation under Am., North plan’s pension law of terms federal common (Tex.1991), where Justice Gonzalez pre-ERISA law light of a worker’s state that a

wrote for a unanimous court “breach Valley Vicinity Constr. rights); Fox & may claim ... be characterized as of contract Brown, Fund v. 897 F.2d Workers Pension a claim for benefits due under the terms of (7th denied, Cir.), cert. 498 U.S. plan,” and that (federal (1990) 67, 112 L.Ed.2d 41 111 S.Ct. alleged the fact that the claim is terms properly developed from law rules common preclude the court of state law does policies with the under state law “consistent pro- adjudicating under the from the case (citation issue”) lying statute at the federal if state law is found to be visions of ERISA omitted); Building Employees Pension Serv. preempted. Co., Bldg. Maintenance Trust v. American (9th Cir.1987) Gorman, (applying F.2d at This conclusion 828 811 S.W.2d principles as federal contracts with that of a number of federal California is consistent expenses” medical as “unlimited.” Such unlimited, comprehensive policy accident is law). Accordingly, we look to the law subject all to a reasonable construction that applying Texas in federal common law to occurring expenses resulting injury from an comprehen- resolve whether cancellation of a covered, while is in force re- are group pol- sive accident and health insurance gardless of incurred.3 when icy plan participant’s right terminates a particular obtain ex- medical Largely ignoring foregoing, the court penses resulting permanently from a disabl- appeals provided concluded ing during suffered term. post- incurrenee-of-expense with no coverage by relying on a termination instead Amy responsibility that Aetna’s contends number of unconnected clauses: nursing certain care vested injured, time she was and that contractual page On “COMPREHENSIVE commitment would therefore extend to all are EXPENSE BENEFITS” MEDICAL resulting regardless such of wheth- explained: Expenses “If Covered Medical group er the policy had been terminated. ... for a cov- incurred treatment of Amy’s right Aetna maintains that to recover member, pay ...” family ered Aetna will in- accrues these are added). curred, obligation that its extends Charge” “Incurred de- page On actually health those care services received charge fined “The as: service period coverage. stated Reso- supply considered to incurred on requires dispute lution of this careful review date it is furnished.” plain of the actual terms —if Page includes the EX- “GENERAL effect; unambiguous, given they must be if “policy which state that the CLUSIONS” susceptible to more than one in- reasonable ... provide does not insurance terpretation, resort must be had to rules of [cjharges person incurred as to a while he construction. National Union Fire family is not a covered member.” Energy v. Hudson page OF On “TERMINATION (Tex.1991); Barnett v. Aetna “[c]ov- COVERAGE” clause outlines that Puckett v. erage an individual will terminate (Tex. U.S. Fire Ins. ... as to [discontinuance Underwriters, Glover v. National coverage.” such (Tex.1977). “Group This entitled a Life and provide guid- These little four Policy,” pro- and Accident Health Insurance explain or otherwise ance. The first does “Comprehensive Expense vides Medical Ben- 2 “Comprehensive Expense define Medical By choosing descriptive efits.” these Rather, prelude listing terms, as a Benefits.” Aetna has itself identified this as it indi- particular expenses, covered medical comprehensive policy, accident rather than cates that if these “incurred incurrence-of-expense the less as extensive Likewise, covered year, calendar for treatment of a urged. “Applica- now in the it, member, family will a bene- Coverage” prepared by for Aetna Group tion “comprehensive “incurred depicted coverage fit....”4 Neither the definition of Co., 386, Group Life Ins. 463 F.2d 389-90 and Accident Health Insurance Westchester Fire (10th Cir.1972) ("the language caption Policy "Group Policy”]. this as [hereinafter 1012-13 policy provisions be well as ... should all other interpreted meaning person what a as reasonable Although explain away unable to position insured in the would understand disparages "cap language, it mere dissent mean”); Nat’l it to also Johnson v. Lincoln see J., Tex.Sup.Ct.J. (Cornyn, 36 140 at 150 tions.” Co., 249], App.3d N.E.2d [69 Ohio 590 Ins. Life dissenting). captions headings or that are But 761, (Ohio Ct.App.1990); v. Union 765 Mohan misleading "repugnant requirements or as to 205], Fidelity Pa.Super. 216 [207 Ins. Life coverage Mosby policy,” v. in the Mutual Life 342, (Pa.Super.Ct.1966). A.2d 348 599], 103, 92 [405 Ill. N.E.2d 107 of N.Y. (Ill.1950), ambiguity be create an which must 4.Group Policy in at 4100. resolved favor of the insured. See Wise

139 Conn., 936 F.2d Blue Cross & Blue Shield of incumbent on the insurer that ion Fire Ins. not combine to create an exclusion. exclude policy,” ly, although already been covered.6 ly there is no reason hensive and unlimited expenses resulting coverage “upon ... es the third since it is though Amy presumably would be as still “covered” dependent. to those “incurred” as there defined.5 Simi- larly, tractual charge” These members, date unambiguous language.” future it is not clear whether as one considered to be “incurred provision explicitly disparate it phrase undisputed the termination vesting If the furnished,” Co., injuries “covered must why Amy sections from policy provides compre- [discontinuance is nowhere when the that she was a covered coverage or rather for future S.W.2d termination. Final- nor injuries family expressed limits provision stops cannot be seen coverage National Un- to such fami- member” defined, other con- that have “intent to payments included, in occurs, ceas- clear It is [the] do al- on in voice law. The dissent would bility HCA assist the federal ing application but Lincoln Nat’l agreement dissenting). dissent demands Cir.1992) (noting Life cert. (Wash.Ct.App.1991); see also Kane v. Aetna Cir.1990);7 L.Ed.2d 587 cert. 98, 107 1991); Emter v. Columbia Health Wash.App. L.Ed.2d 192 declining denied, Ins., denied, in Corp., as an (2d that basic Co., Co., exists Cir.1991); Kunin v. 498 (1990); Phillips v. Lincoln Nat’l McGee In this ^[498] independent 910 F.2d 774 to reach the of this rule to F.2d U.S. F.2d judiciary federal among uniformity F.Supp. U.S. process. situation, 819 534, Co., [890], the federal circuits. circuit Equicor-Equitable But in state court is to P.2d deprive 111 S.Ct. 921 F.2d 150 1286 538-41 1200 n. 11 question). an shaping when see our Benefit ERISA split regard- 498 (Cornyn, (11th Brewer v. (9th responsi- Services, Texas a (N.D.Ill. 581, 112 ERISA 392-93 Trust (10th Cir.), case, Cir.), (8th dis- J., Co., also explicit Gonzalez v. Mission Am. Ins. must be to ensure that Exclusions (Tex.1990). policyholder’s expectation This Texas rule reasonable Congressional construction furthers the not thwarted. See Kulubis purpose “protecting] interstate commerce Texas Farm Bureau Underwriters Ins. (Tex.1986); participants employee Kelly interests of As socs., ...,” plans Casualty benefit and their beneficiaries Ltd. v. Aetna & Sur. 1001(b). § Ramsay U.S.C. This same rule of constru- v. Ma ing ambiguities against part ryland the insurer is Am. Gen. Ins. (Tex.1976). purposes traditionally in-

the federal common law for Texas has con terpreting plan. See Masella v. strued terms insurance contracts “from Bruch, 101, 112, argument 5. Counsel for Aetna conceded at oral 489 U.S. S.Ct. 948 charge" appears [955], (1989), that the exact term "incurred explicit 103 L.Ed.2d which "pertinent no benefit section.” ly rejected employer's attempts to "afford less protection employees their beneficiaries by 6. Another section not discussed the court of enacted”, they enjoyed than before ERISA was appeals provid- is an extension of benefits clause "[ajctions challenging an and further noted that ing coverage "under a benefit" termi- when employer’s denial of benefits before the enact disabled, person totally while a nates covered governed by principles ment of ERISA were up year benefit will be available for to one [109 contract law.” 489 U.S. at 112-14 S.Ct. at beyond Group Policy cancellation. appearing contemplate 955-56]. While that all benefits year, meaning would continue for a full cover- Today we follow a rule of insurance age, clarify this section does not whether other adopted throughout construction this nation. specific already being could be benefits received Application fully of this rule is consistent with year. continued that, holding exercising in de novo the Firestone minority 7. The dissent favors the view that under plan denial of bene- review of fits, administrator’s any disputed plan language be con- must must not defer to the administrator’s courts deferring party’s inter- strued "without to either interpretation plan. [109 of the 489 U.S. at 112 Brewer, Incredibly, pretation." at 921 F.2d at 955]. this is based on Firestone & Rubber assertion Tire by tional contractual benefit was accorded “plain language” of the viewpoint Republic of the insured.” following appeals court of also focused on the Heyward, Nat’l Co. clause: see also Commonwealth apply If ceases to to an individ- benefit Bonding Casualty Bryant & Ins. Co. v. [113 (consider- (1922) coverage 21], dependent, ual or a for that bene- 240 S.W. immediately person for that fit will cease ing the insured’s reasonable belief as to cov- prejudice any rights under but without erage interpreting policy language). by person established [sic] benefit “clearly Where an insurer has limited benefits,” coverage while the was in force. understanding “the reasonable employees” appropriate is an consideration added). Id. at 666 The court ex- ERISA, purpose “pro of which is plained: tecting expectations plan the reasonable only pertinent if the This clause would be participants.” Henglein v. Plan Informal effect, policy was in and a covered individ- 391, 400], 91-3379, 91-3413, [974 F.2d Nos. receiving particular at a ual was benefit (3d Sept. WL at *6-7 Cir. going to cease time when that benefit was 1992).8 provided by policy. In to be a [sic] subject language policy, In the of the us, case, cessa- such a which is not before responsibility find no clear intention to avoid accrue to the tion of the benefit would not legitimate arising from detriment of the individual who was receiv- prior that occurred to termination. ing particular benefit and who would whole, policy, very The read as at the least by the remainder of continue to be covered reasonably could be construed to afford com- policy. prehensive than accident insurance rather Id. n. 4. limited to incurred reading, Amy alleges appeals term. The court of none- Under an alternative “clear, right “while the theless found the to be unam- that her to benefits vested force,” biguous susceptible meaning right and that one “prejudiced” upon nothing to construed.” therefore could not be ter- which leaves “benefit,” Lacking concluding that no addi- mination. a definition of S.W.2d at 667. interpreted standpoint concept considering policyholder’s from the of the aver 8. The Gowing great age layman”); expectations v. Great Plains Mut. Ins. reasonable is a cause of con- (Kan. 78], 483 P.2d [207 Kan. at least one of its sternation for the dissent. As (in 1971) ambiguous provisions, indicates, construing "we differ- cited commentators there is a meaning -ascertain that of the contract must expecta- ence between reliance on reasonable reasonably expect”) which the insured would interpretation ambigu- a factor in the tions as (quoting Gray v. Ins. Co. Cal.2d [65 Zurich disregard un- ous and in their use to 104], (Cal. 1966)). Cal.Rptr. P.2d Henderson, provisions. Roger ambiguous Disregarding these authorities and this distinc- Expectations in In "The Doctrine of Reasonable tion, approach the dissent misattributes the latter Ohio St. L.J. surance Law After Two Decades” 51 length on concerns about which it comments expectations are The insured’s today’s writing. way See 36 in no raised interpretation frequently in the considered J., (Cornyn, dissenting). Tex.Sup.Ct.J. at policy language. inexact See Simon v. Continen have been better advised to dissent would (Ky.1987) (poli tal Ins. rely upon the of its own source: conclusion expectations cyholder's are an "essential tool in ambigu- deciding whether an insurance system equitable can be fair and No insurance ous, interpreted consequently should be deprived where would-be insureds are insured”); Republic Sparks Nat’l participate intelligently favor opportunity to in the obfuscating Ariz. 647 P.2d system because of some factor that (Ariz.1982) (policy "language principle should be viewed of rea- is their control. The average layman standpoint emerged recognition expectations who in from the sonable insurance”); Myers in the law or to intelli- is untrained the need to eliminate these barriers 286], Kitsap Physicians gent participation. Wash.2d It evolved over the [78 Serv. has (Wash. 1970) (considering interpre past that balances P.2d two decades into a doctrine insurance”); against "average purchasing those of insur- the needs of insureds tation of man 376], City N.H. ers.... [118 Brown Laconia (“insurance Henderson, (N.H.1978) supra, policies A.2d eluded from that clause. Such alternative readings reading duplicative would avoid policy controlling contains no term that differently provisions. worded precludes Amy’s interpretation of her cover- interpretation, in conflict This reasonable age. payment A “benefit” is “a or service appeals, with that of the court of indicates an provided policy.” an ... insurance ambiguity.10 only Not is the first without Collegiate Dictionary Webster’s Ninth New unclear, prejudice clause but-even the court term, construing such we appeals’ reading of this contractual lan- charged using plain “popular” with or meaning: guage susceptible to a second Ramsay, meaning. 533 S.W.2d at 346. The preju- only pertinent word in benefit as used the “without clause “would be if [T]he here], any dice” policy clause could mean that [as was effect it was already being provided or service [Amy] and a covered individual was receiv- would not ing particular cease termination. [payment for home benefit nursing care] at a time when that benefit does contain a second “without going to cease was [when prejudice” appears comport clause that provided by cancelled] to be a [sic] closely meaning more with the ascribed to policy.”11 is, by appeals. first clause the court of It however, ambiguity present, With such differently: worded must strictly coverage.” be construed “in favor of family

If member under a Casualty Balderama v. Western section terminates while he is total- benefit (Tex.1991) (citing disabled, ly by provided benefit Barnett, 723 S.W.2d at see also Na- family section for that member will tional Union Fire Ins. 811 S.W.2d at continue to be available for in- Amy’s interpretation 555. Here contractual curred while he totally continues to be alternative, appears plausible to be the more disabled, but not after 3 months from the true, but even if this were not we would be termination date.9 required to: language, particular Under this payments [A]dopt exclusionary the construction of an under a “benefit section” will continue if the urged by long clause the insured so as that policy is altered terminated or if the fami- unreasonable, construction is not [itself] ly member is for longer other reason no urged by even if the construction the in- provision covered. This second seems to dis- appears surer to be more reasonable or ongoing receipt cuss the of the limited and parties’ more accurate reflection of the “particular contemplated by the benefits” intent. appeals. court of 808 S.W.2d at 664 n. 4. presumed Aetna should not be to intend the National Union Fire Ins. at 555; Glover, meaning 761; same in two when it uses see also 545 S.W.2d at Barnett, language 666; “any different benefit” Continental Cas. each— Warren, “any provided rather than by benefit the Co. v. (Tex.1953).12 family (emphasis section for that conjunction member.” Read added). Furthermore, clause, the second prejudice” “without with the first “without prejudice” explicit certainly interpreted clause contains an limita- can be reason- coverage. on ably contemplate coverage tion the duration of Because no for a health clause, already such limitation exists in being prior the first care benefit received presume intentionally must it was ex- termination. added). Group Policy Rehearing Application at 6200 11. Motion for for Writ 4). (quoting of Error at 7 808 S.W.2d at 666 n. 10. The dissent is correct that "it has never been the law of Texas” that an insured can create 12. This is true even where the one ambiguity unambiguous policy in an otherwise may reasonably interpreted to assure challenging simply interpreta- the insurer’s J., provi- for the insured is in conflict with other (Cornyn, tion. 36 senting). at 151 dis- ambiguous only A sions of the contract. when sus- ceptible interpreta- than to more one reasonable tion.

142 contracting can- at 637-38. After

366 S.W.2d cer, payment for more than one she received expectation coverage A reasonable finds year resulting medical from the insurers for testimony support even in the direct of Aet- expenses. ceasing her Two months after compa- legal regarding na’s own officer the however, monthly premium payments, she ny’s limi- policies other that include a dollar recurrence, suffered a for which additional payments. explained tation on total She Refusing pay required. treatment to was policies coverage any under those extends to expenses, later the insurers of those expenses resulting from an accident contended, here, as that the con- does “regardless policy terminated or the if incurring tingency against the insured was paid in not.” the total amount of bills Since pro- expenses, physical condition that not the way no affects the duration of Amy’s policy, testimony supports argument con- at This was duced them. Id. struing ambiguity in favor of rejected that “the with the conclusion event for her. having oc- contingency against insured policies, life of the the curred While we have not before been confronted companies refusal of the specifically may with whether benefits extend incurred termination would have con- policy, many Texas termination of after at stituted a breach of the contracts.” Id. already question in courts have resolved the See, added). e.g., pertinent policyholder. favor of the Washer Since the Casualty ambig- v. Continental S.W.2d provisions in Drinkard were no more (Tex.Civ.App. [14th Dist.] in- prejudice” clause uous than the “without — Houston n.r.e.); writ refd American Bankers here, particu- to be volved we find that case (Tex. McDonald, v. Co. larly instructive.13 dism’d); Civ.App. writ Drin — Austin Thomas, Similarly, in where the insurance Serv., Inc., Group Hospital kard v. policy provided “pay would insurer (Tex.Civ.App. writ S.W.2d — Dallas expenses incurred within one all reasonable n.r.e.); Maryland Casualty v. ref'd Co. accident,” year from the date of the Thomas, (Tex.Civ.App.— 289 S.W.2d 652 interpreted court the word at S.W.2d n.r.e.); Amarillo American writ ref'd covering: as “incurred” Russell, Assoc. Benefit ... re- reasonable for the [A]ll dism’d); (Tex.Civ.App. writ — Amarillo injuries by pairs insured’s] caused [the Dove, Nat’l & Accident correct- the accident whether the services 1942), (Tex.Civ.App. — Beaumont ing performed have not them have or been grounds on other aff'd year within one from the date of the acci- Casualty American (Tex.Civ. Horton, dent. n.r.e.). App. writ ref'd Thus, given Id. at 655. “incurred” was — Dallas liability Drinkard, ordinary meaning incurring rather was entitled an insured group policies. expenses.14 than medical benefits under two Cargill, language purpose Ins. Co. Am. a definition. Riverside 13. Contractual that "for Rider, (Tex.Civ.App. subsequent diagnosis 570 S.W.2d 455 benefits under this — Amarillo writ); Ins. Co. v. no Glenn, Northwestern Nat’l be considered a continuation of cancer shall cancer," (Tex.Civ.App. previous in Drin- S.W.2d 693 was relied — Fort n.r.e.). appeared Cargill court determine that what otherwise writ ref'd kard to Worth policy really contrary incurrence-of-expense was from that of the an reached a conclusion to be policy. S.W.2d at 638-39. in a case in an accident earlier Amarillo court in Thomas disregarded, certainly language. it volving policy cannot be as In both Car- Drinkard the same Glenn, however, appeals, solely entirety on the gill was the court of present grounds ambiguity unambiguous, in that was and no apparently to be was found brought at 667. but not here. 808 S.W.2d case other possibility indicated the court's attention that present coverage, opposed to the distinguished continued appeals Thomas 14. The court of prejudice" clause. These "without to define and its in that case failed because Indeed, unambiguous con to the two cases are limited a re- "incurred.” 808 S.W.2d courts, apply and do not before those contrary in two tracts ambiguous policy. to Thomas was reached sult Riverside, such in which the did contain other cases

143 injuries poli- sustained life of the cy. leading long ago As one source indicat- These Texas authorities are in accord with ed: majority approach.15 nationwide Much of body of law holds that an accident or Where an accident is in full force liability beyond vests termination and effect when insured [an] sustains interpretation based on the it- injury, accidental his cause of action arises times, self.16 At appel- least three the Texas immediately, regardless pol- whether the of Horton, 395, late decision has icy kept subsequent payments alive upon by been relied supreme another state’s premiums, and he is entitled to recover of in upholding court benefit continuation after indemnity full provided. amount of policy termination. See Loesekan v. Benefit (1946) Insurance, 897, § 45 C.J.S. 977 493], Trust Colo.App. [37 Co. 552 Life added) Horton, (citing (Colo.1976); P.2d 37 Service Ins. Co. Life Annotation, 395. also See Cancellation or 463], v. Branscum [234 Ark. Policy Master as Termi Modification of (Ark.1962); 588 Intercoast Mutual Coverage Group Policy, nation under 68 457], Co. v. Andersen [75 Nev. 345 P.2d (1959). 17[a], § A.L.R.2d at 279 This (Nev.1959). Indeed, 764 language at is- today. rule remains the same A. See John sue in Nevada was similar to the instant Practice, Appleman, Insurance Law and prejudice” “without clause and was construed (1981) (“where § at 163-64 the insured to establish an provided accident hospitalized” prior disabled or to termi beyond Andersen, benefits termination. policy, “any rights [already] nation of the (considering P.2d at 764 language that “ter- courts”); protected by accrued ... will be mination shall be prejudice any without Insurance, § Am.Jur.2d at 865-66 thereto”). originating prior claim Among (1982). 2d, See also 19 Couch on Insurance those appear few states that adopted to have (Rev. 82:121, 1983)(“Since § at 864 ed. minority incurrence-of-expense approach, loss, vest a a [group] cancellation of the are unaware of case that is not destroy liability cannot which has al distinguishable.17 death”). ready prior disability attached for Commentators recognized have also group cancellation of a accident liability, does To limit its an insurer must make responsibility relieve the insurer of explicit offering only that it is a limited cov- (limiting holding 542], Ala.App. "the same or similar Alabama v. Turner [43 Shield us”). policy provisions as (Ala.App.1966); before So.2d Erwin v. United 138], [70 N.M. 371 P.2d Beneficial Life (N.M. 1962). See also Fields v. Blue Shield Dreschler, See C.T. Disability Time or Death 570], Cal.App.3d Cal.Rptr. [163 Regard Coverage with California Termination under (Cal.App.1985); Danzig [78 v. Dikman Group Policy, § 68 A.L.R.2d at 156-57 303], (N.Y.App.Div.1980), A.D.2d 434 N.Y.S.2d 217 (1959). Dreschler, Annotation, See also C.T. In N.Y.2d [53 925] 440 N.Y.S.2d aff Liability Policy surer’s Accident which Ter 'd (N.Y.1981)(benefits 423 N.E.2d 403 [402] extend Injury minated Accidental but Prior to Com after policy). modification of a Treatment, pletion Hospitalization, Medical 1[a], Like, § 75 A.L.R.2d and the at 877 example, 17.For v. State Farm Ins. Co. Jefferson 167], (Pa.1988), Pa.Super. [380 551 A.2d 283 containing preju- See, involved a contract "without Faruque e.g., v. Provident & Accident provision dice” 34], that was construed as an incur- Ins. Co. [31 Ohio St.3d 508 N.E.2d 949 (Ohio 1987); rence-of-expense policy. disputed Unlike the Serv., Lutsky Hosp. v. Blue Cross here, however, (Mo. Missouri, 1985); ambiguity was 695 S.W.2d 870 Inc. by including specific eliminated end date to Sparks Republic Ins. Co. [132 National 529], (Ariz.1982), preju- continuation benefits in the "without Ariz. 647 P.2d 1127 cert. de Likewise, nied, dice” 459 U.S. clause. number of other [103 74 L.Ed.2d 632]; holding cases contracts were incurrence-of- Myers Kitsap Physicians [78 Serv. 286], (Wash.1970); expense policies, ambiguity present. Wash.2d 474 P.2d there was no Mote See, e.g., [DeSeret] State Farm Mutual Automobile Ins. v. Desert Mutual Wulffenstein (Utah 1980); Ass’n, (Ind.App.1990); Greenspan N.E.2d 1354 611 P.2d 360 v. Trav Hein v. Benefit Misc.2d Family elers Ins. N.Y.S.[2d] 166 N.W.2d American Mutual (Iowa 1969). (N.Y.App.Div. Blue Cross-Blue Rivera federal law. matter of common Co., 692, 921 F.2d v. Trust Ins. Benefit erage, incurrence-of-expense policy that ex- (7th (under Cir.1991) common 696 federal type any cludes for service of law, pre be “prejudgment interest should rendered after the ends. See Nation- to victims of federal sumptively available al Union Fire Ins. 811 S.W.2d at 555. violations”) (emphasis origi in law [ERISA] clarity helps party no to Such to ensure that nal); Corp., Dependahl Brewing v. Falstaff misled. failed limit the contract is Aetna to (8th Cir.), denied, 1208, cert. 653 F.2d 1219 coverage unambiguously, it therefore 70 L.Ed.2d 619 U.S. obligated compensate under to ERISA (1981) necessary to ac (prejudgment interest Amy expenses arising for medical from the purposes). The complish ERISA’s remedial she suffered the term.18 deny trial lacks to an award court discretion IV. in cases. prejudgment of interest ERISA States, Southeast & South parties not the Short v. Central Although the have briefed issue, Fund, judg- 729 F.2d must address the trial court’s west Areas Pension (8th Cir.1984) (district pro- expenses. ment for future medical court as a mat erred declaratory in or allowing vision ERISA for prejudgment interest as denying ter law in injunctive clarify beneficiary’s] “to claim); [a relief Employees v. to Lorenzen ERISA rights to the future benefits under terms of Sperry Plan & Hutchinson Retirement 1132(a)(1)(B), may plan,” § 29 U.S.C. (7th Cir.1990) (prejudg F.2d recovering implicitly negate possibility allowed); presumptively see ment interest expenses damages. Accordingly, those as Corp., also v. Consolidated Aluminum Sweet judgment trial to court should reform (6th Cir.1990) (citing Short F.2d pay Amy’s future order that Aetna grant prejudg- upholding district court’s Amy’s they plead- as occur. While interest). court thus erred ment The trial injunctive ings expressly request did interest, and we re- failing to award such relief, declaratory prayer her for future med- compute accord- allow it to interest mand to ical can be characterized as a re- F.2d ing Dependahl, law. Texas See to quest declaratory under for relief ERISA. statutory interest (applying at 1219-20 state accords with and the Such relief Gorman law). Because rate as federal common general petition that “the will be con- rule from payable sum is not ascertainable favorably possible plead- strued as as equitable prejudgment rate (quoting Gulf, er.” 811 548 n. 9 by the statuto- interest should determined Bliss, Ry. & Fe 368 S.W.2d Colo. Santa Perry Roofing Co. v. rily specified rate. (Tex.1963)). 594, 599 Olcott, see (Vernon art. 5069-1.05 Tex.Rev.Civ.Stat. V. Supp.1992). We consider whether the trial court also failing Amy prejudgment to erred award VI. interest. The Aetna itself does not set by Aetna points raised interest, We find the other out a but measure without merit.19 appeals to to be Amy prejudgment the court was entitled interest troverted, necessary. jury finding demanding Amy nothing no 18. In receive since 44-45; Sanders, May Teach proof of loss after 205 S.W.2d at American she failed to submit J., (Cornyn, Brugette, dis- at 152 Co. v. ers testimony (Tex. 1987); senting), ignores by Lloyds Mi- the dissent First Southwest provide MacDowell, (Tex.App chael that Aetna would not further Miller 769 S.W.2d 954 . —Texar denied); Security denial "[A] [the after that date. writ see also Viles kana liability (Tex.1990) under the a waiver insurer] of Nat'l Ins. proof enabling ("an (Hecht, J., of loss the insured maintain of a concurring) insurer’s denial furnishing a suit without such on presenting re the deadline claim before proof.” [146 Tex. Sanders Aetna requirement as a quired proof of waives that loss (Tex. 169], see also law”). matter of Womack v. Allstate (Tex.1957). Among that trial them is Aetna's contention Because jury. been the court without have testimony was uncon- should denied judgment We reverse the of that court and

remand the cause to the trial court to com

pute prejudgment interest, judg to render past

ment as to attorney’s “benefits due” and

fees, and to judgment reform the provide

Amy declaratory ordering relief that Aetna occur, they future in accor opinion.

dance with this COMPANY,

ALLSTATE INSURANCE

Petitioner, WATSON,

Kathleen Respondent. G.

No. D-2474.

Supreme Court of Texas.

Jan. 1994.

Concurring Opinion by Spector

Justice Nov.

Dissenting Opinion by Doggett

Justice Nov. schwig Rubber Co. v. current substantive federal law of F.Supp. benefit claims under ERISA. remain free to F.R.D. 688 (D.D.C.1991); which Although bringing an ERISA action in federal reached a F.2d 318 S.Ct. 948 no Artcraft right Rhodes v. required & jurisdiction, to a some decisions have held [955-56], Fils, contrary (8th Cir.1982), many Elec. (N.D.Okl.1991); jury (N.D.Ala.1990). Bruch, Steeples v. Time Ins. Inc., apply Piggly Wiggly de novo review of denials of trial, see, Supply 103 L.Ed.2d result after Firestone Tire & state courts must 489 U.S. their own rules of F.Supp. ERISA; however, they e.g., Vicinanzo See, e.g., Ala. Dist. In re 101, 112-14, exercising Vorpahl, courts have F.Supp. ^[80] court have McDonald apply (S.D.N.Y. v. Brun litigants (1989), proce- con lished under Texas rights. See Overcash v. Blue Cross & Blue Shield tance, cable to ERISA civil enforcement cause in the context of state enforcement of federal stantive (N.C.Ct.App.1989) dure. While the affording N.C.App. Amy’sright it has been considered a liberty guarantee her that right to trial (state law, 381 S.E.2d right. to trial the trial court did not err right by jury of fundamental by jury procedural right jury clearly action). trial ais impor- estab- appli- sub- Be-

Case Details

Case Name: Forbau Ex Rel. Miller v. Aetna Life Insurance Co.

Court Name: Texas Supreme Court

Date Published: Jan 5, 1994

Citation: 876 S.W.2d 132

Docket Number: D-1235

Court Abbreviation: Tex.