Pacific Mut. Life Ins. Co. v. American Guaranty Life Ins. Co.

• Decision Date: 05 January 1984
• Docket Number: No. 83-5706,83-5706
• Citation: 722 F.2d 1498
• Parties: PACIFIC MUTUAL LIFE INSURANCE COMPANY, Plaintiff-Appellee, v. AMERICAN GUARANTY LIFE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1498

722 F.2d 1498

PACIFIC MUTUAL LIFE INSURANCE COMPANY, Plaintiff-Appellee, v. AMERICAN GUARANTY LIFE INSURANCE COMPANY, Defendant-Appellant.

No. 83-5706.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 8, 1983.

Decided Jan. 5, 1984.

Martha G. Bannerman, Adams, Duque & Hazeltine, Los Angeles, Cal., for plaintiff-appellee.

Lane J. Ashley, Sedgwick, Detert, Moran & Arnold, Los Angeles, Cal., for defendant-appellant.

Appeal from the United States District Court for the Central District of California.

Before GOODWIN and ANDERSON, Circuit Judges, and KING, District Judge. ^*

J. BLAINE ANDERSON, Circuit Judge:

American Guaranty Life Insurance Company appeals the granting of Pacific Mutual Life Insurance Company's motion for summary judgment. The district court, finding no genuine issue as to any material fact, construed relevant provisions of the California Insurance Code to permit a prior carrier of group medical coverage to terminate an extension of benefits to a totally disabled insured when replacement insurance becomes effective, shifting responsibility for payment of benefits to the replacement insurer. We affirm.

I. BACKGROUND

On October 14, 1977, Pacific Mutual Life Insurance Company (Pacific Mutual) provided medical expense benefits to the eligible employees of Petrocon Engineering Company (Petrocon) pursuant to Pacific Mutual's Group Policy No. GQ-14049. Subsequently, American Guaranty Mutual Life Insurance Company (American Guaranty) agreed with Petrocon to provide group medical benefits upon termination of the Pacific policy. This replacement coverage, pursuant to American Guaranty's Group Policy No. TG-418, became effective on January 1, 1981.

In May of 1980, during Pacific Mutual's policy period, Helen Moss became totally disabled. Mrs. Moss was the dependent of a Petrocon employee and as such was insured under the terms of the Pacific Mutual policy. This disability continued until her death on October 4, 1981, and Pacific Mutual paid all her medical expenses during that time. From January 1, 1981, until her death in October, Mrs. Moss incurred medical expenses of $74,872.03. Pacific Mutual paid the 1981 medical expenses under protest, with the reservation that it would seek reimbursement for those sums from American Guaranty.

A diversity action ensued. The district court granted Pacific Mutual's motion for summary judgment and awarded it the $74,872.03 which it sought from American Guaranty. The district court, in granting the motion for summary judgment, found no genuine issue as to any material fact and construed California Insurance Code, Secs. 10128-10128.4 (West 1977), ¹ to permit a prior carrier to terminate its extension of benefits to totally disabled insureds when replacement insurance becomes effective. This interpretation allowed the district court to conclude: (1) that the American Guaranty policy constituted replacement coverage as defined by the Code (Cal.Ins.Code Sec. 10128.1(i)); (2) that the Code required American Guaranty to extend benefits to Helen Moss effective January 1, 1981, and barred it from denying those benefits on the basis that her disabling condition preexisted the effective date of the American Guaranty policy (Cal.Ins.Code Sec. 10128.3(c)); and (3) that Pacific Mutual, having properly terminated its coverage (Cal.Ins.Code Sec. 10128.2(d)), would be entitled to reimbursement of those sums expended in extending benefits to Mrs. Moss after January 1, 1981, the effective date of the replacement coverage.

II. DISCUSSION

This court must affirm a summary judgment when, viewing the evidence in the light most favorable to the party opposing the judgment, there is no genuine issue of material fact in dispute and the moving party is entitled to judgment as a matter of law. Angel v. Seattle-First National Bank, 653 F.2d 1293 (9th Cir.1981). In this action, the parties agree and the district court found that there are no facts in dispute. The sole issue on appeal is whether the district court properly interpreted California law.

Substantial deference will be accorded the district court's interpretation of the law of the state in which it sits. Lewis v. Anderson, 615 F.2d 778, 781 (9th Cir.1979), cert. denied, 449 U.S. 869, 101 S.Ct. 206, 66 L.Ed.2d 89 (1980). Ordinarily, where there is no definitive guidance from the state courts, the district court's determination of state law will be accepted on review unless it appears to be clearly wrong. In re Mistura, Inc., 705 F.2d 1496, 1497 (9th Cir.1983); Takahashi v. Loomis Armored Car Service, 625 F.2d 314, 316 (9th Cir.1980). We cannot conclude that the district court's interpretation of California Insurance Code Secs. 10128-10128.4 is clearly wrong.

In interpreting the Code, the district court was guided by well-recognized principles of statutory construction. In the effort to implement legislative intent, the primary rule is to ascertain and give effect to the plain meaning of the language used. Hughes Air Corp. v. Public Utilities Commission, 644 F.2d 1334, 1337 (9th Cir.1981). The words of a statute must be construed in context and the statutes must be harmonized, both internally and with each other, to the extent possible. Pacific Legal Foundation v. California Unemployment Insurance Appeals Board, 29 Cal.3d 101, 172 Cal.Rptr. 194, 624 P.2d 244 (1981); California Manufacturers Association v. Public Utilities Commission, 24 Cal.3d 836, 157 Cal.Rptr. 676, 598 P.2d 836 (1979). Interpretative constructions of a statute which would render some words surplusage, defy common sense, or lead to mischief or absurdity are to be avoided. California Manufacturers Association, 157 Cal.Rptr. at 680, 598 P.2d at 840.

The district court complied with these accepted principles in making its determination: it ascertained and gave effect to the plain meaning of the language of the statute while acting in accord with the intent of the legislature. Hughes Air Corp., 644 F.2d at 1337. American Guaranty argues that the California legislature intended to prevent totally disabled insureds from slipping through gaps in coverage when an employer...