Abbiati v. Buttura & Sons, Inc.

• Decision Date: 31 January 1994
• Docket Number: No. 92-612,92-612
• Court: Vermont Supreme Court
• Parties: Georgianne ABBIATI v. BUTTURA & SONS, INC. and American Bankers Life Assurance Company of Florida.

Page 988

639 A.2d 988

161 Vt. 314

Georgianne ABBIATI v. BUTTURA & SONS, INC. and American Bankers Life Assurance

Company of Florida.

No. 92-612.

Supreme Court of Vermont.

Jan. 31, 1994.

George E. Rice and Joseph G. McHale of Goodrich & Rice, Montpelier, for plaintiff-appellant.

Richard E. Davis and Jonathan P. Cawley of Richard E. Davis Associates, Barre, for defendant-appellee Buttura & Sons.

Jeffry W. White of Eaton & Hayes, Woodstock, and John Davis Buckley (on the brief) of Theriault & Joslin, P.C., Montpelier, for defendant-appellee American Bankers Life Assur. Co.

Before ALLEN, C.J., and DOOLEY, MORSE and JOHNSON, JJ.

DOOLEY, Justice.

Plaintiff sued defendants, Buttura & Sons, Inc., and its life insurance carrier, American Bankers Life Assurance Company of Florida, to recover additional compensation on a life insurance policy provided to her deceased husband, Stuart Abbiati, by Buttura & Sons, as part of his employee benefits package. The trial court awarded plaintiff $11,000 additional compensation and held defendants jointly and severally liable for this amount. The court also awarded plaintiff postjudgment interest on the $11,000, but tolled the accrual of interest at the twelve percent rate prescribed by 9 V.S.A. § 41a(a) as of the date of entry of judgment. The court then ordered that the judgment amount be placed in an interest-bearing account to earn interest at the market rate until distribution. Plaintiff appeals the amount of additional compensation awarded and the tolling of statutory interest; American Bankers cross-appeals on the issue of joint and several liability for the additional compensation and the denial of costs on its offer of judgment. We affirm the award of additional compensation and the imposition of liability upon American Bankers. We reverse the court's denial of costs to American Bankers and remand for a determination of such costs. Finally, the Court has divided on plaintiff's challenge to the order denying her postjudgment interest at the statutory rate as long as American Bankers pays the judgment amount into an interest-bearing account for distribution after the appeal. This issue remains unresolved and must be reargued.

Stuart Abbiati worked for defendant Buttura & Sons as an estimator and granite salesman for a number of years. He was paid a salary for his work as an estimator, but he received commissions for his work as a salesman. Buttura & Sons purchased group life insurance coverage for its employees, including Stuart Abbiati, from American Bankers. The coverage was provided to the employees as a benefit on a noncontributory basis. The policy required Buttura & Sons to pay $0.42 per month per $1,000 of coverage for each employee for life insurance coverage of "2 1/2 times basic annual earnings rounded to the next higher $1,000 to a maximum of $100,000." Buttura & Sons implemented this provision by basing benefits, and its premium payments, upon the basic salary of all nonunion employees, including those workers who also received commission income. Stuart Abbiati was informed of the scope of the benefit in 1985, when the policy was first purchased, and signed an enrollment card listing only his basic salary.

American Bankers provided Buttura & Sons a "Policyholder's Administration Manual" to explain its duties in administering the group policy. As the trial court found, Buttura & Sons was required to perform various administrative tasks including "billing, conversion of coverage, termination of coverage, submission of claims and updated employee census data, including changes in employee annual salaries." It was the policy of American Bankers to request from the employer an annual update of the names and wages of employees. This was done in 1986, and Buttura & Sons responded with current information. The trial court was unable to determine whether it was done in 1987 and 1988. In any event, Buttura & Sons did not update information in those years so that when Stuart Abbiati died in October 1988, the amount of his annual earnings, as shown in the records of American Bankers, was $20,280 when in fact his annual salary was $24,700.

The salary discrepancy underlies some of the issues in this litigation. American Bankers paid plaintiff's death claim based on the 1986 information and refused to pay the additional amount to reflect Stuart Abbiati's 1988 salary. More significant in monetary terms is plaintiff's argument that the death benefit payment also should have reflected Abbiati's annual commission income, which was around $20,000 at the date of his death.

Plaintiff filed suit for the maximum payment allowed under the policy, $100,000, minus the amount paid of $51,000, for a claim of $49,000. On March 9, 1992, American Bankers served plaintiff with an offer of judgment pursuant to V.R.C.P. 68, in which it proposed to pay $11,000 plus prejudgment interest. The offer was not accepted within ten days and thus was deemed withdrawn. See V.R.C.P. 68.

After a bench trial, the court found that Buttura & Sons incorrectly reported Mr. Abbiati's final salary to American Bankers. As a result, the court awarded plaintiff an additional $11,000, which represented the difference between a death benefit of $62,000 due based on Abbiati's $24,700 salary and the $51,000 previously tendered by American Bankers. The court rejected plaintiff's contention that commission income was to be included in calculation of an employee's salary.

The court held defendants jointly and severally liable for the additional $11,000 on the ground that Buttura & Sons was American Bankers' agent for administrative work, such as reporting premiums. The court also awarded plaintiff interest at the statutory rate of twelve percent on the $11,000 from Stuart Abbiati's date of death. The interest award was subsequently modified to market rate interest on motion of American Bankers.

I.

Plaintiff first argues that she was entitled to the policy maximum of $100,000 based on two-and-one-half times her husband's total annual earnings, including commissions, in excess of $40,000. Her contention is based on the wording of the benefit provision of the life insurance policy issued by American Bankers to Buttura & Sons: "2 1/2 X basic annual earnings rounded to the next higher $1,000 to a maximum of $100,000." She argues that the policy bases benefits on "earnings" not "salary," and therefore, her benefits should reflect her husband's commission income.

The trial court rejected plaintiff's argument because it found the argument inconsistent with the contractual relationships of the parties. It concluded that under the policy between American Bankers and Buttura & Sons, it was up to Buttura & Sons to define earnings and to pay premiums and obtain coverage accordingly. As to the employees, including Stuart Abbiati, the court concluded that Buttura & Sons agreed to provide coverage based on salary and not commissions.

The trial court's findings of fact will be upheld unless clearly erroneous. V.R.C.P. 52(a)(2). Similarly, conclusions will be upheld if supported by the findings. See In re M.M., 159 Vt. 517, 522, 621 A.2d 1276, 1279 (1993). We find the trial court's conclusions amply supported by its findings which are, in turn, supported by the evidence.

At the outset, we agree with the trial court's characterization of the contractual relationships. A group insurance contract is primarily a contract between the employer and the insurer. See, e.g., Blue Cross-Blue Shield of Ala. v. Fowler, 43 Ala.App. 572, 195 So.2d 910, 918 (1966); Blaylock v. Prudential Ins. Co. of America, 84 Ga.App. 641, 67 S.E.2d 173, 175 (1951); Credeur v. Continental Assurance Co., 502 So.2d 214, 219 (La.Ct.App.1987); Guardian Life Ins. Co. of America v. Zerance, 505 Pa. 345, 479 A.2d 949, 952 (1984); Paul v. Insurance Co. of N. Am., 675 S.W.2d 481, 483 (Tenn.Ct.App.1984). Moving beyond the primary contract, some courts have held that there is a contractual relationship between the insured employees and the insurer, often created when the employee contributes to premium payment. See, e.g., Morris v. Travelers Ins. Co., 546 S.W.2d 477, 484-85 (Mo.Ct.App.1976) (rejecting theory of insureds as third party beneficiaries of employer-insurer contract and finding contract between insurer and employee); Paul, 675 S.W.2d at 483 ("When employees contribute part of the premium and are issued a certificate by the insurer, there is also a contractual relationship between the employee and the insurer."). We do not have to decide whether we would accept this view because we adopt the holding of Watson v. Pilot Life Insurance Co., 741 S.W.2d 342, 343-44 (Tenn.Ct.App.1987): "[W]here a group insurance policy is non-participatory, in that the employee contributes nothing to the payment of the premiums, no contractual relationship arises between the employee and the insurer." Buttura & Son's group life plan is noncontributory, and there was no direct contractual relationship between American Bankers and Stuart Abbiati.

In construing the insurance contract between Buttura & Sons and American Bankers, we seek to effectuate the intention of the parties. See Cooperative Fire Ins. Ass'n of Vt. v. Gray, 157 Vt. 380, 383, 599 A.2d 360, 362 (1991) (insurance contracts interpreted according to evident intent of parties). Intent of the parties is often discerned directly from the contract language. Id. Here, however, the trial court found that the term "earnings" was ambiguous, and was intended to give Buttura & Sons flexibility in determining the amount of coverage. In light of this ambiguity, the court was well within its power to refer to evidence outside the four corners of the document to help interpret the language of the contract. See Isbrandtsen v. North Branch Corp., 150 Vt. 575, 579, 556 A.2d 81, 84-85 (1988) (if ambiguity found in contract, "court may then rely on subordinate rules of construction in order to interpret the meaning of the...