Balderama v. Western Cas. Life Ins. Co.
| Decision Date | 23 October 1991 |
| Docket Number | No. D-0355,D-0355 |
| Citation | 825 S.W.2d 432 |
| Parties | John BALDERAMA & Dolores Balderama, Petitioners, v. WESTERN CASUALTY LIFE INSURANCE CO., Respondent. |
| Court | Texas Supreme Court |
Article 3.70-2(E) of the Texas Insurance Code prohibits issuance of an accident and sickness insurance policy in this state which covers newborn children but limits or excludes that coverage for a period of time or for congenital defects. At issue in this case is whether insurance documents issued to John and Dolores Balderama, some covering their newborn children and some not, must be construed as a single policy and thus in violation of article 3.70-2(E). The district court concluded that the documents constituted two separate policies, and the court of appeals agreed. 794 S.W.2d 84. We disagree, and reverse and remand this case to the district court for further proceedings.
Through an agent, the Balderamas applied for insurance to Western Casualty Life Insurance Co. Using Western's application form for "Accident/Health and Life" insurance, the agent listed the Balderamas and their three children by name in the column provided for that purpose. Filling in the blanks, he showed the "Policy Form" as "CMH-2", the "Aggregate Amount" as "$100,000", the "Deductible Amount" as "$500.00", and "Endorsement Form(s)" as "OP-ACC-DD" with the number "500" written below. The "Total Premium Paid for All Members for one month" was shown as "$156.70", which was indicated elsewhere on the form to be the sum of $138.30 and $18.40. With this and other information filled out, the application form was sent to Western.
Western received and accepted the application, and returned an envelope containing four documents to the Balderamas. One was a copy of the application, now endorsed as approved, and adding a "Policy No." of "45085". The other three documents were entitled "Catastrophic Medical Hospital Policy" (Form CMH-2), "Accident Policy" (Form OP-ACC-DD), and "Endorsement" (Form EN.ACC.2).
The "Hospital Policy" specifies that it insures the applicant named in the "Policy Schedule", that is John Balderama, and "all other dependent members of [his] family, if any, named in the application". It does not cover newborn children. The "Policy Schedule", like the other pages of the "Hospital Policy", is marked "Form CMH-2". It lists the "policy number" as "45085", the "aggregate amount for each injury or sickness" as "$100,000", the "deductible" as "$500", and the "initial premium" as $156.70.
The "Accident Policy", a separate document, covers accidental injury to a limit of $500. It has no policy number but bears the printed form designation, OP-ACC-DD, listed in the application as "Endorsement Form(s)". It refers to but does not include a policy schedule naming the insured persons, but identifies them by reference to the application. It also provides:
However, in regard to any child born to the insured, such coverage is effective from the moment of birth and is not subject to any evidence of insurability or acceptance of such newborn child and will pay for congenital defects in such newborn child.
The other document in the envelope, entitled "Endorsement", contains no insuring clause but adds accidental injury, death and dismemberment coverage in same aggregate amounts as in the "Accident Policy". Like the "Hospital Policy", the document bears the policy number "45085".
A year after receiving these documents, the Balderamas had another child, Jessica, who from birth suffered serious health problems. The Balderamas presented Western with a claim for Jessica's medical expenses, which Western denied, asserting in relevant part that Jessica was not covered because she was not named in the application. The Balderamas then sued, alleging causes of action for breach of contract, negligence, breach of the duty of good faith and fair dealing, and violations of the Deceptive Trade Practices Consumer Protection Act and the Texas Insurance Code.
The district court, sitting without a jury, tried separately the issue of whether Jessica was insured by Western. The court found that Western issued two separate policies to the Balderamas--the "Hospital Policy" with its "Endorsement", and the "Accident Policy"; that only the "Accident Policy" provided newborn...
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