Ballard v. Northwestern Nat. Life Ins. Co.
| Decision Date | 30 April 1991 |
| Docket Number | No. 90-2519,90-2519 |
| Citation | 931 F.2d 513 |
| Parties | James Mark BALLARD; James Marvin Ballard, Appellees, v. NORTHWESTERN NATIONAL LIFE INSURANCE CO., Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Thomas A. Mars, Springdale, Ark., for appellant.
Elton A. Rieves, IV, West Memphis, Ark., for appellees.
Before McMILLIAN and MAGILL, Circuit Judges, and BRIGHT, Senior Circuit Judge.
Northwestern National Life Insurance Company appeals from the trial court's 1 conclusion that its group life insurance policy's notice of disability provision was a condition subsequent to the waiver of premium payments and the trial court's finding that the decedent had provided notice of her disability to the insurance company as soon as was reasonably possible. In this diversity case, we review the trial court's state law ruling de novo, under the Supreme Court's recent decision in Salve Regina College v. Russell, --- U.S. ----, ----, 111 S.Ct. 1217, 1219-21, 113 L.Ed.2d 190 (1991), and affirm the ruling and factual finding.
On October 1, 1973, Mary Wilson Ballard, now deceased, became insured under a group life insurance policy issued by Northwestern National Life Insurance Company (NWNL) to Crittenden County Memorial Hospital in West Memphis, Arkansas. 2 The policy provided $15,000 in coverage, and Mrs. Ballard's beneficiaries were her husband and son.
NWNL's arrangement with the hospital operated as follows. Each month, NWNL would send the hospital a Premium Statement Listing, which contained the names of all hospital employees insured under NWNL's group plan. The Premium Statement Listing had two parts, a white copy and a yellow copy. After receiving the Listing, the hospital would return the yellow copy to NWNL along with payment for the premiums of its covered employees. When there was a change in coverage, the hospital would draw a line through the insured employee's name on both copies of the Listing, and would write the reason for the change on the yellow copy, selecting one of seven responses provided on the form. The hospital kept the white copy.
Mrs. Ballard suffered continuously from a total and permanent disability as defined in the insurance policy from October 1980 until her death. On April 12, 1981, Mrs. Ballard stopped working at the hospital because of her disability. The hospital's personnel department knew Mrs. Ballard quit because of her disability. In May 1981, someone in the personnel department drew a line through Mrs. Ballard's name on the Premium Statement Listing, erroneously wrote "terminated" next to her name, instead of "disabled," and forwarded the yellow copy to NWNL. As a result of this error, after May 1981 no premiums were paid on Mrs. Ballard's life insurance policy.
From 1981 until a few weeks before her death, Mrs. Ballard was able to pay bills and tend to family business. Approximately a week before her death, Mrs. Ballard gave her son a handwritten note telling him that she had a $15,000 insurance policy with the hospital. Mrs. Ballard died on September 20, 1986.
In June 1987, Mrs. Ballard's widower and son submitted proof to NWNL that (1) Mrs. Ballard had a total and permanent disability as defined in the insurance policy; (2) the disability continued without interruption from October 1980 until September 21, 1986; and (3) Mrs. Ballard was fifty-one when she died. The Ballards requested payment of the $15,000 under the terms of the policy. NWNL refused payment on the ground that Mrs. Ballard had not complied with the notice and due proof provision of the policy. The Ballards brought suit in federal district court.
The issue before the trial court was whether the Ballards had provided proper notice of Mrs. Ballard's permanent disability in order to waive the payment of premiums during the five years between the hospital's error and Mrs. Ballard's death. The relevant policy language states: "[Waiver] will be allowed only upon receipt by the Company at its Home Office of due proof that the Insured has become disabled and that disability has already continued uninterruptedly for a period of at least 6 months." App. at 34. The Ballards contended that this notice and proof provision was a condition subsequent to waiver of the premium payments. Reading the provision as a condition subsequent results in waiver occurring at the time of disability, and notice and proof of disability is not needed before waiver. NWNL argued that the notice and proof of disability was a condition precedent, and that it had to be given within one year of the default in premium payments in order to waive the payments. 3 NWNL contended that because notice and proof were not received until after Mrs. Ballard's death, the premium payments were not waived and NWNL was not liable on the policy.
NWNL also argued that even if the notice and proof of disability provision was a condition subsequent, Mrs. Ballard did not give notice as soon as was reasonably possible, as the policy required: "Failure to give such notice within such time shall not invalidate any claim if it shall be shown that it was not reasonably possible to give it within such time and that such notice was given as soon as was reasonably possible." App. at 34. NWNL contended that Mrs. Ballard could have given notice of her disability any time before her death, and her failure to do so invalidated the notice given after her death. The Ballards argued that it was not reasonably possible for Mrs. Ballard to provide notice of her disability to NWNL before her death because she did not know that the hospital had erroneously classified her as terminated.
The trial court, after reviewing Arkansas case law, first held that the notice and proof of disability provision was a condition subsequent. It also found that the Ballards had provided notice as soon as was reasonably possible under the circumstances. The trial court thus ordered NWNL to pay the Ballards $15,000, a 12% penalty, pre- and postjudgment interest, and reasonable attorney's fees. NWNL appealed to this court.
NWNL first argues that the trial court erred in holding that the notice and proof of disability provision was a condition subsequent to the waiver of premium payments. NWNL asserts that Arkansas case law clearly holds that such a provision is a condition precedent and therefore, the Ballards are not entitled to the $15,000.
The issue of whether the notice and proof of disability provision is a condition subsequent or precedent to the waiver of the premium payments is a matter of Arkansas law. The trial court held that the provision was a condition subsequent. In previous cases such as this, we have deferred to the state law ruling of a federal court sitting in the state whose law controls, unless the ruling is fundamentally deficient in analysis, without a reasonable basis, or contrary to reported state court opinion. See Economy Fire & Cas. v. Tri-State Ins. Co., 827 F.2d 373, 375 (8th Cir.1987). However, we are no longer permitted to defer and must subject such state law rulings to de novo review. See Salve Regina College v. Russell, --- U.S. ----, ----, 111 S.Ct. 1217, 1219-21, 113 L.Ed.2d 190 (1991).
Like the trial court, we have reviewed the Arkansas case law on whether a notice and proof of disability provision is a condition subsequent or precedent to the waiver of premium payments. Some cases have held that the provision was a condition precedent. See, e.g., American Nat'l Ins. Co. v. Freeman, 192 Ark. 474, 92 S.W.2d 210, 211 (1936); New York Life Ins. Co. v. Moose, 190 Ark. 161, 78 S.W.2d 64, 67 (1935); Barnett v. Southwestern Life Ins. Co., 269 Ark. 940, 601 S.W.2d 604, 606 (Ark.Ct.App.1980). Other cases have held that the provision was a condition subsequent. See, e.g., Home Life Ins. Co. v. Keys, 187 Ark. 796, 62 S.W.2d 950, 951 (1933); American Gen. Life Ins. Co. v. First Am. Nat'l Bank, 19 Ark.App. 13, 716 S.W.2d 205, 208 (1986) (en banc); J.C. Penney Life Ins. Co. v. Warren, 268 Ark. 1132, 599 S.W.2d 415, 417 (Ark.Ct.App.1980). Whether the state courts hold the provision a condition subsequent or precedent turns largely on the exact policy language involved. The case with policy language closest to the policy language in this case is Home...
To continue reading
Request your trial
- U.S. v. Scott
-
Ciulla v. Usable Life
...where a person still goes to work but is considered disabled under the applicable insurance policy. See Ballard v. Northwestern Nat'l Life Ins. Co., 931 F.2d 513, 515 (8th Cir.1991) (claimant stopped working in April of 1981, but was considered totally and permanently disabled under the ins......
-
Davis v. Buchanan Cnty.
...113 L.Ed.2d 190 (1991), "we are no longer permitted to defer and must [instead conduct] de novo review." Ballard v. Nw. Nat'l Life Ins. Co. , 931 F.2d 513, 516 (8th Cir. 1991).4 Accompanying definitions of "purchase" include "to get into one's possession," "to obtain (something desired) by ......