Barnett v. Aetna Life Ins. Co.

• Citation: 723 S.W.2d 663
• Decision Date: 04 February 1987
• Docket Number: No. C-5414,C-5414
• Parties: Lacy D. BARNETT, Petitioner, v. AETNA LIFE INSURANCE COMPANY, Respondent.
• Court: Supreme Court of Texas

Page 663

723 S.W.2d 663

Lacy D. BARNETT, Petitioner, v. AETNA LIFE INSURANCE COMPANY, Respondent.

No. C-5414.

Supreme Court of Texas.

Feb. 4, 1987.

Maurice Amidei, Houston, for petitioner.

Larry D. Carlson, Baker & Botts, Dallas, for respondent.

ROBERTSON, Justice.

This case involves whether an insurance company may offset benefits payable under the Veteran's Benefits Act from long term disability insurance payments. In response to issues submitted, the jury found that Barnett's date of disability under the VA did not begin until after the effective date of the Aetna policy, despite the fact that the actual injury occurred long before; that Aetna acted in good faith in taking the deductions; and, that Aetna's actions were not unconscionable. On the basis of these answers, the trial court entered judgment that Barnett take nothing. The court of appeals, 708 S.W.2d 911, affirmed, holding that the VA benefits were deductible under the policy.

In 1943, Lacy D. Barnett broke his right heel bone while serving aboard a U.S. naval vessel in the South Pacific. By virtue of the fact that his injury occurred during service, he became eligible for Veteran's Administration benefits. According to his testimony, he experienced pain and discomfort, and attempted on several occasions to apply for VA disability benefits. In 1946 his application was not processed because he did not have time to wait in line and could not afford to take time off for the mandatory hospital stay. On another occasion, he was told disability was unavailable because his files could not be located.

Through a succession of jobs, Barnett eventually ended up working for Amoco Oil Company. In 1967, Amoco began providing its employees with a noncontributory long-term disability insurance policy (i.e., employees were not required to contribute). In October 1977, Barnett suffered a permanently disabling injury to his right knee while operating some heavy machinery. He underwent knee surgery in November of 1977 and began receiving long-term disability payments from Aetna each month. Due to the realignment of the leg, however, his prior heel injury became debilitating. Thereafter, he again applied for VA benefits and this time the agency approved him for a 10 percent disability, which was later raised to 20 percent. This entitled him to $82 per month in disability payments from the VA to go along with his Aetna payments of $835.93. When Aetna learned that Barnett was receiving VA benefits, it began to offset those payments. Barnett challenged Aetna's right to reduce the benefits in question and sued Aetna for breach of contract, alleging illegal and unconscionable conduct.

The insurance policy in question provides (in pertinent parts) that Aetna may deduct:

Any payment for a disability which commenced on or after the effective date of the employee's insurance under this policy, under the Federal Social Security Act or Railroad Retirement Act, or any similar act of any national government, or by any federal, state, provincial, municipal or other governmental agency or pursuant to any workmen's compensation law, compulsory benefit act or law, occupational disease law or any other legislation of similar purpose, or the maritime doctrine of maintenance, wages and cure.

To interpret the contract in question it is first necessary to determine exactly what is expressed in the provision. Here, the language provides that if disability occurs after the effective date of the policy, and such disability results in any payment of benefits, Aetna can make deductions from its monthly payment in the amount of those other benefits. Aetna can only deduct this "other income" if the benefits come from the following sources:

(1) Benefits under the Federal Social Security Act, Railroad Retirement Act, or any similar act of any national government or any federal, state, provincial, municipal or other governmental agency; or

(2) Benefits pursuant to any workmen's compensation law, compulsory benefit act or law, occupational disease law, or any other legislation of similar purpose; or

(3) Benefits under the Maritime Doctrine of Maintenance, Wages and Cure.

It is apparent that the policy does not specifically mention VA benefits, thus, if such deductions are to be allowed, it must be shown that VA benefits are included under the general language of the document. Barnett argues that the benefits are not included within the general language due to the contract construction rule of ejusdem generis, and the rule which requires insurance policies to be construed strictly against the drafter of the document. Aetna counters by asserting that rules of construction are not applicable when there is no ambiguity in the language used. While we agree with Aetna that ejusdem generis is not controlling, we hold that an ambiguity exists and that the clauses must therefore be construed against Aetna.

It is a fundamental rule of law that insurance policies are contracts and as such are controlled by rules of construction which are applicable to contracts generally. See, e.g., General American Indem. Co. v. Pepper, 161 Tex. 263, 339 S.W.2d 660, 661 (1960); Iowa Mut. Ins. Co. v. Faulkner, 157 Tex. 183, 300 S.W.2d 639, 642 (1957); Brown v. Palatine Ins. Co., 89 Tex. 590, 35 S.W. 1060, 1060 (1896). As pointed out by Aetna, however, if the insurance contract is expressed in plain and unambiguous language, a court cannot resort to the various rules of construction. Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex.1984). Aetna argues that the general language clearly includes VA benefits, while Barnett argues that it manifestly does not. Although we agree that the language used is definite, the meaning and scope of the language is ambiguous. It has long been the law in this State that when language in a policy is susceptible to more than one reasonable construction, it is patently ambiguous. Glover v. National Ins. Underwriters 545 S.W.2d 755, 761 (Tex.1977). Both parties' interpretations are reasonable; therefore, we must resort to rules of construction to decide whether VA benefits are properly included under the general language in the policy.

The first rule of construction raised by Barnett is ejusdem generis. As said by this court:

Where specific and particular enumerations of persons or things ... are followed by general words, the general words are not to be construed in their widest meaning or extent but are to be treated as limited and applying only to persons or things of the same kind or class as those expressly mentioned.

Stanford v. Butler, 142 Tex. 692, 181 S.W.2d 269, 272 (1944);

Barnett contends that since Aetna explicitly mentioned the Social Security Act and the Railroad Retirement Act, those specific acts will provide the only possible offsets under the above theory. This argument, however, is without merit for several reasons. First, the provision in question does not seem to offend the general rule. Aetna did make specific examples of the Social Security Act and the Railroad Retirement Act in (1), but the general language in the provision reveals that such language applies only to that class of statutes which is similar to the specified examples. This is all that is required under ejusdem generis. The same reasoning applies to the general language contained in (2) of the provision as well. Furthermore, to adopt Barnett's reasoning on this...