Brown v. Combined Ins. Co. of America

• Court: Kansas Supreme Court
• Writing for the Court: HOLMES
• Citation: Brown v. Combined Ins. Co. of America, 226 Kan. 223, 597 P.2d 1080 (Kan. 1979)
• Decision Date: 14 July 1979
• Docket Number: No. 49765,49765
• Parties: Edith M. BROWN, by Homer Brown, her guardian and conservator, Appellant and Cross-Appellee, v. COMBINED INSURANCE COMPANY OF AMERICA, a corporation, Appellee and Cross-Appellant.

Page 1080

597 P.2d 1080

226 Kan. 223

Edith M. BROWN, by Homer Brown, her guardian and conservator, Appellant and Cross-Appellee, v. COMBINED INSURANCE COMPANY OF AMERICA, a corporation Appellee and Cross-Appellant.

No. 49765.

Supreme Court of Kansas.

July 14, 1979.

Syllabus by the Court

1. Generally speaking, it is a question for the district court as the trier of the facts to determine whether an insurance company has refused to pay the full amount of an insured's loss "without just cause or excuse" thereby subjecting itself to payment of an attorney's fee under K.S.A. 40-256.

2. Whether an attorney's fee is to be allowed under K.S.A. 40-256 depends upon the facts and circumstances of each particular case.

3. Where the only issue between the parties is a factual dispute with respect to coverage under an insurance policy, and the insuror has refused to pay the full amount of the insured's loss for such reason, the phrase "without just cause or excuse", as used in K.S.A. 40-256, means a frivolous or unfounded denial of liability.

4. Whether there is any reasonable ground for contesting a claim under an insurance policy depends upon circumstances existing when payment is withheld or liability is declined and is not necessarily determined by the outcome of the ensuing litigation.

5. Before attorney fees can be awarded under K.S.A. 40-256, it must appear that the insurance company refused to pay the insured's claim and before any such refusal by the company it has a duty to make a good faith investigation of the facts surrounding the claim.

6. The general rule, subject to certain exceptions, is that a party to litigation who has acquiesced in the judgment of the trial court either by assuming the burden of such judgment or by accepting the benefits thereof will be deemed to have acquiesced in such judgment and may not thereafter adopt an inconsistent position and appeal from such judgment.

7. Where a judgment or decree involves distinct and severable matters, demands or issues, an acceptance of the burdens or benefits of one or more parts thereof will not prevent an appeal as to the remaining contested matters, demands or issues.

8. When a party to an appeal has paid or otherwise assumed the burden of any portion of a judgment rendered against such party, including the payment of costs, such party will not be deemed to have acquiesced in the judgment so long as the issues on appeal cannot affect the payments made or burdens assumed and such payment or burden is not involved in the issues on appeal. Likewise, any party to an appeal who accepts such payment shall not be deemed to have acquiesced in the judgment so long as the issues on appeal do not affect the obligation for the payment of or the right to receive such portion of the judgment.

9. The payment of costs in the trial court by the appellant or cross- appellant, when the assessment and amount of such costs cannot be affected by the decision on appeal, does not constitute such an acquiescence in the judgment that the appeal or cross-appeal must be dismissed. Prior decisions of this Court to the contrary are overruled.

10. In an action by an insured upon an insurance policy, the general rule is that the contract of insurance is to be strictly construed against the insurance company that prepared it and in favor of the insured.

11. In an action against an insurance company by an employee insured under a group disability insurance plan, the record is examined and it is Held : (1) the trial court did not commit error in denying the insured's motion for attorney fees under K.S.A. 40-256; (2) the defendant-cross-appellant insurance company, under the facts and circumstances set forth in the opinion, has not acquiesced in the judgment of the trial court and appellant's motion to dismiss the cross-appeal is denied; (3) the trial court's determination that the plaintiff-insured became totally disabled under the terms of the insurance policy on July 31, 1972, is supported by credible evidence; and (4) the judgment of the trial court is affirmed.

Eldon L. Meigs, Pratt, argued the cause and on brief, for the appellant and cross-appellee.

William F. Dunn, Prairie Village, argued the cause and on brief, for appellee and cross-appellant.

HOLMES, Justice:

This is an appeal by Edith Brown, plaintiff-appellant, from an order of the district court denying her an allowance of attorney fees under K.S.A. 40-256. Plaintiff was successful in the trial court in an action against Combined Insurance Company of America to recover disability insurance payments under a group policy issued by the defendant. After a jury verdict in her favor, appellant moved for the allowance of attorney fees which was denied by the trial court. This appeal followed. Defendant insurance company has cross-appealed from that part of the judgment of the trial court which established the date of the plaintiff's total disability. Under the terms of the policy, the date of disability controls the amount of certain payments to be received by the plaintiff.

Appellant was employed as a teller by The Peoples Bank of Pratt, Kansas, from October 19, 1956, to July 31, 1972. Appellee, during this period, issued a group disability insurance plan to the bank. Appellant was enrolled in this plan on May 1, 1966.

Around February, 1969, appellant began feeling ill and made a number of visits to her doctor. During the latter months of 1971, and the spring and summer of 1972, appellant developed a mental illness subsequently diagnosed as Alzheimer's disease, which has been defined as follows:

"Alzheimer's disease (ahlts hi-merz). (Alois Alzheimer, Ger. neurologist, 1864-1915.) Presenile dementia, which is similar to senile dementia but occurs in the 40-60 year age group. The disease has a relentless and irreversible course but may take from a few months to four or five years to go to the stage of complete helplessness." Taber's Cyclopedic Medical Dictionary, A-59 (12 ed. 1973).

One of the predominant symptoms of this disease is memory loss.

Appellant retired from her job at the bank on July 31, 1972. There is a dispute over the precise reason for appellant's retirement. Appellant claimed it was due to memory loss and mental malfunctioning resulting in her being unable to perform her employment responsibilities. Appellee claimed the disease was not contracted until after July 31, 1972, and therefore was not a consideration in appellant's decision to retire. Both parties presented evidence supporting their contentions. The disease was not diagnosed until May, 1973. Following her retirement, appellant's mental faculties progressively deteriorated until she became totally incapacitated and she remains so to this day. Homer Brown, appellant's husband, was appointed her conservator.

In January, 1973, an officer of the bank visited appellant's home and delivered a manila envelope to Mr. Brown, advising him it contained Mrs. Brown's insurance policies. It was not until January of 1976 that Mr. Brown examined the contents of the envelope and discovered a certificate of insurance under the policy issued by appellee. Mr. Brown contacted a bank officer who notified appellee of a potential claim for disability benefits by Mrs. Brown. This was approximately three years and six months after appellant retired. By the terms of the insurance policy, appellant's coverage terminated when she ceased to be employed at the bank and it also contained a proviso requiring written notice of a claim within ninety days of the date of loss. A grace clause made possible the waiving of the ninety day notice requirement in cases where it would not have been reasonably possible to furnish such notice providing notice was given as soon as possible.

Because of the late notice, appellee initially denied coverage but, upon being contacted by appellant's counsel, agreed to investigate the claim. Appellant contended that the grace clause was applicable thereby preserving her claim. After extended correspondence, appellant filed suit on July 14, 1976, which ultimately resulted in a jury verdict allowing recovery under the policy.

With the foregoing facts before us we will first address the appeal of the plaintiff.

K.S.A. 40-256 provides in pertinent part:

"That in all actions hereafter commenced, in which judgment is rendered against any insurance company . . . if it appear from the evidence that such company . . . has refused without just cause or excuse to pay the full amount of such loss, the court in rendering such judgment shall allow the plaintiff a reasonable sum as an attorney's fee for services in such action . . . ."

The general rules applicable to the allowance of fees under K.S.A. 40-256 were enunciated by this court in Koch, Administratrix v. Prudential Ins. Co., 205 Kan. 561, 470 P.2d 756 (1970).

"Generally speaking, it is a question for the district court as the trier of the facts to determine whether an insurance company has refused to pay the full amount of an insured's loss 'without just cause or excuse' thereby subjecting itself to payment of an attorney's fee under K.S.A.1968 Supp. 40-256. . . .

"It has been held that whether an attorney's fees are to be allowed depends upon the facts and circumstances of each particular case. (Parker v. Continental Casualty Co., 191 Kan. 674, 383 P.2d 937; Sturdy v. Allied Mutual Ins. Co., 203 Kan. 783, 457 P.2d 34.) Where the only issue between the parties is a factual dispute with respect to coverage under an insurance policy, and the insurer has refused to pay the full amount of the insured's loss for such reason, we are of the opinion the phrase 'without just cause or excuse' as used in K.S.A.1968 Supp. 40-256, means a frivolous and unfounded denial of liability. However, if there is a bona fide and reasonable factual ground for contesting the insured's claim, there is no failure to pay 'without just cause or excuse.' And whether there was any reasonable ground for...