Brown v. Farm Bureau Life Ins. Co.

• Decision Date: 14 July 1966
• Docket Number: No. 52091,52091
• Citation: 259 Iowa 235,144 N.W.2d 110
• Parties: Floyd L. BROWN, Appellant, v. FARM BUREAU LIFE INSURANCE COMPANY, a Corporation, Appellee.
• Court: Iowa Supreme Court

Page 110

144 N.W.2d 110

259 Iowa 235

Floyd L. BROWN, Appellant, v. FARM BUREAU LIFE INSURANCE COMPANY, a Corporation, Appellee.

No. 52091.

Supreme Court of Iowa.

July 14, 1966.

Lundy, Butler, Wilson & Hall, Eldora, for appellant.

Brierly, McCall & Girdner, Newton, for appellee.

SNELL, Justice.

This is an authorized interlocutory appeal from the trial court's separate adjudication of law points.

Plaintiff's action is at law for damages in the sum of $58,209.60 claimed in each of three divisions.

The issues are as tendered by the pleadings.

Defendant is an Iowa corporation engaged, among other things, in writing income disability insurance policies.

Plaintiff's petition states: that on March 1, 1963 he made written application to defendant for a guaranteed renewable income disability insurance policy to provide for total disability payments of $200 per month for life, with a 30-day elimination period; that he paid the initial premium; that defendant accepted and retained the application and premium until a time subsequent to plaintiff's demand for payment under the policy.

Plaintiff states that on September 21, 1963 his right arm was accidentally caught in a hay baler so injured as to require amputation and plaintiff is now permanently totally disabled; that when plaintiff made claim defendant refused payment notwithstanding its failure to notify plaintiff of defendant's contention the policy or premium had not been accepted. There is no claim that a policy was ever issued.

Division I of plaintiff's petition sounds in contract and prays judgment for $58,209.60, together with interest and costs. It is based on the breach of an alleged oral contract to furnish disability insurance providing for total disability payments of $200 per month for life. Division II is a tort claim based on deceit resulting from defendant's implied misrepresentation that plaintiff's application and premium had been accepted and such a policy was in force. The third division is also in tort based on defendant's negligence in failing to give plaintiff notice that his application for such a policy and premium had not been accepted, that it was not in force, inducing him to believe it was in force, in failing to issue the policy, taking an unreasonable time to act upon his application and notify him of its rejection.

Each division of plaintiff's petition prays for judgment in the sum of $58,209.60, the claimed present worth of future monthly payments he would have had if the insurance policy had been issued.

Defendant denied the acceptance of plaintiff's application, denied any contract and denied liability.

What plaintiff seeks is a 'lumps sum' equal to the commuted value of $200 payable each month throughout his life expectancy.

The trial court concluded that in the event plaintiff established a cause of action in either contract or tort his recovery would be determined by the terms of the policy contract he had sought and he could not recover judgment in a lump sum or accelerated amount.

From this determination plaintiff has appealed and the question now before us is the measure of plaintiff's damage in the event he establishes his right to recover in either contract or tort.

Attached to plaintiff's petition as Exhibit 'A' is a copy of the insuring agreement he says he was to receive. Under the heading 'Definitions' the following appears:

'Total Disability. The term 'total disability' or 'totally disabled', whenever used in this policy, means the complete inability of the insured to engage in his regular occupation, except that if indemnities have been paid for twenty-four months in any period of continuous disability, then for the remaining duration of such period of continuous disability, the term 'total disability' shall mean the complete inability of the insured to engage in any gainful occupation.

'Partial Disability. The term 'partial disability' or 'partially disabled', whenever used in this policy, means the inability of the insured to perform one or more but not all of the important duties of his occupation.'

Benefit provisions are provided in Part A to E, inclusive, of said Exhibit 'A'.

Paragaph 9 of said Exhibit provides that:

'Subject to due written proof of disability, all accrued indemnities will be paid at the expiration of each month during the continuance of the period for which the company is liable and any balance remaining unpaid upon the termination of liability will be paid immediately upon receipt of the written proof.'

I. That plaintiff may bring his action in either contract or tort is not seriously disputed. If he can establish a contract he may, of course, recover for its breach. That an insurer may also be compelled to respond in damages for negligence in accepting or rejecting an application for insurance is well settled. Werthman v. Catholic Order of Foresters, 257 Iowa ---, 133 N.W.2d 104 and cases cited therein.

II. The issue under the contract claim is stated by plaintiff as follows:

'Can plaintiff, if totally permanently disabled, recover damages for the present worth of future payments under an income disability insurance policy, providing monthly payments for life, where the insurance company has denied all liability and refused payment?'

We have in previous cases determined the measure of damage for breach of an oral contract to provide insurance. In re Estate of Carter, 254 Iowa 138, 116 N.W.2d 419 involved an oral agreement to procure credit life insurance. We said:

'Under the general rule the measure of damages for breach of an agreement is the amount which will compensate the injured person for the loss which a fulfillment of the contract would have prevented or which the breach of it has entailed. The injured person is entitled to be placed, so far as this can be done by money, in the same position he would have occupied if the contract had been performed. (Citations)

'In view of the record, the question of damages in this case will be treated and considered as if a policy in the usual form had been obtained by the bank. The measure of defendant's recovery is the amount recoverable had a policy been actually obtained.' (Citations) (loc. cit. 142--143, 116 N.W.2d loc. cit. 422)

We quoted with approval from Barre v. Council Bluffs Ins. Co., 76 Iowa 609, 610, 611, 41 N.W. 373, 374, as follows:

"While the action is not upon the policy of insurance, it cannot be doubted that defendant's liability must be determined by the terms and conditions of the policy, which also must determine the plaintiff's measure of damages in case he recovers. The action is on an agreement to issue a policy. Now, it is plain that plaintiff's damages are just what he would have recovered if the policy had been issued and the suit brought thereon."

Winn v. John Hancock Mutual Life Insurance Company, 216 Iowa 1249, 250 N.W. 459 was an action for damages for negligent failure to complete a contract for insurance. We said:

'Of course, it is also necessary, in order to recover for injury to or loss of any right, whether it be accrued or in the making, to show the extent, character, and value of the right. In this case it was clearly incumbent on the appellant to prove the contract of insurance, if not its exact terms and conditions, at least its substance, of which he claims his intestate was deprived.' (loc. cit. 1252, 250 N.W. loc. cit. 460.)

III. Plaintiff alleges that he is permanently totally disabled within the meaning of the insurance contract. While for the purpose of the present submission we accept plaintiff's allegation we note the policy definitions and the distinction between total and partial disability. To allow a lump sum or commuted value judgment based on alleged life time total disability caused by the loss of an arm would be far beyond anything contained in or contemplated by the insurance contract. It would completely disregard the changed definition of total disability after 24 continuous disability payments.

IV. Plaintiff claims that he applied and paid for a contract that would pay him $200 per month for life. How long plaintiff will live no one knows. How many payments he might be entitled to is uncertain. There is no claim of any guaranteed value or number of payments certain. Obviously based on his estimated life expectancy, he seeks the present value of undeterminable amounts. He tries to invoke the rule of probabilities in measuring his damage. He tries to compute what is not computable.

Even where commutation is authorized and the limit of liability fixed we have refused to adopt the rule of probability.

Under the Workmen's Compensation Law the maximum period during which compensation for certain injuries is payable is fixed. Commuted value is determinable and commutation may be authorized under the statute.

In Diamond v. Parsons Co., 256 Iowa 915, 129 N.W.2d 608, a Workmen's Compensation case, claimant, a permanently disabled workman sought commutation of benefits. The insurance carrier in resistance argued that because of claimant's poor physical condition the period should not be determined to be the maximum under the statute as claimant might not live that long. It was argued that the rule of probability as to how long claimant might live should control in determining the period during which compensation would be payable.

There the statute fixed the maximum period. We refused to adopt the rule of probability and said to do so would inject endless speculation not contemplated by the statute.

In the case at bar what defendant might be obligated to pay was fixed by the alleged contract. There is no provision in the contract nor in any of our pronouncements for commutation of payments due over an undetermined period.

Plaintiff's measure of damage is fixed by what he tried to buy. There is neither need nor right to inject speculation or uncertainty as to value.

V. We have been favored by counsel with excellent briefs covering the many ramifications...