Cody v. Connecticut General Life Ins. Co.

Decision Date12 August 1982
Citation439 N.E.2d 234,387 Mass. 142
PartiesWilliam F. CODY v. CONNECTICUT GENERAL LIFE INSURANCE CO.
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court

William H. Shaughnessy, Wilmington, for plaintiff.

Will J. Bangs, Boston (Larry C. Kenna, Brighton, with him), for defendant.

Before HENNESSEY, C. J., and LIACOS, ABRAMS, NOLAN and O'CONNOR, JJ.

ABRAMS, Justice.

We granted the parties' applications for direct appellate review to determine whether the public policy of this Commonwealth permits coordination-of- benefits clauses in insurance contracts. 1 We conclude that coordination-of-benefits clauses do not violate the public policy of this Commonwealth unless the company engaged in misleading marketing practices, or the insurance contract as a whole is without substantial economic value.

We summarize the facts. The defendant Connecticut General Life Insurance Co. entered into a group contract of insurance with Sun Oil Company (Sun Oil), effective January 1, 1970. Under the contract, the defendant agreed to pay eligible Sun Oil employees, who become totally disabled, fifty per cent of their base monthly earnings 2 up to $5,000 a month. The contract also contained two coordination-of-benefits clauses. The first clause provided that the benefits under the contract would be reduced by certain other income benefits, including workers' compensation, and fifty per cent of the amount of the employee's primary Social Security benefits. 3 The second clause stated that if the sum of the employee's benefits under the contract, other income benefits, 4 and benefits from Social Security, 5 exceed seventy-five per cent of the employee's base monthly earnings, the benefits under the contract would be reduced until the sum of all benefits equals seventy-five per cent of the employee's base monthly earnings.

The plaintiff William F. Cody, an employee of Sun Oil, elected to purchase the coverage provided by this group contract. Through payroll deductions, the plaintiff paid a portion of the monthly premium for this coverage. The plaintiff never saw a copy of the insurance contract. The defendant did not distribute copies of the insurance contract to the employee-beneficiaries. Instead, the defendant sent a copy of the contract to Sun Oil. Sun Oil then distributed to its employees a booklet describing the benefits provided under the contract. The plaintiff testified that after reading the booklet, he believed that he would receive seventy-five per cent of his base pay in the event of a long term disability. 6

As an employee, the plaintiff trained new tractor-trailer drivers for Sun Oil. On March 1, 1971, a driver trainee hit an obstruction on Route 95 in Groveland and lost control of the truck he was driving. The plaintiff, a passenger in that truck, was severely injured as a result of this accident. From the date of the accident until April 15, 1981, the date of the trial, the plaintiff has not worked. The plaintiff received no benefits under the contract.

In February, 1977, the plaintiff sued the defendant in the Superior Court. The plaintiff alleged a breach of the insurance contract by the defendant's failure to pay him any benefits. 7 At trial, the parties stipulated that the insurance contract controlled this action. The parties also stipulated that if the judge interpreted the contract to allow the defendant an offset for fifty per cent of the plaintiff's primary Social Security benefits, plus the full amount of workers' compensation payments received between September 1, 1971, and April 15, 1981, the plaintiff would not be entitled to any payments under the contract; if the judge interpreted the contract to allow the defendant to offset only fifty per cent of the plaintiff's primary Social Security benefits, the plaintiff would be entitled to $27,168.05 under the contract; if the judge interpreted the policy to allow no offsets at all, the plaintiff would be entitled to $52,402.70 under the contract.

The judge submitted to the jury two special verdict questions (see Mass.R.Civ.P. 49[a], 365 Mass. 812 [1974] ): (1) whether the plaintiff was disabled at any time after September 1, 1973, 8 and (2) if so, during what period of time. The jury found that the plaintiff was totally disabled from September 1, 1973, until April 21, 1981, the date of the verdict.

Over the plaintiff's objection, the judge determined the amount of damages himself. The judge found that under the insurance contract the plaintiff was entitled to recover fifty per cent of his base monthly earnings reduced by his Massachusetts workers' compensation benefits and by fifty per cent of his primary Social Security benefits. Since these offsets reduced the plaintiff's benefits under the insurance contract to nothing, the judge entered judgment for the defendant. We affirm the judgment.

The plaintiff appeals, claiming that the judge erred: (1) in failing to submit the issue of damages to the jury, and in entering judgment for the defendant; and (2) in enforcing the coordination-of-benefits clauses. We conclude that the judge correctly determined the question of damages himself. We also believe that the judge did not err in enforcing the coordination-of-benefits clauses contained in the contract. We add, however, that coordination-of-benefits clauses will no longer be enforced if they are misleading or if they render the insurance contract as a whole without substantial economic value.

1. Damages. The plaintiff claims that the judge erred in failing to submit the issue of damages to the jury, and in entering judgment for the defendant. We disagree.

The interpretation of an insurance contract is not a question of fact for the jury. Biathrow v. Continental Cas. Co., 371 Mass. 249, 356 N.E.2d 451 (1976). See Daley v. J. F. White Contracting Co., 347 Mass. 285, 288, 197 N.E.2d 699 (1964); Hiller v. Submarine Signal Co., 325 Mass. 546, 549-550, 91 N.E.2d 667 (1950). The responsibility of construing the language of an insurance contract is a question of law for the trial judge, and then for the reviewing court. Save-Mor Supermarkets, Inc. v. Skelly Detective Serv., Inc., 359 Mass. 221, 226, 268 N.E.2d 666 (1971).

When interpreting insurance contracts, courts are guided by several principles. Like all contracts, insurance contracts are to be construed "according to the fair and reasonable meaning of the words in which the agreement of the parties is expressed." MacArthur v. Massachusetts Hosp. Serv., Inc., 343 Mass. 670, 672, 180 N.E.2d 449 (1962), quoting Koshland v. Columbia Ins. Co., 237 Mass. 467, 471, 130 N.E. 41 (1921). "A policy of insurance whose provisions are plainly and definitely expressed in appropriate language must be enforced in accordance with its terms." Hyfer v. Metropolitan Life Ins. Co., 318 Mass. 175, 179, 61 N.E.2d 3 (1945), quoting Stankus v. New York Life Ins. Co., 312 Mass. 366, 369, 44 N.E.2d 687 (1942). But, if the contract is ambiguous, "doubts as to the meaning of the words must be resolved against the insurance company that employed them and in favor of the insured." August A. Busch & Co. of Mass., Inc. v. Liberty Mut. Ins. Co., 339 Mass. 239, 243, 158 N.E.2d 351 (1959). See MacArthur v. Massachusetts Hosp. Serv., Inc., 343 Mass. 670, 672, 180 N.E.2d 449 (1962).

Consistent with these principles, the judge, rather than the jury, interpreted the insurance contract at issue in this case. The judge correctly concluded that the language of this contract was unambiguous. 9 Enforcing this contract according to its terms, the judge rightly determined that the plaintiff was entitled to fifty per cent of his base monthly earnings reduced by the offset for Social Security and workers' compensation. 10

In addition, the parties stipulated to the amount of damages that the plaintiff could receive under each possible interpretation of the contract. After this stipulation, the only disputed issues involved the plaintiff's disability. Pursuant to Mass.R.Civ.P. 49(a), 365 Mass. 812 (1974), the judge required the jury to return a special verdict on every issue of fact in dispute. Once the jury determined that the plaintiff had been totally disabled from September 1, 1973, to April 21, 1981, there were no other disputed factual issues for the jury to decide. Thereafter, the judge merely had to apply the law to the facts as found by the jury and as stipulated to by the parties. Specifically, he had to select, from the damage calculations to which the parties had stipulated, that calculation which was consistent with his interpretation of the contract. In line with his construction of the contract, the judge determined that the plaintiff was entitled to nothing under the contract. We therefore conclude that the judge properly entered judgment for the defendant.

2. Coordination-of-benefits clauses. Relying on Kates v. St. Paul Fire & Marine Ins. Co., 509 F.Supp. 477 (D.Mass.1981), the plaintiff claims that the judge erred in enforcing the coordination-of-benefits clauses, because they violate public policy. We agree with the plaintiff that Kates v. St. Paul Fire & Marine Ins. Co., supra at 491, correctly states the public policy of this Commonwealth, that insurance contracts may not be misleading, and that coverages may not be "unrealistically limited" or so limited in scope as to be of no "substantial economic value." However, in this case, the insurance contract took effect, and the plaintiff's injury occurred, before the Legislature enacted the statutes that are the source of this public policy. We therefore believe that it would be unfair to apply this public policy in this case.

In the Kates case, supra, the judge correctly found one source of this public policy in G.L. c. 175, § 110E. 11 Pursuant to G.L. c. 175, § 110E, inserted by St.1973, c. 1081, the Commissioner of Insurance may issue rules and regulations "to establish minimum standards of full and fair disclosure, for the form...

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