Continental Cas. Co. v. Freeman

• Decision Date: 28 April 1972
• Citation: 481 S.W.2d 309
• Parties: CONTINENTAL CASUALTY COMPANY, Appellant, v. Raymond FREEMAN and Bertie Freeman, Appellees. Raymond FREEMAN and Bertie Freeman, Cross-Appellants, v. CONTINENTAL CASUALTY CO., Cross-Appellee.
• Court: United States State Supreme Court — District of Kentucky

Page 309

481 S.W.2d 309

CONTINENTAL CASUALTY COMPANY, Appellant, v. Raymond FREEMAN and Bertie Freeman, Appellees.

Raymond FREEMAN and Bertie Freeman, Cross-Appellants, v. CONTINENTAL CASUALTY CO., Cross-Appellee.

Court of Appeals of Kentucky.

April 28, 1972.

Rehearing Denied June 30, 1972.

William H. McCann, Frank Reaves, Jr., Brown, Sledd & McCann, Lexington, for appellant.

Gardner L. Turner, Sturgill, Moreland & Turner, Lexington, for appellees.

PALMORE, Judge.

The appellee Raymond Freeman was insured by the appellant, Continental Casualty Company, under a group mortgage protection policy under which he was entitled to receive $100 per month while disabled and wholly unable to engage in his occupation by reason of sickness or injury caused by an accident. He received an accidental injury on June 25, 1963, and promptly submitted a proof of loss to the company. On August 22, 1963, the company tentatively denied the claim, and on September 5, 1963, after reviewing the claim and securing a report from Freeman's surgeon, Dr. Harvey Chenault, it categorically denied liability. Freeman remained continuously disabled for five years, the maximum period covered by the policy, following which he brought this suit and recovered a verdict and judgment of $6,000, from which the company appeals.

The first point of controversy concerns that clause of the policy entitled 'Legal Actions,' which provides as follows:

'No action at law or in equity shall be brought to recover on this policy prior to the expiration of sixty days after written proof of loss has been furnished in accordance with the requirements of this policy. No such action shall be brought after the expiration of three years after the time written proof of loss is required to be furnished.' (Emphasis added.)

The clause entitled 'Proofs of Loss' reads as follows:

'Written proof of loss must be furnished to the Company at its said office in case of claim for loss for which this policy provides any periodic payment contingent upon continuing loss within ninety days after the termination of the period for which the Company is liable. Failure to furnish such proof within the time required shall not invalidate nor reduce any claim if it was not reasonably possible to give proof within such time, provided such proof is furnished as soon as reasonably possible and in no event, except in the absence of legal capacity, later than one year from the time proof is otherwise required.' (Emphasis added.)

The trial court construed this clause as meaning that Freeman was not 'required' to furnish a proof of loss until the end of the 5-year period for which he claims the company was liable. The company contends that in view of the type of policy it can have but one sensible meaning, which is that a proof of loss is required within 90 days after each monthly period for which the policyholder is entitled to indemnity. The company points out also that the above-quoted policy clauses are required by statute, KRS 304.712, 304.720, 304.724, for which reason the familiar rule of construing the terms of an insurance policy most strongly against the insurer should not apply.

We need not consider the rule of construction, because we agree with the company that the clause is not ambiguous and that there is no reason not to construe it as meaning just what it says. Our only difference on this point is that we do not think it says what the company contends it says. It means either (a) that one proof of loss will suffice for one continuous period of liability or (b) tht each month of continuing loss must be covered by a proof of loss submitted within 90 days thereafter. Neither of these alternatives would appear to achieve an entirely satisfactory arrangement, but we see no room for any other possible construction of the sentence as it is worded. The most natural import of the expression 'the period for which the Company is liable' is the total continuous period, be it five days or five years. In support of that construction it is interesting to note that the clause entitled 'Monthly Indemnity' provides that indemnity 'is not payable for the first fifteen days of any period of disability.' Unless the word 'period' has a different meaning from one clause to another the definition espoused by the company in this case would result in a claimant's being unable to recover for the first 15 days of each monthly 'period' of disability.

The other principal contention made by the company is that it should have had a directed verdict because the evidence did not justify a finding that the claimant's disability was attributable to an injury 'caused by an accident occurring while the policy (was) in force and resulting directly and independently of all other causes,' that being the applicable condition of coverage.

Freeman was a carpenter by trade. He sustained some degree of back injury in 1948 but responded to conservative treatment and apparently recovered completely. Another injury in 1958 resulted in spinal surgery, from which he also recovered and resumed his normal activities, though he wore a back brace whenever he expected to do heavy lifting. He sprained his back again in 1961 and was in the hospital for several days of bed rest, but he says the reason for the hospitalization was severe headaches which were not related to the back trouble. After this incident he returned to his usual occupation and in the year 1962 built five houses and remodelled two. He says that during this period he was able to do and did all of the things he had ever done. The insurance here in question was issued on October 9, 1962, incident to the purchase of a new home.

The last injury, out of which this litigation arises, occurred on June 25, 1963, while Freeman was working. It resulted in further spinal surgery which appears not to have been successful. It is not disputed that from an occupational standpoint he has been wholly disabled ever since.

The policy covers accidental injury only if it (1) occurs while the policy is in force, and (2) is the direct and independent cause of total disability. If, therefore, the disability depends to some extent on another cause or causes it does not fall within the literal terms of the policy. In brief, the company's argument is that on the basis of the evidence in the record reasonable minds are bound to conclude that Freeman's disability resulted to some extent from the diseased or injured condition of his back prior to the particular injury that occurred while the policy was in force.

Contractual language limiting the insurer's risk to those losses which result from injuries (or sickness) independently of all other causes commonly appears, with variations, in accident and health policies and in the double indemnity feature of life policies.

In an absolute sense no single event can ever be the 'exclusive' cause of a disability, and for that reason there must be some rule or principle by which a separation can be made between those causative factors that are legally inconsequential and those that must be recognized in determining whether under this condition of coverage a specific illness or injury is the sole and independent cause of the disability of death.

There is a comprehensive annotation on the subject at 84 A.L.R.2d 176 styled, 'Pre-existing physical condition as affecting liability under accident policy or accident feature of life policy.' See also Appleman, Insurance Law and Practice, § 403 et seq. (rev. ed. 1965), and Couch on Insurance 2d § 41.2 et seq. (2d ed. 1962). As may be seen from these text materials, case law throughout the country presents a wide divergence of viewpoints, from extremely strict to extremely liberal, on the question of what really is an exclusive, independent or sole cause of loss under this type of policy. Our own cases, speaking usually in generalities, do not provide much insight. As pointed out in 44 Am.Jur.2d 113 (Insurance, § 1270), 'in principle the courts are, in substance, agreed,' yet it is another matter when abstract theory is applied to earthen facts.

Some authorities hold that if the harm (i.e., the disability) would not have occurred but for a pre-existing disease or infirmity it is not independently attributable to the injury. Others hold that if nevertheless an accidental injury is the 'proximate' or 'primary' cause the loss is covered. See 84 A.L.R.2d 199 et seq., in which cases from this court are cited for both propositions. Still others draw a distinction between those policies which, as in this instance, simply cover loss 'resulting directly, independently and exclusively' from the injury and those which contain an additional clause specifically excluding disability 'wholly or in part, directly or indirectly, from disease or other bodily infirmities,' or similar phraseology. 84 A.L.R.2d 176, 185; Couch on Insurance 2d § 41.380 (2d ed. 1962). Our case of Prudential Inc. Co. of America v. Gaines, 271 Ky., 496, 112 S.W.2d 666 (1938), a double indemnity life case, is cited as givig effect to this distinction. 84 A.L.R.2d at 187.

According to Couch, the expression 'resulting directly, independently and exclusively' refers to the 'efficient, substantial, and proximate cause' of the disability, and if the accidental injury combines with a pre-existing disease to cause total disability which would not have occurred otherwise, the injury is deemed to be the proximate cause; but if the insurer's liability is further restricted by a clause excluding liability where death or disability results directly or indirectly from disease or from bodily or mental infirmity, it is not enough to establish a direct causal relation between the accident and the death or disability, and if the evidence points to a pre-existing infirmity or abnormality which may have been a contributing factor the plaintiff must show that the resulting condition was caused solely by external and accidental means. Couch on Insurance 2d, §...