Corgatelli v. Globe Life & Acc. Ins. Co.

• Court: Idaho Supreme Court
• Writing for the Court: SHEPARD; McQUADE, C. J., and BAKES; DONALDSON; McFADDEN
• Citation: Corgatelli v. Globe Life & Acc. Ins. Co., 533 P.2d 737, 96 Idaho 616 (Idaho 1975)
• Decision Date: 28 January 1975
• Docket Number: No. 11513,11513
• Parties: Randolph CORGATELLI, Plaintiff-Appellant, v. GLOBE LIFE & ACCIDENT INSURANCE COMPANY, Defendant-Respondent.

Page 737

533 P.2d 737

96 Idaho 616

Randolph CORGATELLI, Plaintiff-Appellant, v. GLOBE LIFE & ACCIDENT INSURANCE COMPANY, Defendant-Respondent.

No. 11513.

Supreme Court of Idaho.

Jan. 28, 1975.

Eugene L. Bush, Sharp, Anderson & Bush, Idaho Falls, for plaintiff-appellant.

John D. Hansen, Hansen & Boyle, Idaho Falls, for defendant-respondent.

SHEPARD, Justice.

This is an appeal from a decision of the district court reversing a judgment of the magistrate's division on a claim under an insurance contract and remanding the matter for further proceedings in the magistrate court. We in turn reverse the decision of the district court and add to the body of Idaho law the so-called 'doctrine of reasonable expectations' in litigation involving interpretation of insurance contracts.

Plaintiff-appellant Randolph Corgatelli was a part-time rodeo performer and a member of an association made up of such performers. That association sanctioned the activities of agents of defendant-respondent Globe Life and Accident Insurance Company in selling what is styled an 'accident insurance policy' to members of the association. Upon being solicited Corgatelli purchased such a policy in May 1971.

The insuring clause of that policy provided:

'(Globe) hereby insures the applicant * * * subject to the terms, provisions and limitations of this policy, against (1) loss of life, limb, or sight or (2) specific injury, resulting directly and independently of all other causes from accidental bodily injury * * *.'

Thereafter a schedule of benefits was set forth in Part 2 of the policy, stating:

'If the Insured shall sustain an accidental bodily injury occurring while this policy is in effect as to such person which shall directly and independently of all other causes and within thirty days from the date of such accident result in any of the following losses or conditions and is so diagnosed by a licensed physician, the Company will pay the amount specified in the schedule below:

(Amounts payable for loss of eye or limb)

'For Complete Dislocation of
                Hip Joint                    $1,200.00
                Knee Joint (except Patella)  $  600.00
                Bone or Bones of the Foot
                 other than Toes             $  600.00
                Ankle Joint                  $  600.00
                Wrist Joint                  $  500.00
                Elbow Joint                  $  400.00
                Shoulder Joint               $  300.00
                Bone or Bones of the Hand
                 other than fingers          $  200.00
                Collor Bone                  $  200.00
                Two or More Fingers          $  100.00
                Two or More Toes             $  100.00
                One Finger                   $   50.00
                One Toe                      $   50.00
                'For Complete Simple or Closed Fracture of Bone or Bones of
                Skull (except bones of face or
                 nose) both tables              $1,300.00
                Hip-Thigh (Femur)               $1,200.00
                Pelvis (except Coccyx)          $1,000.00
                Arm between shoulder and
                 elbow shaft                    $  800.00
                Shoulder Blade (Scapula)        $  800.00
                Leg (Tibia or Fibula)           $  800.00
                Ankle                           $  600.00
                Knee Cap (Patella)              $  600.00
                Collar Bone (Clavicle)          $  600.00
                Forearm (Radius or Ulna)        $  600.00
                Foot (except Toes)              $  500.00
                Hand or Wrist (except
                 Fingers)                       $  500.00
                Lower Jaw (except Alveolar
                 Process)                       $  300.00
                Two or More Ribs, Fingers
                 or Toes                        $  200.00
                Bones of Face or Nose           $  200.00
                One Rib, Finger or Toe          $  100.00
                Coccyx                          $  100.00
                

'For Complete Open or Compound Fracture the Amount Payable will be One and One-Half Times the Amount Payable for Simple Fracture.

'For an Open Operation with Bone Grafting or Metallic Fixation at Point of Fracture the Amount Payable will be Twice the Amount Payable for Simple Fracture.

'Only one of the amounts, the largest, named in this Part 2 will be paid for losses due to any one accident and shall be in lieu of all other benefits under this policy.'

While participating in a rodeo in June 1971 Corgatelli boarded an ill-tempered Brahma bull. He was promptly bucked off, injuring his right shoulder. That injury was diagnosed as an 'acromioclavicular separation' of the right shoulder. As is common in such injuries treatment required open surgery and the insertion of metal fixation.

Corgatelli filed a claim with Globe and was tendered a check for $57.14, the amount allegedly representing two-sevenths of the weekly benefit payable for unspecified injuries that required hospitalization. Corgatelli then made a written demand upon Globe for $1,200 contending that amount was due under the policy for an injury to the collar bone where open surgery with metallic fixation was required. Globe refused that demand and Corgatelli instituted this action. Following trial in the magistrate's division a decision was entered awarding Corgatelli $1,200, plus $750 attorney fees. The basis for that decision appears to have been that the insurance contract contained an ambiguity to be resolved against the insurer.

Upon appeal to the district court it was again recognized that there was a patent ambiguity in the policy since a collar bone could not be 'dislocated.' The district court believed the only question to be whether Corgatelli should be reimbursed for dislocation of his shoulder joint ($300) or for 'dislocation of his collar bone' ($200). The district court remanded the case for resolution of that question and for a redetermination of appropriate attorney fees. This appeal resulted.

Corgatelli urges, and we agree, that the so-called 'doctrine of reasonable expectations' (alias the doctrine of adhesion contracts) should be adopted in Idaho. ¹ That doctrine was articulated in the case of Gray v. Zurich Insurance Company, 65 Cal.2d 263, 54 Cal.Rptr. 104, 419 P.2d 168 (1966). Gray involved the duty of an insurer under a personal liability policy to defend the insured against personal injury or property damage lawsuits. That court held that any exception to the basic underlying obligation of the insurer must be set forth in such a manner that the insured is clearly informed of its import. The court stated:

'These principles of interpretation . . . have found . . . restatement in the doctrine of the adhesion contract . . . (A) contract entered into between two parties of unequal bargaining strength, expressed in the language of a standardized contract, written by the more powerful bargainer to meet its own needs, and offered to the weaker party on a 'take it or leave it basis' carries some consequences that extend beyond orthodox implications. Obligations arising from such a contract inure not alone from the consensual transaction but from the relationship of the parties.

'Although courts have long followed the basic precept that they would look to the words of the contract to find the meaning which the parties expected from them, they have also applied the doctrine of the adhesion contract to insurance policies, holding that in view of the disparate bargaining status of the parties we must ascertain that meaning of the contract which the insured would reasonably expect.' 419 P.2d at 171-172 (footnotes omitted).

Thereafter, and perhaps unfortunately, the Gray decision discusses at length the ambiguities found in the insurance policy. While ambiguities may be highly relevant in determining the reasonable expectations of an insured, nevertheless we deem it clear that the invocation and application of the doctrine of reasonable expectations does not depend for its existence upon the presence of ambiguities. See R. Keeton, Insurance Law Rights as Variance with Policy Provisions, 83 Harv.L.Rev. 961 (1970).

The doctrine of reasonable expectations proceeds from an acceptance of the fact that most insurance policies are contracts of adhesion. Ordinarily there can be no bargaining over the terms of the contract. The buyer either accepts the policy as written or turns elsewhere where he will usually be confronted with the same dilemma resulting from the same terminology. If the layman actually studies the contract he usually becomes bewildered and/or uncertain as to the terminology. He expects that he will be generally insured and does not anticipate these expectations will be upset by an artfully drawn clause that the will be unable to detect or, in the event detected, will be powerless to modify. Indeed, this court can take notice that usually an insured never sees his policy until after he has paid his premium and the contract has been formed. In Idaho, as in most states, the consuming public and the public interest is to be guarded by a state insurance commissioner. The policy in question herein is an example that the efforts of the state authority have at times fallen short of adequately discharging that responsibility.

Golbe asserts that most of the cases cited by Corgatelli involve, as did Gray, the application of the doctrine of reasonable expectations to cases involving an insurer's duty to defend lawsuits brought against the insured. If the doctrine of reasonable expectations has validity, logic and reason to its credit, the scope of the doctrine cannot be so narrow, for its theory is relevant to insurance contracts regardless of whether the question posed is the amount of coverage or coverage itself. In the case at bar the fact that Globe admits that Corgatelli's injury was 'covered' to the extent of $57.14 should hardly preclude this court from applying the doctrine and determining what coverage could reasonably have been expected.

Today we adopt the doctrine of reasonable expectations and hold that an ambiguity in the policy is not a prerequisite for the invocation of the doctrine. Consideration of the terms of an insurance contract will continue since they will most often be a critical element in determining the reasonable expectations of the insured.

Applying the doctrine of reasonable expectations to the case at bar, an insured would reasonably...