Drinkard v. Group Hospital Service, Inc., 16108

• Citation: 366 S.W.2d 637
• Decision Date: 29 March 1963
• Docket Number: No. 16108,16108
• Parties: C. A. DRINKARD et ux., Appellants, v. GROUP HOSPITAL SERVICE, INC., et al., Appellees.
• Court: Court of Appeals of Texas. Court of Civil Appeals of Texas

Page 637

366 S.W.2d 637

C. A. DRINKARD et ux., Appellants, v. GROUP HOSPITAL SERVICE, INC., et al., Appellees.

No. 16108.

Court of Civil Appeals of Texas, Dallas.

March 29, 1963.

Rehearing Denied April 19, 1963.

Brown & Elliott, Dallas, for appellants.

Thompson, Coe, Cousins & Irons, Dallas, and Folley, Snodgrass & Calhoun, Amarillo, for appellees.

BATEMAN, Justice.

Our former opinion in this case is withdrawn and the following substituted therefor:

This is a suit upon two group insurance policies, one entitling appellant's wife to certain specified hospital benefits and the other entitling her to certain medical, surgical and radiation benefits, and particularly the 'Catastrophic Illness Endorsement' attached to and made a part of each policy and under which the particular company insured against certain expenses in connection with the treatment of eleven certain serious diseases, including cancer. Defendants answered (1) by general denial, and (2) that both policies provided that they would be terminated upon default of payment of monthly charges, and that benefits would not be available after termination date, and that the policies were terminated prior to the accrual of the claims asserted.

The material facts, as found by the court following a non-jury trial are (1) that both of the contracts sued on provided for termination upon default of payment of monthly charges, and that benefits will not be available after termination; (2) that appellant paid the monthly charges up to and through July 10, 1960; (3) that appellant's wife contracted cancer in January 1959, incurring certain hospital, medical and surgical expenses over a period of about one year, which appellees paid without protest; (4) that on or about September 25, 1960 she was afflicted by a recurrence of said disease of cancer for which she was 'treated' until her death from said disease on February 11, 1961; (5) that appellees refused to pay any of the expenses of treatment necessitated by the recurrence of the disease in September 1960; (6) that written demand for payment of such expenses was amde more than 30 days prior to suit, and that a reasonable fee for appellants' attorney is $500.; (7) that effective July 10, 1960 appellant voluntarily became insured under another group plan underwritten by The Aetna Insurance Company, which paid $1,178.67 of the expenses sued for herein; (8) that appellant understood that the coverage under said new plan was from his standpoint a substitute for the coverage he had been carrying with appellees; and (9) that Aetna Insurance Company did not deduct anything from the payments made to appellant because of his wife's history of cancer prior to July 10, 1960.

The court then concluded as a matter of law that appellant's right to benefits under the policies terminated on July 10, 1960, and rendered judgment that he take nothing. For the reasons hereinafter given we reverse that judgment.

Appellant's first contention is that the court erred in concluding as a matter of law that his right to benefits terminated July 10, 1960, when he became in default in the payment of premiums on these policies, because, he says, his right to benefits became vested when his wife contracted cancer during the life of the policies and his subsequent failure to pay premiums did not affect appellees' liability already incurred.

Each of the 'Catastrophic Illness Endorsement,' after listing in Section I the eleven deadly diseases covered, provided in Section II:

'For each person included hereunder, the benefits shall be available for expenses incurred during the five-year period immediately following diagnosis of any of the named diseases, and not thereafter. In no event shall the maximum liability of the Plan under this Endorsement exceed [$2,000. in one endorsement and $3,000. in the other] for any one illness, or during any five-year period.'

Section IV of each endorsement, under the heading 'CANCER BENEFIT,' then provides:

'The benefits hereunder apply only to services rendered following a pathological diagnosis of cancer; and for the purpose of benefits under this Rider, a subsequent diagnosis of cancer shall be considered a continuation of the previous cancer.' (Emphasis supplied).

Appellees argue very plausibly that since the contingency insured against here is the incurring of certain expenses, as distinguished from disability or loss of time, and since the expenses were incurred several months after termination of the policies, there can be no liability. They cite Phillips v. Great Nat. Life Ins. Co., Tex.Civ.App. 226 S.W.2d 660, no wr. hist.; Livingston v. Aetna Life Ins. Co., Tex.Civ.App., 246 S.W.2d 261, err. ref.; Washington Nat. Ins. Co., v. Ollie, 200 Ark. 1001, 142 S.W.2d 226. These cases merely hold that a group policy may be cancelled by agreement of the contracting parties, or by either party in accordance with the contract, and that the insurer is not liable where the event or contingency insured against occurs after termination. They do not help us here because there is no question in the case before us that certain hospital and medical expenses (the event insured against) were insurred prior to termination and in connection with a disease that recurred shortly after termination.

The important question to be determined here, then, is: When did appellees' liability for expenses incident to Mrs. Drinkard's cancer cease? With the termination of the policies, as appellees contend? Or, appellees' liability having once attached, were appellant's rights so vested that the expenses incident to the recurrence of the cancer were covered, even though the policies were previously terminated at a time when Mrs. Drinkard had apparently or temporarily been restored to health?

We would be inclined to agree with appellees in this respect were it not for the provisions in Sections II and IV hereinabove quoted, and particularly the phrase, 'for the purpose of benefits under this Rider, a subsequent diagnosis of cancer shall be considered a continuation of the previous cancer.' If Mrs. Drinkard had been in the hospital suffering from cancer at the very time of the termination of the policies, the liability of appellees for the expense incurred in connection therewith would have continued on for the remainder of the five year period immediately following the original diagnosis or until the maximum monetary limit specified in Section II had been exhausted. In other words, the event or contingency insured against having occurred during the life of the policies, the refusal of the...