Forbau v. Aetna Life Ins. Co., D-1235

Citation876 S.W.2d 132,37 Tex.Sup.Ct.J. 345
Decision Date05 January 1994
Docket NumberNo. D-1235,D-1235
Parties17 Employee Benefits Cas. 2163 Edwadine FORBAU, as Next Friend of Amy Miller, Petitioner, v. AETNA LIFE INSURANCE COMPANY, Respondent.
CourtSupreme Court of Texas

Alton R. Griffin, Ralph H. Brock, Lubbock, C.L. Ray, Charles B. Lord, Law Offices of C.L. Ray, Austin, for petitioner.

John P. LeVick, Jeffrey B. Jones, Jones Flygare Galey Brown & Wharton, Lubbock, for respondent.

CORNYN, Justice, delivered the opinion of the Court, in which PHILLIPS, Chief Justice, and GONZALEZ, HECHT, ENOCH, and SPECTOR, Justices, join.

Petitioner's motion for rehearing is overruled. We withdraw our opinion of May 5, 1993, and substitute the following opinion in its place.

In this case we are called upon to determine whether the insurance policy at issue created a vested right in unlimited lifetime benefits, or restricted benefits to the recovery of medical expenses incurred while the policy was in effect. The trial court rendered judgment on a jury's verdict in favor of Petitioner, Edwadine Forbau, as next friend of Amy Miller. The court of appeals reversed the trial court's judgment, holding that under the unambiguous terms of the policy, Petitioner's recovery was limited to those medical expenses incurred while Aetna's policy was in effect. 808 S.W.2d 664. We agree that Aetna's policy is unambiguous and does not afford the coverage claimed by Petitioner. We thus affirm the judgment of the court of appeals. 1


In March of 1983 fourteen-year old Amy Miller suffered serious, permanent, and disabling injuries as a result of a motor vehicle accident. At the time, Amy's father, Mike Miller, was insured under an Aetna group insurance policy (Group Policy) issued to Affiliated Foods, Inc., a cooperative of grocery stores of which his employer, E Triple M, Inc., was a member. Miller's premiums and those of his dependents, including Amy's, were paid by E Triple M. Miller was eligible as an "individual" under the plan, defined as an "employee of any store owner who is a participant under this plan;" Amy was eligible for dependent coverage as an "individual's unmarried child under nineteen years of age." Group Policy at 1500, 1550.

After Amy's accident, Aetna paid her medical expenses as incurred until April 30, 1985, when Affiliated terminated the group contract with Aetna. Aetna continued to pay benefits until May 1, 1986, under the policy's one-year extension of benefits clause. After that date, Petitioner submitted claims to Safeco Life Insurance Company as Aetna's successor insurer for Affiliated's members. A dispute eventually arose between Petitioner and Safeco, which resulted in a lawsuit and settlement.

After settling with Safeco, Petitioner filed this lawsuit against Aetna, alleging breach of contract and of fiduciary duty, and violations of the Texas Deceptive Trade Practices-Consumer Protection Act and the Insurance Code. Only the breach of contract claims were submitted to the jury. In accordance with the jury's verdict, the trial court awarded Amy $238,000 in past damages, $2.5 million in future damages, and $500,000 in attorneys' fees.


Interpretation of insurance contracts in Texas is governed by the same rules as interpretation of other contracts. Upshaw v. Trinity Cos., 842 S.W.2d 631, 633 (Tex.1992); Western Reserve Life Ins. Co. v. Meadows, 152 Tex. 559, 261 S.W.2d 554, 557 (1953).

When construing a contract, the court's primary concern is to give effect to the written expression of the parties' intent. Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d 951, 953 (Tex.1983); R & P Enterprises v. LaGuarta, Gavrel & Kirk, 596 S.W.2d 517, 518 (Tex.1980). This court is bound to read all parts of a contract together to ascertain the agreement of the parties. See Royal Indem. Co. v. Marshall, 388 S.W.2d 176, 180 (Tex.1965); Pan Am. Life Ins. Co. v. Andrews, 161 Tex. 391, 340 S.W.2d 787 (1960). The contract must be considered as a whole. Reilly v. Rangers Management, Inc., 727 S.W.2d 527, 529 (Tex.1987); Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983). Moreover, each part of the contract should be given effect. See Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 666 (Tex.1987). For example, when a contract provision makes a general statement of coverage, and another provision specifically states the time limit for such coverage, the more specific provision will control. See 3 ARTHUR L. CORBIN, CONTRACTS §§ 545-54 (1960). This is but an application of our long-established rule that "[n]o one phrase, sentence, or section [of a contract] should be isolated from its setting and considered apart from the other provisions." Guardian Trust Co. v. Bauereisen, 132 Tex. 396, 121 S.W.2d 579, 583 (1938); see also Wynnewood State Bank v. Embrey, 451 S.W.2d 930, 932 (Tex.Civ.App.--Dallas 1970, writ ref'd n.r.e.).


The operative language in this policy states that Aetna will pay for "covered medical expenses incurred during a calendar year for treatment of a covered family member." Group Policy at 6210 (emphasis added). Under the contract, Aetna is obligated only to a covered family member, that is, a covered individual or dependent. A person ceases to be a covered individual when the policy has been discontinued or the individual is no longer employed by the policy's sponsor. When this occurs, dependent coverage also terminates. 2

The policy also states that "[t]his policy does not provide insurance for any of the following: Charges incurred while he is not a covered family member." Under the unambiguous language of the contract, Aetna's obligation to pay benefits under the contract terminated upon the discontinuance of Affiliated's policy, unless some other provision of the policy extended coverage. As the contract contains such a provision, 3 which extended Petitioner's benefits for one additional year, she was entitled to the additional benefits Aetna paid for this time period only. 4 Under basic tenets of contract law, these provisions must be read together with the other sections of the contract to comprehensively address the rights and obligations of all parties to the insurance contract.

Petitioner urges that the policy afforded her a right to receive payment for all future medical services related to any accident occurring during the policy period. That interpretation is based on the following clause:

If any benefit ceases to apply to an individual or a dependent, coverage for that benefit will cease immediately but without prejudice to any rights under the benefit established by this person while the coverage was in force.

Group Policy at 1850. Petitioner further urges that even if this clause does not explicitly provide her with coverage, it at least creates an ambiguity which must be interpreted in favor of coverage. However, not every difference in the interpretation of a contract or an insurance policy amounts to an ambiguity. Both the insured and the insurer are likely to take conflicting views of coverage, but neither conflicting expectations nor disputation is sufficient to create an ambiguity. See Preston Ridge Fin. Servs. v. Tyler, 796 S.W.2d 772, 777 (Tex.App.--Dallas 1990, writ denied); Medical Towers v. St. Luke's Epis. Hosp., 750 S.W.2d 820, 822 (Tex.App.--Houston [14th Dist.] 1988, writ denied). The "without prejudice" clause by its own terms preserves the right to benefits "established ... while the coverage was in force." It does not create new rights or benefits beyond those afforded by the other provisions of the policy. And it is undisputed that Aetna paid the benefits to which Petitioner was entitled--payment of charges incurred while she was a covered dependent and for the one-year extension.

Accordingly, we affirm the judgment of the court of appeals.

DOGGETT, Justice, joined by HIGHTOWER and GAMMAGE, Justices, delivered this Supplemental Dissenting Opinion on Petitioner's Motion for Rehearing.

[January 5, 1994]

In again rejecting Amy's plea for relief, the majority leaves all Texans without the security that should be at very core of health insurance.

At least today's substituted opinion has abandoned footnote five of the majority's prior writing, which suggested that ambiguities are not to be resolved against the insurer in an ERISA plan. See 36 Tex.Sup.Ct.J. 860, 864 n. 5. I have previously explained the reasons for rejecting this regressive rule. See 36 Tex.Sup.Ct.J. 860, 865-66, 869 (Doggett, J., dissenting).

However, the decision announced today remains wrong now for the other reasons it was wrong before, specifically the same "sweeping anti-consumer alteration of our longstanding method for interpreting insurance policies." Id. at 866. For this reason, I continue to dissent.


[May 5, 1993. * ]

DOGGETT, Justice, dissenting.

With the switch of a vote on rehearing, the law announced in this case a short while ago is no longer the law. Continuing to believe that this court's prior decision was correct, I incorporate it fully in this opinion. 1 See Appendix A.

The new majority opinion rejects our recent determination in Gorman v. Life Ins. Co. of North Am., 811 S.W.2d 542, 547-48 (Tex.1991), and a substantial body of federal law 2 in refusing to treat Amy Miller's breach of contract pleading as a claim for benefits due under ERISA. See 36 Tex.Sup.Ct.J. 860, 863-864. This misapplication of the doctrine of federal preemption 3 is sufficient to achieve an Aetna victory and to create considerable injustice for Amy and others like her who have already secured judgments based on determinations that they have been illegally denied health care benefits. Unfortunately this is not enough for the majority when even more mischief can be accomplished by reaching out to address state law issues totally unnecessary to this judgment. First, in dicta it embraces the...

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