Hobson v. Mutual Ben. Health & Acc. Ass'n

• Citation: 221 P.2d 761,99 Cal.App.2d 330
• Court: California Court of Appeals
• Decision Date: 05 September 1950
• Parties: HOBSON v. MUTUAL BENEFIT HEALTH & ACCIDENT ASS'N, Inc. Civ. 14396.

Page 761

221 P.2d 761

99 Cal.App.2d 330

HOBSON v. MUTUAL BENEFIT HEALTH & ACCIDENT ASS'N, Inc.

Civ. 14396.

District Court of Appeal, First District, Division 1, California.

Sept. 5, 1950.

Robert E. Nisbet, Oakland, for appellant. Horace T. Beverly, Leonard S. Lurie, San Francisco, for respondent.

Fred N. Howser, Attorney General, T. A. Westphal, Jr., Deputy Attorney General, Harold B. Haas, Deputy Attorney General, for Wallace K. Downey, as Insurance Com. of California, amici curiae.

BRAY, Justice.

In an action upon a health and accident insurance policy issued by defendant to plaintiff and tried before a jury, the jury found in favor of plaintiff in the sum of $3,730. Plaintiff appealed, on the ground that the amount awarded was less than he was entitled to under the terms of the policy.

Questions Presented.

Were the terms of the policy ambiguous and hence extrinsic evidence should have been admitted to interpret them, and if not, was the court's interpretation correct?

Facts.

The facts are not disputed. On December 2, 1941, defendant issued plaintiff, who was then 53 years of age, a 'Lifetime Income Protection Policy' which provided 'Benefits for Loss of Life, Limb, Sight or Time, by Accidental Means, or Loss of Time by Sickness as Herein Limited and Provided.' Its terms as they affect this litigation will be set forth hereafter. In December, 1942, plaintiff was injured. The jury found that plaintiff 'was wholly and continuously disabled by bodily injuries resulting directly and independently of all other causes and through purely accidental means from December 23, 1944, to and including May 22, 1949.' This finding is not challenged. Plaintiff became 56 years of age on September 18, 1944. Defendant paid plaintiff $100 per month from the date of the accident until December, 1944, and then stopped payment. The record is not clear as to whether this was because defendant believed plaintiff had fully recovered, or because plaintiff would not accept payments at a reduced monthly sum. This action was then brought. At the trial defendant took the position, as it does now, that the policy provided that when the insured became 56 years of age the monthly payments were reduced 10% each year until the insured should become 60, and thereafter would be $50 per month. Plaintiff's position was and is (1) that the policy provides for payment of $100 per month without reduction; (2) that if the policy is construed as contended by defendant, then the policy is repugnant to the California Insurance Code; and (3) that at worst, the policy is ambiguous and therefore the court erred in refusing to permit plaintiff to introduce parol evidence to explain the ambiguity. The trial court took the position that the policy was not ambiguous, construed it in accordance with defendant's contention, and so instructed the jury. The amount awarded by the jury was in accordance with this construction.

Terms of Policy.

The terms relevant here follow: The association 'Does Hereby Insure Ivan B. Hobson * * * against loss of life, limb sight or time, resulting directly and independently of all other causes, from bodily injuries sustained during any term of this Policy, through purely Accidental Means (Suicide, sane or insane, is not covered), and against loss of time beginning while this Policy is in force and resulting from disease contracted during any term of this Policy, respectively, subject, however, to all the provisions and limitations hereinafter contained.' After the words 'Does Hereby Insure,' on either side of the policy appears in large type the following:

'Monthly Benefits $100.00

Death Benefit $2,500

'Maximum

Maximum

Monthly Benefits $200.00

Death Benefit $5,000'

On the top of page 2, is part D, a crucial clause in this case. The clause reads:

'Part D. Total Accident Disability Benefits For Life

'If such injuries, as described in the Insuring Clause, do not result in any of the above mentioned specific losses but shall wholly and continuously disable the Insured for one day or more, the Association will pay a monthly indemnity at the rate of One Hundred ($100.00) Dollars per month so long as the Insured lives and suffers said total loss of time.'

On the third page, under the heading 'Additional Provisions' appears the following: '(c) The term of this policy begins at 12 o'clock noon, Standard Time, on date of issue to the Insured against accident and on the thiry-first day thereafter against disease and ends at 12 o'clock noon on date any renewal is due. No reduction in the benefits of this policy shall be made during the lifetime of the Insured on account of age except in Parts D and K which shall be reduced ten per cent when the Insured is or becomes fifty-six years of age, with further reduction of an equal amount effective with each additional attained year of age to and including age sixty.' The italicized portion of this clause is in heavier type than the first sentence.

Interpretation.

The basic question is the effect of this last clause (which for convenience will be called 'the reduction clause') on 'Part D' which provides for indemnity at $100 per month for life. The trial court was correct in its finding that the policy did not require parol evidence for its interpretation, and therefore, that such evidence was inadmissible. However, the court was in error in its construction of the disputed clause. It held that additional provision (c) modified part D, so that when an insured who had been injured prior to his attaining age 56, reached that age, the $100 monthly payments would be reduced to $90; at age 57 they would be reduced to $80, and so on until from age 60 on they would be $50.

In construing an insurance policy it must be borne in mind that where two constructions are reasonable, that which is most favorable to the insured should be adopted. Frenzer v. Mutual Ben. H. & A. Ass'n, 27 Cal.App.2d 406, 416, 81 P.2d 197; Island v. Fireman's Fund Indemnity Co., 30 Cal.2d 541, 548, 184 P.2d 153, 173 A.L.R. 896; 14 Cal.Jur. 443; Norton v. Farmers A. Inter-Ins. Exch., 40 Cal.App.2d 556, 566, 105 P.2d 136.

The policy should be read as a layman would read it and not as an attorney or an insurance expert might read it. From an examination of the policy it is obvious that a layman would reasonably conclude that it provided that were he less than 56 years of age at the time of injury, he would receive $100 per month as long as he lived and was wholly and continuously disabled. Were he 56 years of age when injured, he would receive $90 per month as long as the disability continued; were he 57 years of age when injured he would receive $80 per month for such period, and were he 60 years of age or older at the time of injury, he would receive $50 per month for such period.

A layman reading the policy would first be struck with the statement on the first page of the policy, in bold type and large figures 'Monthly Benefits $100.00 Maximum Monthly Benefits $200.00.' Then in large letters at the top of page 2 he would see 'Part D. Total Accident Disability Benefits For Life' followed by the paragraph stating that he would be paid 'a monthly indemnity at the rate of One Hundred ($100.00) Dollars per month so long as the Insured lives and suffers said total loss of time.' In view of these eye-catching positive statements, his interpretation of the reduction clause would undoubtedly be as we have above set forth.

Cases like Taff v. Atlas Assur. Co., 58 Cal.App.2d 696, 137 P.2d 483, and Kahn v. Royal Indemnity Co., 39 Cal.App. 180, 178 P. 331, cited by defendant, which hold that an assured is bound by the terms of the policy he accepts and cannot complain that he did not read the policy, are not in point. This is not a case of the policy not being read, but one of the interpretations a person reading the policy would reasonably give it.

If the court's interpretation of the policy were correct, then additional provision (c) is repugnant to part D, and under well-established principles of insurance law must be disregarded. Part D clearly states that the indemnity to be said is $100 per month as long as the insured lives, and the disability continues. There is nothing in part D or the insuring clause or clauses that modifies this statement in any way.

The language in Frenzer v. Mutual Ben. H. & A. Ass'n, supra, 27 Cal.App.2d 406, 81 P.2d 197, applies here. There the court was discussing the repugnancy of part K of that policy to part A. Of part A the court said in 27 Cal.App. at page 415, 81 P.2d, at page 202: 'It purports to be a complete method of dealing with the specific losses there mentioned. It does not refer to Part K or to any portion of the policy for clarification.' Substitute part D and additional provisions (c) of our policy for part A...