Layh v. Jonas
| Decision Date | 16 April 1975 |
| Docket Number | No. 11338,11338 |
| Citation | 96 Idaho 688,535 P.2d 661 |
| Court | Idaho Supreme Court |
| Parties | George LAYH and Karleen J. Layh, husband and wife, Plaintiff-Appellants, v. Robert JONAS and Continental Life & Accident Company, defendant-Respondents. |
David W. Cantrill of Derr, Derr, Walters & Cantrill, Boise, for plaintiffs-appellants.
Edith Miller Klein of Langroise, Sullivan & Smylie, Boise, for defendants-respondents.
Plaintiff-Appellants Layh sought reformation of a medical insurance policy alleging that fraudulent representations had been made by the insurance agent which induced them to enter into the contract. This appeal is from summary judgment sought by and granted to defendant-respondents Continental Life and Accident Company, and Jonas. We reverse and remand.
At the outset we note that on appeal from a summary judgment, the party against which summary judgment is rendered is entitled to have all facts liberally construed and all coubts resolved in its favor. Schaefer v. Elswood Trailer Sales, 95 Idaho 654, 516 P.2d 1168 (1973). Herein the facts are recited in conformity with that rule.
On February 1, 1970 Karleen Layh had a heart condition which would necessitate surgery. At that time defendant-respondent Robert Jonas was the agent for Continental Life and Accident Company which had previously in 1962 issued a group medical insurance policy to the Idaho Employer's Council, Inc. It is alleged that Jonas assured the Layhs that Continental's policy would pay all costs of treatment for the pre-existing heart condition and upon that assurance the Layhs enrolled in Continental's group medical insurance program.
In March 1970 Karleen Layh underwent surgery necessitated by the pre-existing heart condition and sought payment of those costs. Continental refused to pay for the costs of treatment beyond the basic benefits of the policy, plus a $500 limit that the written policy placed on pre-existing conditions. Continental however, did pay the sum of $2,572.50 to the Layhs as benefits. The Layhs then brought the instant action seeking a reformation of the written insurance policy to the end that the limitation on pre-existing conditions be deleted. Facts were developed by way of depositions and other documents and thereafter summary judgment was sought against the Layhs.
The trial court in ruling upon the motion found that there was a conflict on all of the elements of fraud, which conflict would preclude summary judgment, except the element of damage or injury. As to that element the facts indicated that the Layhs had contributed $688.14 in premiums during the period of time when the coverage was in force. Of that amount more than $100 was attributable to life insurance. As to the medical aspect of the policy the facts indicated that Continental had paid $2,572.50 as medical benefits during the time the policy was in force. The trial court therefore held that the Layhs had received more in benefits than they had paid in premiums and they were therefore misled, if at all, to their benefit and had thus suffered no damage or injury.
Given the proper circumstances, the doctrine of reformation of instruments is well recognized in Idaho. Collins v. Parkinson, 96 Idaho 294, 527 P.2d 1252 (1974). However, no Idaho case specifically dealing with the reformation of an insurance policy has been brought to our attention. The application of the doctrine of reformation of instruments to insurance policies is well established in other jurisdictions. See generally 32 A.L.R.3d 661, 704-708. Heikes v. Farm Bureau Ins. Co., 181 Neb. 827, 151 N.W.2d 336 (1967); Lumbermen's Ins. Co. v. Heiner, 74 Ariz. 152, 245 P.2d 415 (1952); Noel v. Continental Casualty Co., 138 Kan. 136, 23 P.2d 610 (1933); Buck v. Mountain States Invest. Corp., 76 N.M. 261, 414 P.2d 491 (1966); Modica v. Hartford Accident & Indemnity Co., 263 Cal.App.2d 588, 46 Cal.Rptr. 158 (1965); Ohio Casualty Insurance Co. v. Callaway, 134 F.2d 788 (10th Cir. 1943); Portella v. Sonnenberg, 74 N.J.Super. 354, 181 A.2d 385 (1962). This court recently stated in Nab v. Hills, 92 Idaho 877, 883, 452 P.2d 981, 987 (1969), quoting from McKelvie v. Hackney, 58 Wash.2d 23, 360 P.2d 746 (1961):
'When fraud induces a variance between a written contract and the agreement between the parties, the latter will prevail and the trial court is empowered to reform the written instrument to conform to the agreement.'
Thus it would appear that upon a finding of fraudulent misrepresentation by the agent as alleged, the insurance policy should be reformed to eliminate the limitation upon the pre-existing heart condition of Mrs. Layh. The Layhs would thereafter be entitled to receive full coverage without the limitation on pre-existing conditions. It might be argued that looked at in this light the question of which measure of damages to apply becomes irrelevant. The problem with that theory is that it ignores the elements which this Court has previously laid down as necessary to be proven to support allegations of fraud and misrepresentation.
In the case of Nab v. Hills, supra, plaintiffs sought the foreclosure of a materialman's lien and the defendants raised the affirmative defense of fraud. The court found that the facts of the case justified treatment for reformation of the contract although such relief had not been sought. The court redefined the necessary elements of fraud including '(9) And his consequent and proximate injury.' 92 Idaho at 883, 452 P.2d at 987. The court then went on to say:
(Emphasis supplied)
The court then quoted from Stillwell v. Rankin, 55 Mont. 130, 174 P. 186 (1918):
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