Lewis v. Continental Life & Acc. Co.

• Decision Date: 14 November 1969
• Docket Number: No. 10229,10229
• Citation: 36 A.L.R.3d 529,461 P.2d 243,93 Idaho 348
• Parties: , 36 A.L.R.3d 529 Arvilla L. LEWIS, Plaintiff-Appellant, v. CONTINENTAL LIFE AND ACCIDENT CO., a corporation, Defendant-Respondent.
• Court: Idaho Supreme Court

Page 243

461 P.2d 243

93 Idaho 348, 36 A.L.R.3d 529

Arvilla L. LEWIS, Plaintiff-Appellant, v. CONTINENTAL LIFE AND ACCIDENT CO., a corporation, Defendant-Respondent.

No. 10229.

Supreme Court of Idaho.

Nov. 14, 1969.

Rehearing Denied Dec. 10, 1969.

Gee & Hargraves, Pocatello, for appellant.

Langroise, Clark & Sullivan, Boise, for appellee.

McQUADE, Justice.

The appellant, Arvilla L. Lewis, commenced this action against the defendant-respondent, Continental Life and Accident Co., on April 7, 1967. She claimed that $2,000 was owed to her, as the beneficiary of her husband Edward R. Lewis, under respondent's group policy number GE-223, issued to Bannock County, her husband's last employer. The insurance company denied liability. A variety of affidavits, exhibits, admissions and interrogatories were offered by both sides, and both parties moved for summary judgment. The district court found that Lewis had failed to make periodic proofs of disability which were found to be required by the 'plain terms of the policy,' and granted the insurance company's motion for summary judgment while denying that of the widow. The appellant appeals from that determination.

There is no substantial controversy over the circumstances which produced this litigation. Edward R. Lewis was an employee of Bannock County, Idaho, and, as such, he was covered from June, 1955 to November, 1961, by a group life insurance policy issued to Bannock County by the Aetna Insurance Company. Mr. Lewis suffered from emphysema, a chronic and debilitating lung condition, which became so severe that he had to take a leave of absence in 1958. The disease never relinquished its hold on him, and he remained unable to return to work until his death in August, 1966. According to an Aetna Insurance Company handbook Lewis remained covered even though not working, in the amount of $2,000, under this policy until 1961, when the county changed insurers to the defendant corporation.

In the late 1950's, the defendant Continental Insurance Company together with Blue Cross of Idaho approached the Bannock County Commissioners with a proposal to provide group insurance for its employees. The county commissioners were, however, hesitant to change insurers despite the fact that the Continental and Blue Cross offer was financially more attractive than the then current Aetna package. This hesitancy was inspired by a desire on the part of the commissioners not to deprive any employee of any benefits he was then enjoying under the Aetna policy. Continental's representatives, in order to sell their insurance to the county, agreed with the commissioners that there would be no loss of coverage and that all persons included in the Aetna program would be included equally in Continental's plan. The county commissioners then agreed to change insurers, and, in November, 1961, the defendant issued its group policy to Bannock County. The master copy of this policy was kept in the county clerk's vault. Continental also issued certificates of insurance to covered employees, including the appellant's husband, Edward R. Lewis. And Continental and Blue Cross jointly published and circulated a booklet entitled 'Bannock County Employees Benefit Program' which purported to be an explanation of the entire insurance scheme in layman's terms. Mr. Lewis was also provided with one of these. This policy was in force at the time appellant's husband died.

The master policy, which was kept in the custody of the county clerk, is fourteen pages long, and it is for all practical purposes entirely printed. It contains a number of clauses which are not appropriate or necessary for this policy-holder or its employees. The certificate of insurance which the appellant's husband was given is also a fine printed form, six pages long. The explanatory booklet, on the other hand, is set out in large print on heavy paper and it is substantially easier to read than either of the first two documents. All three documents have provisions concerning continuation of insurance if the insured's employment is terminated because of total disability before the age of sixty.

Mr. Lewis, apparently under the assumption that he was covered under the group insurance contract, paid monthly premiums to the county for 'group insurance' coverage. On November 4, 1963, he made the last of these payments and, at that time, informed the Bannock County clerk that he would never be well enough to return to work. In February of 1964, Lewis became sixty years old and in August of 1966, he died. At the time of his death the Continental insurance policy was in force with the county. The contributions which Lewis paid to the county were included in the monthly premium paid to the company.

After her husband's death, the appellant claimed the life insurance benefit of $2,000. She was told by the respondent's representative that, if she provided the company with proof that Lewis had actually been disabled at the time of termination, the company would pay her claim. Continental was provided with certificates from three doctors and the Social Security disability award. The company has used this information to support its refusal to pay appellant the $2,000. The company asserts the policy provides that only employees in 1961 or since 'actively at work' for the county were covered by the policy. The company contends that if Lewis was initially covered by the policy, that such coverage was not continued because he failed to provide yearly proof of total disability (the actual fact of which is not disputed) as is said to be required by the master policy.

There are two issues for the Court to resolve. The first is a determination of what the legal effect of the contract between Continental and the county actually was. More specifically, we must decide whether the contract of insurance related to all employees previously covered under the Aetna program according to the negotiated agreement between the insurance company and the county commissioners, or whether, as provided in the printed form master policy, only those employees 'actively at work' could claim the death benefits under the Continental-Blue Cross insurance policy. Because we hold that Continental was bound to honor its agreement to cover all employees covered by Aetna, including Lewis, we must then decide the second issue of whether the failure of the appellant's husband to make yearly proof of his disability deprived her of her rights to $2,000 as beneficiary under the contract. We hold, for the reasons hereinafter set out, that the defendant-respondent, Continental Life and Accident Company, is estopped to raise either of these objections to recovery by the appellant.

The respondent argues that, regardless of what arrangements may have been worked out between the county and itself prior to its issuing the group policy, the 'plain words' of the printed form master policy must control. It is argued that we must hold that once this written policy was issued, it, according to the traditional precepts of the parol evidence rule, represented the entire, 'integrated' contract between the two parties. With these contentions we cannot agree. It is, of course, true that insurance companies may limit their liability. But this must be done by contract, and we have long recognized that 'it is a matter of common knowledge insurance contracts are not entered into as other contracts generally are.' ¹ As Justice William Howard Taft noted seventy-six years ago:

'Policies are drawn by the legal advisers of the company, who study with care the decisions of the courts, and, with those in mind, attempt to limit as narrowly as possible the scope of the insurance. It is only a fair rule, therefore, which courts have adopted, to resolve any doubt or ambiguity in favor of the insured and against the insurer.' ²

We have, on a number of occasions, ³ cited and quoted with approval the words of the Supreme Court of Utah in the case of Browning v. Equitable Life Assurance Society,

'Insurance policies, while in the nature of written contracts, are not prepared after negotiations between the parties, to embrace the terms at which the parties have arrived in their negotiations. They are prepared beforehand by the insurer, and the company solicitors then sell the insurance idea to the applicant. Normally, the details and provisions of the policy are not discussed, except that the particular form of policy is best suited to give the applicant the protection he seeks. If he reads the policy he is generally not in a position to understand its details, terms, and meaning except that, in the event against which he seeks insurance, the company will pay the stipulated sums. He seldom sees the policy until it has been issued and is delivered to him. He signs an application blank in which the policy sought is described either by form number or by a general designation, pays his premium, and in due course thereafter receives, either from the agent or through the mails, his policy. Many of its terms and all of its defenses and super-refinements he has never heard of and would not understand them if he read them.' ⁴

This Court, recognizing the character of the written insurance 'contract,' has long held, where a policy holder is induced to enter into contract in reasonable reliance on promises of or agreements with the soliciting representative of that insurance company thereby leaving the insured person or property otherwise unprotected, and the company profits from that change of position, that the insurance company is estopped to deny the liability for which it actually contracted by raising provisions from its own printed policy form. ⁵

In Mull v. United States Fidelity & Guaranty Co., ⁶ it was, thus, held that an insurance company which had promised to protect a building contractor under a new workmen's compensation law and which had collected a premium from him had to indemnify him for a claim arising under that...