Malerbi v. Central Reserve Life of North America Ins. Co.

• Decision Date: 05 June 1987
• Docket Number: No. 85-757,85-757
• Citation: Malerbi v. Central Reserve Life of North America Ins. Co., 225 Neb. 543, 407 N.W.2d 157 (Neb. 1987)
• Parties: Larry R. MALERBI and Linda Malerbi, Appellees, v. CENTRAL RESERVE LIFE OF NORTH AMERICA INSURANCE COMPANY, Appellant.
• Court: Nebraska Supreme Court

Page 157

407 N.W.2d 157

225 Neb. 543

Larry R. MALERBI and Linda Malerbi, Appellees, v. CENTRAL RESERVE LIFE OF NORTH AMERICA INSURANCE COMPANY, Appellant.

No. 85-757.

Supreme Court of Nebraska.

June 5, 1987.

Syllabus by the Court

1. Judgments: Appeal and Error. On appeal from an action at law, this court will not reweigh the facts. Instead, the court is obligated to examine the evidence to determine whether, under a view most favorable to the successful party, the facts support the trial court's judgment.

2. Insurance: Contracts: Intent. An insurance policy is to be construed as any other contract to give effect to the parties' intentions at the time the contract was made. Where the terms of such a contract are clear, they are to be accorded their plain and ordinary meaning.

3. Insurance: Contracts. Where a clause in an insurance contract can be fairly interpreted in more than one way, the ambiguity is to be resolved by the court as a matter of law. In the case of such ambiguities, the construction favorable to the insured prevails so as to afford coverage.

4. Insurance: Contracts. The insurer as drafter of the policy is responsible for language creating an ambiguity.

5. Insurance: Contracts. Resolution of an ambiguity in a policy of insurance turns not on what the insurer intended the language to mean, but what a reasonable person in the position of the insured would have understood it to mean at the time the contract was made.

6. Trial: Pretrial Procedure. Pretrial conferences are conducted to simplify the issues, amend pleadings, and avoid unnecessary proof of facts at trial. They are also conducted to avoid traps and surprises at trial.

7. Trial: Pretrial Procedure. Issues specified at a pretrial conference control the course of an action and, unless altered by the court, constitute the issues on which the case is tried.

8. Pretrial Procedure: Pleadings: Waiver: Appeal and Error. The issues set out in a pretrial order supplant the issues raised in the pleadings. Failure to object to the specification of issues in a pretrial order waives error claimed in that regard on appeal.

9. Insurance: Contracts: Pleadings. Provisions in an insurance policy which limit the benefits payable thereunder are generally defensive in character and must be pleaded and proved by the insurer.

10. Pleadings. A pleading should not be amended to conform to the proof where the proposed amendment substantially changes the nature of the claim or defense.

Richard A. Rowland, Omaha, for appellant.

Jeffrey A. Silver, Omaha, for appellees.

KRIVOSHA, C.J., and BOSLAUGH, WHITE, HASTINGS, CAPORALE, SHANAHAN, and GRANT, JJ.

BOSLAUGH, Justice.

This action was brought by Larry R. and Linda Malerbi for benefits under a certificate of insurance issued by the defendant, Central Reserve Life of North America Insurance Company (hereinafter Central Reserve).

On October 1, 1982, Central Reserve issued a group insurance policy to Younglove Career Consultants, Inc. As a Younglove employee, Larry Malerbi and his dependents, including his stepson Bryan Buckley, were insured by the policy. The policy included comprehensive major medical coverage, the purpose of which was to indemnify for major loss through accident or sickness.

On December 15, 1982, Bryan Buckley was hospitalized for inpatient treatment at the Nebraska Psychiatric Institute (NPI) in Omaha, Nebraska. This hospitalization was based on the recommendation of Dr. Jane Bottlinger, a psychiatrist, following psychological testing of Bryan. Also, prior to his hospitalization at NPI, a question arose regarding insurance coverage for Bryan's treatment. In a letter from Glenn Shipley, a general agent for Central Reserve, to Theodore Liapis, Central Reserve's director of technical claims service, Shipley indicated that the claim would be paid according to the cause of the treatment. If the cause was physiological, Central Reserve would pay as on any illness. If it was entirely psychological, benefits would be paid according to the limitations for psychological treatments. This information was relayed to the Malerbis by Theodore Lange, the representative who delivered the policy to the employer Younglove. In discussions with both the Malerbis and Lange, Dr. Bottlinger indicated the cause of Bryan's treatment was a physical problem.

An intake evaluation indicates Bryan was admitted on complaints of behavioral problems. As related by his mother at trial, Bryan's previous medical history included a series of hospitalizations in 1976, at the age of 5 years. Bryan was hospitalized then for an illness and fever of unknown etiology. He eventually developed hepatitis and became semicomatose. He also experienced his first seizures during this time. Eventually, he was diagnosed as having epilepsy and was still experiencing some seizures at the time of trial. Following his 1976 illnesses, Linda Malerbi noted a distinct change in her son's personality. Prior to this time, she had observed no significant behavior problems in Bryan.

Bryan was first treated as an outpatient by Dr. Bottlinger in 1980. He was then experiencing behavior problems at home and at school. In 1981 he received treatment from a neurologist for seizures. On his admission to NPI, Bryan was taking anticonvulsant medication.

During his hospitalization at NPI, Bryan was subjected to many diagnostic tests, including an electroencephalogram (EEG) and a computerized axial tomography (CAT) scan. As a result of these tests and those of the Luria-Nebraska neuropsychological battery performed prior to Bryan's admission, Dr. Bottlinger testified that she formed an opinion, based upon a reasonable degree of medical certainty, that Bryan had a dysfunction in the temporal lobe region of his brain. Brain dysfunction in this case meant that there was something physically wrong with Bryan's brain. According to Dr. Bottlinger, the structural deficit in the temporal lobe of Bryan's brain was the cause of his epileptic seizures as well as his behavioral and emotional problems.

Dr. Bottlinger's final diagnosis as to Bryan Buckley was atypical organic brain syndrome with obsessive-compulsive features. She explained that organic brain syndrome involves impairment of behavioral or emotional functioning coupled with a physical brain dysfunction. The term organic indicates a physical etiology or cause. According to exhibit 14, 3 H. Kaplan, A. Freedman & B. Sadock, Comprehensive Textbook of Psychiatry/III (3d ed. 1980), a recognized text in the field of psychiatry, "When disturbed behavior is encountered in a child with evidence of neurological impairment, the diagnosis of brain damage is commonly regarded as constituting a sufficient cause for the psychiatric disorder." Id. at 2435. According to Dr. Bottlinger, and consistent with the above statement, Bryan Buckley's neurological problem was identified as a seizure disorder with evidence of some degree of temporal lobe brain structural damage.

Bryan's treatment at NPI included administration of the drug Haldol to address inappropriate behaviors, administration of the drug Tofranil for depression, behavior modification, emotional counseling, educational training, structured recreational activities, group therapy, individual therapy, and counseling for his parents. He was also treated by a neurologist. Dr. Bottlinger testified that because there was no surgery available to treat a brain dysfunction such as Bryan's, the only treatment approach available was to treat his symptoms.

During the course of his treatment a question of insurance coverage again arose. Dr. Bottlinger was asked to clarify her diagnosis because some of the code numbers on Bryan's bills did not match the doctor's diagnosis. Dr. Bottlinger responded by sending a letter to Glenn Shipley of Group Sales Associates, the company that originally distributed the Central Reserve contract to Theodore Lange. In that August 17, 1983, letter, Dr. Bottlinger indicated that Bryan's diagnosis was organic brain syndrome (atypical) with obsessive-compulsive features. She also indicated that in her opinion, Bryan's emotional and behavioral problems were secondary to the neurological deficits identified.

Bryan was released from inpatient treatment on August 27, 1983. The evidence shows the Malerbis were billed a total of $41,865 by NPI and $5,735.35 by the Nebraska Clinicians' Group for charges related to his hospitalization. Central Reserve paid a total of $3,459.80 on these claims. Theodore Liapis testified that this amount was paid in accordance with limitation 19 of the Central Reserve policy, which limits benefits for the treatment or care of nervous, mental, or alcoholic conditions. The rest of the claim was denied, based on Central Reserve's view that the claim was for treatment of a mental condition. The bill from NPI also reflects that $7,500 was paid by Union Casualty Company. A Union major medical policy had been obtained by Linda Malerbi to insure Bryan, in August of 1981. At the time of trial, suit was pending by the Malerbis against Union for denial of their claim for the same hospitalization as involved in this case.

On January 5, 1984, the Malerbis filed their petition, in which they prayed for judgment against Central Reserve in the amount of $45,205.35, plus an attorney fee and the costs of the action. In its answer, Central Reserve affirmatively alleged that Larry Malerbi had been paid all claims due and owing on his claim under the terms of the policy in question. Trial was had to the court on July 8 and 9, 1985.

During the course of the trial, Central Reserve attempted to elicit testimony from Theodore Liapis regarding preexisting conditions. The court sustained the Malerbis' objection to this line of questioning on grounds that it was irrelevant and immaterial. Central Reserve's motion to amend its pleadings to include preexisting condition as a defense was also denied.

Following submission of all the...