Martin v. Crown Life Ins. Co.

• Decision Date: 18 February 1983
• Docket Number: No. 81-550,81-550
• Parties: Louise C. MARTIN, Plaintiff and Respondent, v. CROWN LIFE INSURANCE COMPANY and Montana Bank of Butte, N.A., Defendants and Appellants.
• Court: Montana Supreme Court

Page 1099

658 P.2d 1099

202 Mont. 461

Louise C. MARTIN, Plaintiff and Respondent, v. CROWN LIFE INSURANCE COMPANY and Montana Bank of Butte, N.A., Defendants and Appellants.

No. 81-550.

Supreme Court of Montana.

Submitted Nov. 8, 1982.

Decided Feb. 18, 1983.

Henningsen & Purcell, Mark Vucurovich, argued, Butte, for defendants and appellants.

Poore, Roth, Robischon & Robinson, Urban Roth argued, Butte, for plaintiff and respondent.

SHEA, Justice.

Crown Life Insurance Company appeals from a summary judgment of the Silver Bow County District Court which allowed Louise C. Martin to collect the difference of $60,000 between the life insurance benefit of $104,000 she had claimed and the life insurance benefit of $44,000 which the insurer, Crown Life had paid. Louise C. Martin was the beneficiary of a group life and health policy which had been provided for her husband, Daniel Martin by his employer, Montana Bank of Butte, N.A. After Daniel Martin's death, the insurer, Crown Life paid Louise C. Martin the $44,000 life insurance benefit described in the master policy. She brought this action believing she was entitled to the $104,000 life insurance benefit set out in Daniel Martin's individual certificate of insurance. Both sides moved for summary judgment. In addition to granting summary judgment in favor of Louise C. Martin for the $60,000 difference, with interest from January 29, 1979; the trial court awarded attorney fees to Louise C. Martin of 33 1/3 percent of the total recovery plus interest from the date of judgment. Crown Life appeals both the summary judgment and the award of attorney fees.

Crown Life challenges the trial court's ruling that the Crown Life master policy together with Daniel Martin's individual certificate of insurance constitute a single contract of insurance. Based on this ruling the trial court held that the differing amounts of life insurance coverage derived from those two documents created an ambiguity which should be resolved in favor of the insured, Daniel Martin and his beneficiary, Louise C. Martin. Crown Life argues that the error was clerical and should not have been resolved in favor of the insured and his beneficiary and that equity would require this Court to correct the mistake. Crown Life also claims that the trial court erred in awarding attorney fees to Louise C. Martin without benefit of a specific contract provision or of statutory authority. We affirm the trial court's summary judgment that Louise C. Martin is entitled to a total life insurance benefit of $104,000, plus interest, but we reverse the award of attorney fees to Louise C. Martin.

This dispute involves the amount of life insurance coverage the insured, Daniel Martin had under a group insurance policy issued by Crown Life Insurance Company to Daniel Martin's employer, Montana Bank of Butte, N.A. In 1975, Crown Life sold a group insurance policy to the Montana Bank System which became effective January 1, 1976. As an officer of the Montana Bank of Butte from the time the Crown Life policy became effective on January 1, 1976, until his death on January 29, 1978, Daniel Martin was insured under the group policy. The plaintiff, Louise C. Martin is Daniel Martin's widow and beneficiary under the group policy.

To acquaint employees with the benefits of the group policy, Montana Bank conducted an employee meeting on December 4, 1976 which Daniel Martin attended. A brochure explaining the benefits was distributed to each employee; however, Louise C. Martin did not find such a booklet in Daniel Martin's effects after his death. The Montana Bank System paid the entire premium and the Bank's employees were not individually responsible for the payment of any premiums. Crown Life issued one master policy which was kept at Montana Bank's main office in Billings. The master policy contained a formula for calculating a bank officer's life insurance benefit by taking 300 percent of annual earnings, and rounding to the nearest thousand. There is no evidence that Daniel Martin ever went to Billings to read the master policy.

Section 33-20-1208, MCA, requires a group insurer to issue individual certificates of insurance containing certain information:

"Section 33-20-1208, MCA. 'Certificate. The group life insurance policy shall contain a provision that the insurer will issue to the policyholder for delivery to each person insured an individual certificate setting forth a statement as to the insurance protection to which he is entitled, to whom the insurance benefits are payable, and the rights and conditions set forth in 33-20-1209 through 33-20-1211.' "

Based on this statute, Crown Life provided the Montana Bank with certificates of insurance to be issued to employees of the bank.

Daniel Martin received his first certificate of insurance with an effective date of January 1, 1976. The certificate did not set out the formula for calculating a bank officer's life insurance benefit. Instead, the certificate merely stated that his life insurance benefit was $42,000.

In 1977, Daniel Martin's salary increased to $14,700. Because of the salary increase, Crown Life issued Daniel Martin another certificate of insurance with an effective date of January 1, 1977. Based on the formula set forth in the master policy, the correct amount of Daniel Martin's life insurance coverage would have been $44,000. The second certificate, like the first, did not mention the formula used to compute an officer's life insurance benefit. It merely stated that Daniel Martin's life insurance benefit was $104,000. Montana Bank paid premiums to Crown Life based on the $104,000 coverage.

It is undisputed that the error on the second certificate is solely attributable to Crown Life. Both the 1976 and the 1977 certificates of insurance informed the insured that, "If you die while insured for this Benefit, the amount of life insurance shown on the FRONT PAGE of this certificate will be payable to your designated beneficiary."

Daniel Martin died on January 29, 1978. The record shows that on January 6, 1978 an employee of Montana Bank of Butte and a Crown Life employee discussed the fact that Daniel Martin was overinsured. Though the Bank had been paying premiums for $104,000 worth of life insurance, the correct amount of Daniel Martin's life insurance based on his income, was $44,000. On January 10, 1978, Crown Life sent Montana Bank of Butte a corrected certificate of insurance which stated that Daniel Martin's life insurance benefit was $44,000. Crown Life failed to inform Daniel Martin of the error on his certificate of insurance before his death. On March 3, 1978, more than a month after Daniel Martin died, Vince Fisher, Montana Bank of Butte's president delivered the new, corrected certificate of insurance to Daniel Martin's widow.

Louise C. Martin accepted a payment of $44,000 from Crown Life, but reserved her right to bring an action for the $60,000 balance to which she believed she was entitled. Crown Life contends that when there is a conflict between the master policy and the certificate of insurance, the master policy controls. A provision of the master policy states that, "[i]f there is any discrepancy between the provisions of any employee's certificate and the provisions of this policy, the provisions of this policy shall govern." Crown Life also contends that even though Daniel Martin never went to Billings to read the master policy, he knew or should have known that the master policy controls because of a statement on the front of his certificate of insurance that, "[t]he insurance is subject to the terms of the group policy, and all provisions of the group policy apply to the insurance whether mentioned in this certificate or not."

It has long been the general rule that "[a] certificate issued to an...