Moore v. American United Life Ins. Co.

• Decision Date: 09 January 1984
• Citation: 197 Cal.Rptr. 878,150 Cal.App.3d 610
• Court: California Court of Appeals Court of Appeals
• Parties: Doris B. MOORE, Plaintiff and Respondent, v. AMERICAN UNITED LIFE INSURANCE COMPANY, Defendant and Appellant. Civ. 21540.

Page 878

197 Cal.Rptr. 878

150 Cal.App.3d 610

Doris B. MOORE, Plaintiff and Respondent, v. AMERICAN UNITED LIFE INSURANCE COMPANY, Defendant and Appellant.

Civ. 21540.

Court of Appeal, Third District, California.

Jan. 9, 1984.

As Modified on Denial of Rehearing Feb. 6, 1984.

Hearing Denied March 14, 1984.

Long & Levit, John B. Hook, Marsha L. Morrow and Betty C. Bullock, San Francisco, for defendant and appellant.

Crosby, Heafey, Roach & May, Peter W. Davis and James C. Martin, Oakland, as amici curiae on behalf of defendant and appellant.

Panattoni, Westley, Farrell & Fraulob and Thomas C. Westley, Sacramento, for plaintiff and respondent.

SIMS, Associate Justice.

Plaintiff, Doris B. Moore, sued defendant American United Life Insurance Company (AUL) for breach of a contract to provide disability benefits and "bad faith" denial of benefits. After 40 days of trial, a jury awarded plaintiff $30,000 compensatory damages and $2.5 million punitive damages. ¹ Pursuant to a stipulation that "the issue" of damages in the form of attorney fees would be tried to the court without a jury, the court awarded plaintiff an additional $843,333.33. Defendant appeals.

In this published portion of our opinion (see Cal.Rules of Court, rule 976.1), we address issues related to evidentiary rulings, instructions, punitive damages, and whether attorney's fees are recoverable where the contract contains no attorney's fees clause. We affirm that portion of the judgment awarding plaintiff damages. However, we conclude attorney's fees are not recoverable and reverse that award. To the extent our prior opinion in Dinkins v. American National Ins. Co. (1979) 92 Cal.App.3d 222, 154 Cal.Rptr. 775 suggests attorney's fees are properly recoverable, we disapprove it.

In an unpublished portion of this opinion we address defendant's remaining contentions that do not meet criteria for publication. (See Cal.Rules of Court, rule 976(b).)

FACTS

A. Facts related to plaintiff's disability and claim. ²

Plaintiff was born in 1932 in Cloudcroft, New Mexico. Plaintiff's mother died when she was two years old and she was raised by her aunt. From age five plaintiff kept house and cooked meals for her brothers and sisters who worked out of the home. Plaintiff attended school through the eighth grade. She received no other formal education.

Eventually plaintiff migrated to California and for ten years was employed as a food waitress at a restaurant in North Sacramento. Throughout her entire working life, plaintiff had three other jobs. She held a seasonal part-time job at Hunt's Cannery sorting tomatoes for a few months, assisted in the operation of a lathe in the making of pistons for aircraft at McClellan Air Force Base, and, for six years immediately preceding July 12, 1975, drove a school bus. For the last three years prior to July 12, 1975, plaintiff worked for North Sacramento School District as a school bus driver (as a twelve-month, full-time, permanent employee) driving elementary school students to and from school and performing certain maintenance and custodial chores.

Defendant issued a group life insurance policy to the North Sacramento School District containing an installment disability benefit provision. This disability option provided that, in lieu of death benefits, the amount of the life insurance would be paid in sixty monthly installments if the employee became "totally and permanently disabled" while insured under the policy. The term "total disability" was defined in the policy as a disability resulting from bodily injury or disease which wholly prevented the employee "from engaging in any occupation Defendant's group life insurance policy with installment disability benefits terminated on September 1, 1975, and was succeeded by a group policy, issued by a different insurer, that did not include a disability benefit provision.

                or employment for compensation, profit, or gain."   Total disability was considered to be "permanent" under the policy if it was "reasonably certain that such disability will continue during the remaining lifetime of the Employee."   There was also a presumption in the policy that, for purposes of commencing benefit payments, any total disability which existed for a continuous period of nine months was permanent.  The policy contained no clause awarding attorney's fees to either insurer or insured in the event of litigation arising out of the policy
                

In early July 1975, plaintiff went to the emergency room at Kaiser Hospital complaining of chest pains. On July 12, 1975, she was diagnosed as having had a myocardial infarction and was admitted to the hospital. She was discharged on July 29 and returned periodically to be examined and treated on an out-patient basis.

Shortly thereafter plaintiff requested information pertaining to the filing of a claim for disability benefits with defendant. Defendant told plaintiff in the letter enclosing the claims form that the "provisions of the Installment Disability Benefits are contained in your Certificate of Insurance." The certificate of insurance contained the definition of total disability quoted above.

On September 3, 1975, plaintiff filled out a form provided by defendant claiming installment disability benefits. On that form plaintiff stated that she had had a heart attack on July 8, 1975, and that she had been prevented from working since July 11, 1975.

The form also contained a section ("Attending Physician's Statement") to be filled out by plaintiff's attending physician. The Attending Physician's Statement section of the form asked the treating doctor, among other things, to give an opinion as to whether or not the insured was "totally disabled." Nowhere in the form was "total disability" defined or the criteria to be used in such a determination given. The form also asked the treating doctor to render an opinion as to whether or not the insured was "totally disabled" for "any occupation" or for his "regular occupation." Additionally, the form asked a physician who had answered "yes" to the question of whether or not the patient was totally disabled to render a further opinion as to when the physician thought the "patient will be able to resume to any work."

On October 1, 1975, Dr. Ralph Swerdlow, one of plaintiff's treating physicians at Kaiser, completed the Attending Physician's Statement so as to indicate that Mrs. Moore, in his opinion, was then totally disabled from any work but might be able to resume working on November 15, 1975.

On October 28, 1975, defendant's claims examiner, Jo Lynn Short, sent a letter to Dr. Swerdlow asking for clarification of his opinion regarding plaintiff's ability to return to work. This letter indicated, "Ms. Moore must be totally disabled,' 'resulting from bodily injury or disease which wholly prevents the employee from engaging in any occupation or employment for compensation, profit, or gain. Total disability during its continuance shall be presumed to be permanent if it continues during the remaining lifetime of the employee.' " (Emphasis added.) The letter continued: "According to the claim form which was completed by you, under the Attending Physician's statement, you have indicated that Ms. Moore may resume work on November 15, 1975. Therefore, according to the above definition, do you believe Ms. Moore to be totally disabled?" A copy of the letter was sent to plaintiff.

The definition of total disability provided to Dr. Swerdlow by the claims examiner's letter was taken directly from defendant's policy. The policy language misstated California law as it has existed since 1942. When coverage provisions in general disability policies require total inability to perform "any occupation," the On January 13, 1976, Dr. Swerdlow responded to defendant's letter by stating plaintiff was not totally disabled at that time. He noted, however, that her bus driver's license had been revoked by the Department of Motor Vehicles due to her physical condition so that she could no longer work as a bus driver.

courts have assigned a common sense interpretation to the term "total disability" so that total disability for purposes of coverage results whenever the employee is prevented from working "with reasonable continuity in his customary occupation or in any other occupation in which he might reasonably be expected to engage in view of his station and physical and mental capacity." (Erreca v. West. States Life Ins. Co. (1942) 19 Cal.2d 388, 394-395, 121 P.2d 689.)

Without further investigation, defendant denied plaintiff's claim for installment disability benefits.

On February 2, 1976, claims examiner Short wrote to plaintiff stating defendant was unable to approve her claim because Dr. Swerdlow, plaintiff's treating physician, had concluded plaintiff was not totally disabled. The letter again included the restrictive and legally incorrect policy definition of total disability. Plaintiff was invited to contact the claims department if she had any questions.

Beginning in May 1976, plaintiff's medical condition began to deteriorate. In late May and early June 1976, plaintiff suffered an unidentified medical event characterized by chest pain, amnesia and disorientation. In July 1976, Dr. Alfredo Burlando performed three separate stress tests upon plaintiff. During those tests plaintiff demonstrated a very low level of functional performance. She complained of chest pains during the treadmill test. Because this pain was not relieved by nitroglycerin or by reducing work load, Dr. Burlando concluded it was in part psychosomatic.

In November 1976, plaintiff underwent a double bypass operation but showed no improvement following that operation. In January 1977, Dr. Burlando concluded plaintiff was totally and permanently disabled.

In February 1977, Dr. Burlando advised the Public Employee's Retirement System that plaintiff "is now permanently and totally disabled." He based this conclusion of permanent...