Parrot v. Guardian Life Ins. Co. of America

• Decision Date: 01 March 2005
• Docket Number: No. 17062.,17062.
• Citation: 866 A.2d 1273,273 Conn. 12
• Court: Connecticut Supreme Court
• Parties: Charles M. PARROT v. The GUARDIAN LIFE INSURANCE COMPANY OF AMERICA.

866 A.2d 1273

273 Conn. 12

Charles M. PARROT v. The GUARDIAN LIFE INSURANCE COMPANY OF AMERICA.

No. 17062.

Supreme Court of Connecticut.

Argued September 21, 2004.

Decided March 1, 2005.

Bruce L. Elstein, Bridgeport, with whom was David C. Grimes, for the appellant (plaintiff).

Allan B. Taylor, with whom were Francis H. Morrison III, and, on the brief, Deborah S. Russo, Hartford, for the appellee (defendant).

NORCOTT, KATZ, PALMER, VERTEFEUILLE and ZARELLA, Js.

ZARELLA, J.

The dispositive issue in this case, which comes to us upon our acceptance of two certified questions from the United States Court of Appeals for the Second Circuit pursuant to General Statutes § 51-199b(d), is whether the "entire contract" clause of General Statutes § 38a-483(a)(1)¹ prohibits an insurer from incorporating by reference its underwriting income rules² described in a future increase option rider to a disability insurance policy, when the application of those rules can neither decrease nor eliminate a fixed benefit of the original policy. We answer that question in the negative.

The plaintiff, Charles M. Parrot, commenced this breach of contract action in the United States District Court for the District of Connecticut after the defendant, The Guardian Life Insurance Company of America (Guardian), denied his request to obtain the maximum amount of insurance available under a future increase option rider to an existing disability insurance policy. In that proceeding, Parrot contended, inter alia,³ that the income rules that Guardian had used to calculate the monthly benefit to which he was entitled were void because they were not appended to the rider to his policy as required by § 38a-483(a)(1). The District Court rendered judgment as a matter of law for Guardian, from which Parrot appealed to the Second Circuit Court of Appeals. That court then certified two questions to us, which we have agreed to answer.⁴

The record certified by the Second Circuit Court of Appeals reveals the following relevant facts and procedural history. In 1988, Parrot, a medical doctor, purchased a disability insurance policy from Guardian that provided for the payment of monthly benefits if he should become partially or totally disabled. The policy included a future increase option rider that gave Parrot the right to purchase an additional insurance policy on each anniversary date of his original policy at terms offered to new insureds at that time, regardless of any intervening changes to his health or occupation. The future increase option rider, together with the attached schedule of benefits, stated that the maximum monthly indemnity amount that Parrot could purchase on all option dates combined was $6000. Although this term established a cap on the optional coverage, the precise amount of coverage that Parrot could purchase was limited by Guardian's underwriting income rules, which were referenced in the rider but not appended thereto. Specifically, the rider stated: "The monthly indemnity of the option plan ... may not exceed our published income rules for new insureds. These rules limit the total insurance which we will issue in relation to earned income.⁵ We will use the rules that applied on the date of issue of this policy, unless more liberal rules are then in effect." Parrot's policy, to which the rider was attached, also contained the "entire contract" provision mandated by § 38a-483(a)(1). The relevant provision in Parrot's policy states: "This policy, with its riders and attached papers, if any, is the entire contract of insurance. No change in this policy will be valid unless it has been endorsed on or attached to this policy in writing by the president, a vice president, or the secretary of Guardian."

In 1995, Parrot became partially disabled and Guardian began paying monthly benefits to him. One year later, Parrot became totally disabled and Guardian adjusted his monthly benefit upward to $3000, the full monthly indemnity allowed under his original policy. On the 1995 anniversary date, Parrot exercised his future increase option and submitted his tax returns and other financial records to Guardian for use in calculating the additional coverage that he was eligible to obtain under the terms of the future increase option rider. On the basis of those records, Guardian calculated Parrot's average monthly rate of earnings during the twelve months preceding his disability. Guardian then applied its most liberal income rules to that earnings figure and determined that Parrot was qualified to receive an additional benefit of $1600 per month.⁶ On December 19, 1995, Guardian issued to Parrot a second insurance policy specifying an indemnity in that amount.

Parrot's dissatisfaction with Guardian's calculation prompted him to file a diversity action against Guardian in federal district court. Parrot alleged that Guardian had breached the terms of its insurance contract with him and demanded that the company raise his monthly benefits under the 1995 contract to $6000, the maximum set forth in the schedule of benefits, to which the future increase option rider refers. According to Parrot, such a remedy was appropriate because the income rules were not appended to the original policy, and, consequently, were invalid under § 38a-483(a)(1). Parrot also contended that Guardian had misinterpreted the contract term "rate of earnings when you first became disabled," which drives the incremental amount of insurance that Guardian will underwrite to its disabled policyholders in accordance with its published income rules. See footnote 3 of this opinion. Following the close of evidence after a jury trial, the District Court granted Guardian's motion for judgment as a matter of law on both issues and rendered judgment thereon in favor of Guardian.

Parrot appealed from that judgment to the Second Circuit Court of Appeals. Following oral argument by the parties, the Court of Appeals determined that Parrot's claim implicates "an important question of Connecticut insurance law" that involves the application of § 38a-483(a)(1). Parrot v. Guardian Life Ins. Co. of America, 338 F.3d 140, 144 (2d Cir.2003). The Court of Appeals noted that Connecticut appellate precedent addressing that statutory provision is limited to a single case, namely, Sanghavi v. Paul Revere Life Ins. Co., 214 Conn. 303, 572 A.2d 307 (1990); see Parrot v. Guardian Life Ins. Co. of America, supra, at 142-43; in which this court invalidated, under a predecessor statute to § 38a-483, an income limitation in an option rider to a disability policy. Sanghavi v. Paul Revere Life Ins. Co., supra, at 307-308, 572 A.2d 307. The Court of Appeals observed, however, that there are "material factual differences" between the policy at issue in Sanghavi and the policy at issue in the present case, and that the principal concern underlying our decision in Sanghavi apparently does not exist in the present case. Parrot v. Guardian Life Ins. Co. of America, supra, at 143. In its certification order, the Court of Appeals explained: "In Sanghavi, the [Connecticut Supreme Court's] primary concern was that the unappended income rules empowered the insurer to reduce the insured's benefits under the original policy. Parrot's policy, in contrast, applies the more generous of the income rules in effect at either the time of the initial purchase of the policy or when the insured exercises his option. Therefore, any changes in Guardian's published income rules could never work to Parrot's disadvantage." Id. In light of that distinction, the Court of Appeals questioned whether this court would find Sanghavi controlling under the circumstances of this case. See id. Accordingly, the Court of Appeals certified the following two questions to us, which we accepted: "(1) Does ... § 38a-483(a)(1)'s requirement that the `entire contract' be provided to the insured prohibit an insurance company from incorporating by reference current and future annual benefit rates, where the insurer can neither decrease nor eliminate a fixed benefit of the original policy?

"(2) In the event that the unappended income rules are void under § 38a-483(a)(1), what is the proper remedy in this case?" Id., at 145.

Resolution of the first certified question involves an issue of statutory interpretation over which we exercise plenary review. See, e.g., Perodeau v. Hartford, 259 Conn. 729, 735, 792 A.2d 752 (2002). "When construing a statute, [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature." (Internal quotation marks omitted.) Hartford Courant Co. v. Freedom of Information Commission, 261 Conn. 86, 99, 801 A.2d 759 (2002). In other words, "we seek to determine, in a reasoned manner, the meaning of the statutory language as applied to the facts of [the] case, including the question of whether the language actually does apply." (Internal quotation marks omitted.) Jones v. Kramer, 267 Conn. 336, 343, 838 A.2d 170 (2004). In seeking to determine that meaning, General Statutes § 1-2z directs us first to consider "the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, extratextual evidence of the meaning of the statute shall not be considered."

Connecticut has enacted a statute that requires insurers to incorporate certain standard provisions in individual health insurance policies, including those providing disability income protection.⁷ See generally General Statutes § 38a-483(a). Subdivision (1) of § 38a-483(a) requires the inclusion of the following clause: "ENTIRE CONTRACT: CHANGES: This policy, including the endorsements and the attached papers, if any, constitutes the entire contract of insurance. No change in this policy shall be valid until approved by an executive officer of the insurer and unless such...