Pearce v. General American Life Ins. Co.
| Decision Date | 10 December 1980 |
| Docket Number | No. 80-1112,80-1112 |
| Citation | 637 F.2d 536 |
| Parties | Gerry PEARCE, Appellant, v. GENERAL AMERICAN LIFE INSURANCE COMPANY, Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Bruce Nangle, Clayton, Mo., for appellant.
Joseph M. Kortenhof, St. Louis, Mo., for appellee.
Before STEPHENSON and HENLEY, Circuit Judges, and HUNTER, * District Judge.
Plaintiff Gerry Pearce appeals from a judgment for the defendant General American Life Insurance Company (General) on all five counts of plaintiff's suit for interest, damages and the return of premiums paid subsequent to plaintiff's accidental injury and resultant permanent and total disability. We affirm the district court 1 as to its ruling on Counts I, II and III of the complaint, but reverse and remand Counts IV and V for further proceedings to determine the amount which the plaintiff is entitled to receive as a refund for premiums improperly collected and for a decision on the merits of plaintiff's fraud claim under Count V.
Pearce was an employee of McDonnell Douglas Corporation (McDonnell) and while working in Thailand on behalf of McDonnell sustained serious injuries in an automobile accident on November 14, 1970. After initial treatment in Thailand, Pearce was returned to the United States, where he was hospitalized in El Paso, Texas, under the care of Dr. William J. Nelson. Pearce was eventually transferred to a hospital near to his home in Alamo Gordo, New Mexico.
At the time of the accident, McDonnell carried several group insurance policies covering its employees which were issued by General American Life Insurance Company, of Missouri. Pearce was covered by three of those policies: (1) MCP-5350, Special Accident Insurance, with a maximum amount payable of $150,000 upon the occurrence of permanent and total disability suffered by the employee; (2) MCP-5090, Long Term Disability Income Insurance, paying sixty percent of normal monthly compensation at the time of disability, not to exceed two thousand dollars; and (3) MCP-5546, Additional Life and Accidental Death and Dismemberment Benefits, which offered an additional twelve thousand dollars life insurance and certain benefits for accidental death and dismemberment. The primary focus in this case is upon MCP-5350.
McDonnell deducted the employees' contribution toward the insurance premiums from their paychecks, and forwarded the premiums to General American. Although the employees so covered at the time of each payment of premium were not individually named, the total amount, representing the aggregate premiums owed for all the employees actually covered, was paid in one undifferentiated sum on a monthly basis.
On April 27, 1971, Pearce filed a claim with McDonnell for long-term disability benefits, under policy MCP-5090. In support of that claim, Dr. Nelson filed a report on or about May 5, 1971, indicating that Pearce was totally disabled from performing his or any other occupation, but predicted he could return to work about June 1971. Pearce's handwritten claim form, executed for him by his wife on April 27, 1971, also indicated that a June return date was possible.
Pearce thereafter went to St. Louis, Missouri, where he was treated by Dr. Herbert E. Rosenbaum. Dr. Rosenbaum filed a report, dated August 24, 1971, in which he stated, "I think this man is recovering nicely and we might expect that he will eventually be again employable." Pearce continued his treatment in St. Louis, and in early 1973, underwent rehabilitative treatment at the Jewish Hospital of St. Louis. On April 4, 1973, Dr. Rosenbaum reported that he had told Pearce to "spend a month regrouping all of his energies and emotional stamina," with the aim of beginning work at least on a half-time basis on the first of May 1973. Dr. Rosenbaum suggested observation for a period of one month in some work activity so that Pearce's employability in some aspect of the labor market could be determined.
In an attempt to return to his former duties at McDonnell, Pearce and his wife met with company representatives on April 11, 1973. Pearce was informed that McDonnell was unwilling to hire him back in his former position. He was advised at this meeting to apply for permanent total disability. In response, Mrs. Pearce wrote to Dr. Rosenbaum, who then filed a report that indicated Pearce was permanently and totally disabled, dated June 29, 1973. General American was advised on July 9, 1973, that, in addition to the prior claims filed under the long-term disability policies, Pearce was now filing for benefits for permanent and total disability under Policy MCP-5350.
In response to this notice, General American conducted its own investigation and on September 19, 1973, concluded that Pearce was indeed totally and permanently disabled. On September 25, 1973, General American issued its draft in the amount of $150,000 payable to Pearce under policy MCP-5350.
Pearce thereafter filed this five-count diversity suit. In Count I Pearce alleged that General improperly delayed payment for permanent total disability from December 15, 1970 until October 15, 1973, and that as a result he was entitled to interest of approximately $26,000.00 on the principle amount of the policy and interest of $7,320.00 on the interest claimed since October 15, 1973. In Count II Pearce alleged that the delay was vexatious, in violation of Mo.Rev.Stat. § 375.420, 2 and claimed damages of $15,000.00 plus an attorney's fee of $12,500.00. Pearce alleged fraud in Count III, charging General with knowingly making a false representation with the intent to mislead Pearce by only tendering the $150,000.00 insurance benefit, and in not paying the interest claimed. He prayed for the full amount of interest indicated in Count I, and for punitive and exemplary damages. In Count IV Pearce alleged that McDonnell wrongfully deducted premiums from his paycheck during the period of his disability, totalling $711.56, and claimed a refund in that amount and interest of $172.00. In Count V Pearce accused General of fraud in regard to the transaction alleged in Count IV, and claimed the premium and interest set out in Count IV and punitive and exemplary damages in the amount of $250,000.00.
After trial to the court, judgment was rendered in favor of the defendant General American on all counts. The court found specifically that:
under the facts noted herein that there was no notice of permanent total disability communicated to General American until July 9, 1973. The Court finds further that McDonnell could not have reasonably known that plaintiff was permanently totally disabled, or claiming to be so situated, until the time of plaintiff's application in July of 1973 and Dr. Rosenbaum's statement dated June 29, 1973.
(emphasis added). Accordingly, the court found that there was no improper delay on the part of General, and therefore no viable claim for interest, as alleged in Count I. Further, having found no improper delay under Count I, the court found no vexatious delay, as alleged in Count II, and no violation of Mo.Rev.Stat. § 375.420. Pearce's claim under Count III was likewise denied. Since no wrongful delay was found, the court declined to provide a detailed recitation of the elements of fraud. Pearce's claims under Counts IV and V were denied on the grounds that such claims were properly brought against McDonnell, since the policies between General and McDonnell were for the benefit of certain McDonnell employees, and that McDonnell paid premiums to General and only advised General of the number of employees so covered, and did not indicate the specific employees by name.
The thrust of Pearce's claim is that McDonnell either knew or should have known that Pearce was totally and permanently disabled when he first filed his claim for long-term disability benefits in April 1971, under policy MCP-5090, and that this knowledge is imputable to General. This claim may be answered by a review of the terms of the policy.
As a general rule, plain and unambiguous language will be given its ordinary meaning and effect; the need to resort to construction arises only when an ambiguity exists. Kyte v. Fireman's Fund American Insurance Companies, 549 S.W.2d 366, 367 (Mo.App.1977). The language in the policy is ambiguous where it is reasonably susceptible of two interpretations. Id. at 368. Such ambiguities are construed against the insurer, and in favor of the insured. Williams v. North River Insurance Company, 579 S.W.2d 410, 412 (Mo.App.1979). But where a term is defined in the policy, the court must look there and nowhere else, McManus v. Equitable Life Assurance Society of the United States, 583 S.W.2d 271, 272 (Mo.App.1979).
The crucial issue is the determination of when proof of "permanent total disability" was presented to and accepted by General American. Policy MCP-5350 provides in pertinent part:
If an employee less than age 60 sustains an accidental bodily injury while insured for the Special Accident Insurance and as a result of that injury, directly and independently of all other causes, becomes Totally Disabled within 30 days after the date of the accident in which the injury is received, the Company will, immediately upon receipt of proof of Permanent Total Disability, satisfactory to the Company, and as a result of such injury, pay the employee the Maximum Amount applicable to the employee at the time the injury is sustained less any amount previously paid under this Special Accident Benefit to or on behalf of the employee as a result of the same accident.
As used in this provision:
"Total Disability" means the employee is completely prevented from performing the duties of his occupation.
"Permanent Total Disability" means the employee is completely prevented from performing any work or from engaging in any occupation or employment...
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