Wetherbee v. United Ins. Co. of America

• Decision Date: 24 September 1968
• Citation: 265 Cal.App.2d 921,71 Cal.Rptr. 764
• Court: California Court of Appeals Court of Appeals
• Parties: Anne Dillon WETHERBEE, Plaintiff and Respondent, v. UNITED INSURANCE COMPANY OF AMERICA, a corporation, Defendant and Appellant. Civ. 24496.

Page 764

71 Cal.Rptr. 764

265 Cal.App.2d 921

Anne Dillon WETHERBEE, Plaintiff and Respondent, v. UNITED INSURANCE COMPANY OF AMERICA, a corporation, Defendant and Appellant.

Civ. 24496.

Court of Appeal, First District, Division 2, California.

Sept. 24, 1968.

Hearing Denied Nov. 20, 1968.

Sedgwick, Detert, Moran & Arnold, San Francisco, Eugene Kelly, Los Angeles, John R. Stokes, Dorothy L. Steeves, Michael D. Calligan, Arcata, for appellant.

Mitchell, Henderson & Dedekam, Eureka, for respondent.

Maurice J. Hindin, Ronald M. Sohigian Hindin, McKittrick & Powsner, Beverly Hills, for amicus curiae Reserve Life Insurance Co., in support of appellant.

Tankel, Toll, Lertzman & Leavitt, Ernest S. Gould, Beverly Hills, as amicus curiae in support of appellant.

SHOEMAKER, Presiding Justice.

Plaintiff Anne Wetherbee brought this action against defendant United Insurance Company of America to obtain declaratory relief, together with compensatory and punitive damages.

Plaintiff's first count alleged that she had purchased two policies of health and accident insurance from defendant, the first in 1958, the other in 1960; that said policies provided for a total payment of $150 per month in the event of a disability requiring continuous confinement within doors; that plaintiff was totally and permanently disabled as the result of a stroke in 1964 and that defendant then commenced paying her $150 per month; that on February 4, 1966, defendant advised plaintiff that her file had been reviewed and that it would make no further payments and would discontinue her insurance coverage as of January 15, 1966; that a controversy had arisen between the parties as to whether plaintiff's condition constituted a 'confining sickness' within the meaning of the two policies.

The second count of the complaint alleged that within 30 days of purchasing the first of the two insurance policies, plaintiff returned the policy to defendant and requested that the same be canceled and her money refunded; that upon receiving said request, defendant represented to plaintiff that the policy provided for the lifetime payment of benefits to plaintiff if she were permanently disabled by sickness or injury; that at the time of making said representation, defendant knew it to be false; that the representation was fraudulent and made with the intent to deceive plaintiff and induce her not to cancel her policy; that plaintiff at all times believed the representation to be true and, in reliance on such belief, did not cancel her policy and subsequently purchased a second policy; that defendant knew at all times that the insurance benefits were essential to plaintiff's sustenance and medical care and also knew that it was obligated to continue to pay said benefits to plaintiff; that defendant's conduct was oppressive to plaintiff.

Plaintiff prayed for a declaration that her condition constituted a 'confining sickness' within the meaning of the two insurance policies; a judgment in the amount of $150 per month for each month from and after January 15, 1966 to the date of trial; a decree compelling defendant to pay further benefits of $150 per month until such time as plaintiff's condition improved; and punitive damages in the sum of $500,000.

The facts are without substantial conflict. On July 28, 1958, defendant insurer issued to plaintiff, a woman then in her late fifties, a benefit policy which obligated defendant to pay plaintiff $50 per month in the event she became totally disabled, suffered a total loss of time and required continuous confinement within doors and regular attendance by a physician.

Within a month after the issuance of the policy, plaintiff became dissatisfied with it because, as she interpreted the policy, it could be canceled at the whim of defendant. She therefore mailed the policy to defendant's San Francisco office and asked that the same be canceled and her premium returned.

Defendant thereafter mailed the policy back to plaintiff, enclosing a letter dated August 21, 1958 and purportedly signed by defendant's 'Pacific Coast Manager,' Louis Hirschorn. This letter assured plaintiff that '(a)ccording to the provisions of your policy, when you are sick or hurt you will draw your benefits as long as you live. Your policy cannot be terminated nor do you have to send in any further premiums on your policy when you are permanently disabled.'

According to Mr. Hirschorn's deposition, the letter in question was a form letter prepared by defendant insurer's former general counsel. Although Mr. Hirschorn denied that he had actually signed the letter, he conceded that it had undoubtedly emanated from his office.

After receiving the letter of August 21, 1958, plaintiff made no further attempt to cancel her policy and continued to pay the premiums thereon. In addition, she subsequently purchased from defendant a second policy which was issued on July 15, 1960. This policy, like the first, contained a 'confining sickness' provision which obligated defendant to pay plaintiff $100 per month in the event she incurred such a disability.

In February 1964, while both policies were still in effect, plaintiff suffered a stroke which resulted in the loss of the major functions of her right arm and leg and the right side of her face. She was thereafter incapable of performing even the simplest household chores, required assistance to feed and clothe herself and was unable to get up when she fell. She was required to spend the majority of her waking hours in a chair and was ambulatory only to the extent that she was capable of a slow shuffle performed with the aid of a brace, a crutch and the assistance of another person. According to the testimony of Dr. Welton, an internist who examined her at the time of her stroke and again shortly before the trial, plaintiff was totally and permanently disabled and required regular medical care. He denied that her condition had in any way improved during the two and one-half years following her stroke.

The evidence pertaining to plaintiff's activities during the period following her stroke was to the effect that she was actually confined to her apartment at least 90 percent of the time. She rarely left the apartment except to obtain medical treatment and was always assisted by another person. On two occasions, she attended meetings of a club to which she belonged, and she also went to church on several occasions.

During the two years following her stroke, defendant insurer paid plaintiff $150 per month under the two policies. However, the payments were frequently late, and plaintiff repeatedly found it necessary to communicate with defendant concerning the delays.

Defendant's records indicate that it had conducted investigations into the extent of plaintiff's disability and confinement in June and August 1964 and again in August 1965, and that the information derived from said investigations was to the effect that plaintiff left her home only to visit her doctor and required crutches or a wheelchair and the assistance of another person on such occasions.

On October 13, 1965, defendant wrote plaintiff's physician, Dr. Davis, requesting supplemental data '(i)n order that adequate reserves be established for this account and so there will be no interruption in the payments now being made. * * *' In a postscript to the letter, defendant directed the following inquiry to Davis: 'It appears that patient is not continuously confined within the house. Is this correct?'

Dr. Davis wrote, 'This is correct,' after the postscript and returned the letter to defendant. Subsequently, on October 26, 1965, he wrote defendant and explained his reply to the postscript in greater detail, stating that when plaintiff made her monthly visits to his office, 'She walks with the aid of a crutch, foot brace and the assistance of another person. * * * In answer to your footnote 'Is she continously (sic) confined within the house?' No she is not, but she must have assistance.'

Defendant subsequently sent plaintiff a $150 check covering the period from November 25 to December 25, 1965, and advised her in writing that 'This represents the final payment * * * based on the medical report in our file.'

Plaintiff thereafter retained counsel who wrote defendant on January 24, 1966, assuring it that plaintiff was still confined to her home and inquiring as to the basis for defendant's decision to discontinue plaintiff's benefit payments. Defendant replied, by letter of February 3, 1966, that it had been advised by Dr. Davis that '(w)hile total disability continues, * * * the condition is not of such severity to cause continuous house confinement.' On the following day, defendant wrote plaintiff and advised her that it had not approved continuance of her coverage as of January 15, 1966.

At the conclusion of the trial, the jury returned a verdict in favor of plaintiff and against defendant insurer and awarded her compensatory damages in the amount of $1,050 and punitive damages in the amount of $500,000. Following the entry of judgment on the verdict, defendant moved for a new trial and said motion was denied. Defendant appeals from the judgment.

Defendant has directed all of its arguments on appeal toward the proposition that the award of punitive damages was improper and the result of errors occurring at the trial and prejudice and passion on the part of the jurors. Defendant apparently does not question the propriety of the award of compensatory damages and concedes that under the rule applied in Norager v. Mountain States Life Ins. Co. (1935) 10 Cal.App.2d 188, 51 P.2d 443, the jury was justified in finding that at all times subsequent to her 1964 stroke, plaintiff was continuously confined indoors, within the meaning of the two insurance policies, and thus entitled to benefit payments of $150 per month.

With regard to the alleged invalidity of the punitive damages award, defendant first contends that since the instant...