Wiener v. Mutual Life Ins. Co.

• Decision Date: 20 July 1945
• Docket Number: No. 3496.,3496.
• Citation: 61 F. Supp. 430
• Parties: WIENER v. MUTUAL LIFE INS. CO. OF NEW YORK.
• Court: U.S. District Court — Eastern District of Missouri

61 F. Supp. 430

WIENER v. MUTUAL LIFE INS. CO. OF NEW YORK.

No. 3496.

District Court, E. D. Missouri, E. D.

July 20, 1945.

Burnett, Stern & Liberman, of St. Louis, Mo., for plaintiff.

Jones, Hocker Gladney & Grand, of St. Louis, Mo., for defendant.

HULEN, District Judge.

Plaintiff instituted this action against the defendant to recover disability benefits under a policy of insurance issued by defendant. The petition is in four counts, for yearly benefits. The first count covers the period July 3, 1940, to July 3, 1941. Counts two, three, and four are for successive yearly periods. The answer put in issue the total and permanent disability of the plaintiff within the meaning of the term as used the policy during the period in question. The case was submitted to the jury on interrogatories. The jury answered the interrogatories in favor of the plaintiff, and also returned a verdict finding defendant's refusal to pay the plaintiff was vexatious, arbitrary, and without reasonable cause, and allowed plaintiff $1500 attorneys' fee, but no damages. The principal complaint now presented by motion for new trial of the defendant is that the Court erred in submitting to the jury the issue of vexatious refusal to pay plaintiff's claim.

This is the second trial of this case. The first trial was in the state court. There plaintiff suffered an adverse verdict. On appeal to the St. Louis Court of Appeals, that Court, 170 S.W.2d 174, certified the case to the Supreme Court because of division in opinion. The Supreme Court reversed and remanded the case for new trial, 179 S.W.2d 39, on account of error in admission of evidence and instructions given. The record on the second trial is not substantially different than that of the first trial as summarized in the opinions of the Supreme Court.

By brief, the plaintiff submits the following circumstances in support of his position that the issue of vexatious refusal to pay was properly submitted to the jury:

"1. The fact that the defendant company had recognized the claim and paid the benefits thereunder for four years, but in 1941 ceased its payments without any apparent reason or justification.

"2. The undisputed testimony that plaintiff's condition had not improved by 1941, but, if anything, was worse.

"3. The report by Dr. O'Neal, the defendant's own doctor, in May, 1941, that plaintiff was still disabled and should not return to work.

"4. The inexplicable, arbitrary failure of defendant to produce any testimony on the ultimate issue, especially its failure to have the insured examined before trial by its doctors or by a doctor appointed by the court.

"5. The `maneuverings' by defendant in its pleadings in an unjustified, reprehensible effort to get immaterial, prejudicial evidence before the jury.

"6. The attitude of the company, exemplified by the statements of its adjuster, that it would only make a lump sum settlement, to get the claim off of its books, despite its contract to continue annual payments during the period of disability."

In examining the authorities cited by learned counsel for the plaintiff and defendant, it appears that while the opinions handed down by the appellate courts construing the statute on vexatious refusal to pay, R.S. No. 1939, Section 6040, Mo. R.S.A., are uniform as to principles of law announced, the application of the law to the fact situations in the particular cases does not present a uniform construction of the law. The authorities are agreed that a penalty for vexatious refusal to pay is not lightly to be assessed and its imposition will, with rare exceptions, be found to be based upon evidence of conduct on the part of the insurer which clearly reflects delaying tactics, bad faith, or a wilful and recalcitrant attitude toward the claimant on the policy. The cases make it clear that absent such conduct, if there is any reasonable doubt on the part of the insurer as to its liability, it is justified in refusing to pay the claim, and where such liability is doubtful, it is error to submit to the jury the question of whether the insured's refusal to pay was vexatious. Clower v. Fidelity-Phenix Fire Ins. Co., St. Louis Ct. App. 1921, 220 Mo.App. 1112, 296 S.W. 257; Paetz v. London Guarantee & Accident Co., Ltd. of London, England, K.C.Ct.App. 1934, 228 Mo.App. 564, 71 S.W.2d 826. The penalty should not be permitted unless the evidence and the circumstances show that the refusal to pay was wilful and without reasonable cause, as the facts would appear to a reasonably prudent man before the trial. Volz v. Travelers Insurance Co., K. C.Ct.App. 1942, 161 S.W.2d 985.

The defense urged at both trials of this cause was one of fact. Such being the case, the question of vexatious refusal to pay will not be one for the jury to pass upon unless there is "something of a substantial nature" in the case to indicate that the insurer has acted in bad faith and without reasonable cause. St. Clair v. Washington Fidelity National Insurance Co., St. Louis Court of Appeals, 89 S.W.2d 85. We review some of the cases as illustrations of what the courts have in mind when they refer to "something of a substantial nature" in the case to indicate that the insurer has acted in bad faith and without reasonable cause. In Clair v. American Bankers Ins. Co., K.C.Ct.App. 1940, 137 S.W.2d 969, it was denial of liability without making any investigation and assertion that the policy was reinsured with another company, a claim later shown to have no basis in law or fact. In Thomas v. Metropolitan Life Ins. Co., K.C.Ct.App. 1935, 230 Mo.App. 206, 89 S.W.2d 590, it was the writing of letters by the insurer which misconstrued the terms of the contract sued on, and which set up an arbitrary and false basis as the grounds for refusing to pay. In Lux v. Milwaukee Mechanics' Ins. Co., K.C.Ct. App. 1930, 30 S.W.2d 1090, it was the raising of the issue of plaintiff's insurable interest without a tender back of premiums. In White v. American Life & Accident Ins. Co., St. Louis Ct.App. 1936, 90 S.W.2d 118, it was defendant's action in taking the position that at the time the policy was issued, assured was suffering from duodenal ulcers, which it claimed had contributed to his death, while assured stated in his application he was in good health. The insurance company did not have any evidence to the effect that the insured was suffering from duodenal ulcers at the time the policy was issued. The court held that the defendant could not reasonably have expected the return of a verdict in its favor upon the issue of breach of the sound health provision of the policy. In Florea v. Iowa State Ins. Co., St.L.Ct.App. 1930, 225 Mo.App. 49, 32 S.W.2d 111, it appeared that three days after a fire loss, plaintiff notified the company's agent; that an investigator came to the scene of the first a month later; that neither agent nor investigator would inform plaintiff as to the company's position on paying the loss. A letter to the company got no reply. Mortgage of the premises had like experience. The local agent could get no response from the company. Such facts were held to sustain recovery of penalty for vexatious refusal to pay the loss. In Novosel v. Mid West Life Ins. Co. of Mo., K.C.Ct.App. 1925, 276 S.W. 87, recovery was allowed where defendant's answer alleged that at time of issuance of the policy, insured had tuberculosis of the lungs, which resulted in her death, and that the insured was aware of her condition, and that the insured falsely warranted her condition in her application for insurance. At the trial, the evidence of defendant's medical examiner showed that insured did not have tuberculosis at time of her application. Deceased's death certificate showed she died of lobar pneumonia. The evidence showed all premiums on the policy were paid, yet it was insisted by defendant at the trial that there was a default in payment of premium. In Occidental Life Insurance Co. v. Eiler, 8 Cir., 125 F.2d 229, certiorari denied 316 U.S. 688, 62 S.Ct. 1278, 86 L.Ed. 1760, it was the act of the insurance company in contesting a claim for accidental death, where deceased committed suicide while insane, in the face of a long line of decisions, both federal and Missouri, which sustained the proposition that suicide by an insane person is death by accidental means. In Columbian National Life Insurance Co. v. Keyes, 8 Cir., 1944, 138 F.2d 382, it was the act of the defendant in raising the question of the constitutionality of the Missouri suicide statute and also claiming the contracts in issue were Massachusetts contracts, although each contained an express provision to the effect that it was to be treated as a Missouri contract.

Plaintiff in the case at bar claims that the payment by the defendant company of benefits under the policy for four years is a circumstance to support the allowance of damages for vexatious refusal to continue payments under the policy. In Stearns v. Prudential Ins. Co. of America, Springfield Ct.App. 1940, 235 Mo.App. 135, 140 S.W.2d 766, 774, a situation somewhat similar to the one now urged by the plaintiff was present. In the Stearns case, the plaintiff became disabled because of pleurisy and pulmonary tuberculosis, and the defendant commenced the payment of disability claims under the provisions of the policy. Payments were continued for almost two years before the defendant terminated the payments. Plaintiff filed suit, whereupon defendant resumed payments for several years. Payments being suspended, plaintiff instituted an action on the policy. Trial resulted in a verdict for the plaintiff, assessing damages for monthly payments due and for vexatious refusal to pay. In the Stearns case, plaintiff was examined by two physicians, upon whose report the insurance company made payments. The court found that the plaintiff was totally and permanently disabled unless in fact he was a malingerer. There was no evidence of malingering on the part of the...