Wolf v. Mutual Ben. Health and Acc. Ass'n

• Decision Date: 10 November 1961
• Docket Number: 42339,Nos. 42267,s. 42267
• Parties: Walter F. WOLF, Appellee, v. MUTUAL BENEFIT HEALTH AND ACCIDENT ASSOCIATION, Appellant. Walter F. WOLF, Appellee, v. UNITED BENEFIT LIFE INSURANCE COMPANY, Appellant.
• Court: Kansas Supreme Court

Page 219

366 P.2d 219

188 Kan. 694

Walter F. WOLF, Appellee, v. MUTUAL BENEFIT HEALTH AND ACCIDENT ASSOCIATION, Appellant.

Walter F. WOLF, Appellee, v. UNITED BENEFIT LIFE INSURANCE COMPANY, Appellant.

Nos. 42267, 42339.

Supreme Court of Kansas.

Nov. 10, 1961.

Syllabus by the Court

1. Where an insured was entitled to benefits under a health and accident policy payable monthly in the event of total and continuous disability, and as a result of accident the insurance company recognized liability and paid benefits to the insured for over three years, but then stopped payments on the report of one doctor, resulting in litigation by which the insured recovered $7,513, the trial court determined a reasonable fee allowance to the insured for the services of his attorney pursuant to G.S.1959 Supp. 40-256, to be $7,500. On appeal it is held the attorneys' fee allowance was reasonable, and the trial court was permitted, on all the facts and circumstances presented by the record, to take probable future benefits to the insured resulting from the litigation into consideration in determining such fee allowance.

2. The provisions of G.S.1959 Supp. 40-256, are construed to authorize the allowance of a reasonable attorney fee for the insured in all actions commenced in which judgment is rendered against an insurance company on a policy of insurance, if it appear that the insurance company has refused without just cause or excuse to pay in accordance with the terms of the policy. The judgment contemplated by the statute need not be after a full trial and hearing on the merits, a confession of judgment or its equivalent (among others) being sufficient.

3. G.S.1959 Supp. 40-256, authorizing the allowance of a reasonable attorney fee to be recovered and collected as part of the costs in an action against an insurance company, upon certain conditions, is a compensatory statute and not a penal one, thus calling for the ordinary rules of statutory construction more fully set forth in the opinion.

4. Generally speaking, where an insurance company's refusal to pay in accordance with the terms of an insurance policy is based on a reputable physician's certificate and advice, its action in withholding payment is not unreasonable, and whether there was any reasonable ground for contesting the claim is a matter which depends upon the circumstances existing when the payments are withheld or liability is declined, and not by the fact that payments were ultimately resumed.

5. Total disability, within the meaning of insurance policies, does not necessarily mean utter helplessness, or inability to perform any task, or even in some cases, usual tasks for a limited period. It is only necessary that the disability render him unable to perform the substantial and material acts of a business or occupation in the usual and customary way.

6. Where a physician's report of an insured's physical condition discloses in detail the facts concerning the insured's disability, which by legal definition classify the insured as totally and continuously disabled, the ultimate conclusion of such physician inconsistent therewith is insufficient to permit an insurance company to withhold payments under an insurance policy for reasonable cause.

7. Where the overall effect of litigation is to establish that an insured has total and continuous disability which measures the future rights and liabilities of the parties to an insurance contract until conditions change, the probable future benefits to the insured as a result of the litigation may be taken into consideration by a court in fixing the attorney fees.

8. The provisions of G.S.1959 Supp. 40-256, which authorize the allowance of a reasonable sum as an attorney fee to be recovered and collected as a part of the costs, do not contemplate an amount in the nature of a speculative or contingent fee conditioned on winning the case, but only a reasonable fee for the insured to pay his attorney for prosecuting the case, and the statute does not contemplate a fee for more than one attorney or firm of attorneys.

George B. Powers, Wichita, argued the cause, and Carl T. Smith, John F. Eberhardt, Stuart R. Carter, Robert C. Foulston, Malcolm Miller, Robert N. Partridge, Robert M. Siefkin, Richard C. Harris and Gerald Sawatzky, Wichita, and William B. McElhenny, Topeka, were with him on the briefs, for appellants.

Charles S. Fisher, Jr., Topeka, argued the cause, and O. B. Eidson, Philip H. Lewis James W. Porter, E. Gene McKinney, Frank C. Sabatini, John High and Roscoe E. Long, Topeka, were with him on the briefs, for appellee.

SCHROEDER, Justice.

These actions were instituted by the insured plaintiff for the recovery of monthly benefits alleged to be payable under certain health and accident policies issued by the defendant companies. Benefits under these policies were payable in the event of total and continuous disability resulting from accidental injury. After commencement of the actions the defendants paid the plaintiff all accrued monthly payments, and the plaintiff stipulated that such payment was in full settlement and agreed to dismiss the actions with prejudice. The issue of whether the defendants were liable for attorneys' fees under G.S.1959 Supp. 40-256, was reserved for determination by the court. After a hearing on this issue the trial court held the defendants liable for attorneys' fees, from which ruling appeals have been duly perfected by the defendants.

Four appeals have been docketed in this court, all of which have been consolidated by agreement of the parties. For further clarification, No. 42,267 is an appeal by Mutual Benefit Health and Accident Association from the initial adverse judgment of the trial court dated June 15, 1960, and No. 42,339 is Mutual's appeal in the same action from subsequent rulings of the trial court. These separate appeals were taken to avoid the possible argument that a motion for a new trial was unnecessary and therefore would not extend the appeal time.

The same situation is presented concerning the action against United Benefit Life Insurance Company. This defendant took an appeal from the initial adverse judgment of the trial court dated June 15, 1960, (No. 42,268) and also from the trial court's subsequent rulings (No. 42,338). The two actions in the trial court were consolidated for hearing because the identical issue of the plaintiff's (appellee's) total disability was involved in both cases.

The trial court ordered the defendants (appellants) in both cases to pay $7,500 for an attorneys' fee, and after hearing arguments on the motion for a new trial, allocated $6,000 of the fee against Mutual Benefit Health and Accident Association (appellant in Nos. 42,267 and 42,339), and the remaining $1,500 against United Benefit Life Insurance Company (appellant in Nos. 42,268 and 42,338). Throughout the remainder of this opinion we shall treat these cases as one and refer to the fee allowance as $7,500.

Basically, only two questions are presented: (1) Whether or not the appellee is entitled to recover attorneys' fees from the appellants under the provisions of G.S.1959 Supp. 40-256; and (2) if the appellee is entitled to recover attorneys' fees, was the allowance for attorneys' fees made by the trial court reasonable? Within these questions others are embraced.

Except for the expert testimony concerning the amount of a reasonable attorney fee, the facts were stipulated by the parties. The appellee, Walter F. Wolf, held several health and accident policies of insurance with the appellants which provided for monthly benefits aggregating $400 per month (prior to reaching age 60 and $325 per month after age 60) in the event of accidental injury resulting in whole and continuous disability. On May 27, 1955, when he was 55 years old, he was severely injured when the tractor which he was driving fell some fifteen to twenty feet from a bridge on top of him, as a result of which he was hospitalized for several months and suffered a whole and continuous disability which all parties agree lasted until July 1, 1958. The appellee was paid $400 per month benefits until July 1, 1958. On June 27, 1958, the appellee was examined one time by Dr. Harold S. Bowman, an orthopedic surgeon at Wichita, Kansas, who gave a report which was admitted into evidence.

At this particular time the appellee was under the care of Dr. G. R. Hastings, a general practitioner from Garden City, Kansas, and Dr. H. O. Marsh, orthopedic surgeon of the Wichita Clinic at Wichita Kansas, and had been under their care since the original injury was inflicted. Both Dr. Hastings and Dr. Marsh were at that time, and are now (at the time of trial), of the opinion that the appellee was, and is, suffering from a whole and continuous disability. Both the reports of Dr. Marsh and Dr. Hastings were attached to the agreed statement of facts and admitted into evidence.

On the basis of the report of Dr. Bowman and in the face of the reports of Dr. Hastings and Dr. Marsh, the appellants terminated the payment of monthly benefits to the appellee. The appellee thereafter consulted an attorney in Garden City, Kansas, who for several months attempted to negotiate a settlement of the appellee's claim with the appellants, but being unable to arrive at a satisfactory settlement forwarded the matter to Charles Fisher of Lillard, Eidson, Lewis & Porter of Topeka for handling. This firm accepted employment in accordance with a letter dated July 29, 1959, which reads in part:

'Relative to attorneys' fees, we would be happy to handle this case for you on a basis of a contingent fee of thirty-three and one-third per cent of the gross amount of recovery, less a credit to you of any attorneys' fees allowed by the Court. In other words, the statute allows the recovery of attorneys' fees and if we are successful, these would be applied to the overall thirty-three and one-third per cent arrangement. If this is...