No. 81-550
IN THE SUPREME COURT OF THE STATE OF MONTANA
1983
LOUISE C. MARTIN,
Plaintiff and Respondent,
VS.
CROWN LIFE INSURANCE COMPANY
and MONTANA BANK OF BUTTE, N.A.,
Defendants and Appellants.
Appeal from: District Court of the Second Judicial District,
In and for the County of Silver Bow
Honorable Arnold Olsen, Judge presiding.
Counsel of Record:
For Appellants:
Henningsen and Purcell, Butte, Montana
Mark Vucorvich argued, Butte, Montana
For Respondent:
Poore, Roth, Robischon & Robinson, Butte, Montana
Urban Roth argued, Butte, Plontana
. .
Submitted: November 8, 1982
Decided: February 18, 1383
Filed:
18 1983
Mr. Justice Daniel J. Shea delivered the Opinion of the Court.
Crown Life Insurance Company appeals from a summary judgment of
the Sil-verRow County District Court which allowed Louise C Martin
.
to collect the difference of $60,000 between the life insurance
benefit of $104,000 she had claimed and the life insurance benefit
of $44,000 which the insurer, Crown Life had paid. Louise C. Martin
was the beneficiary of a group life and health policy which had been
provided for her husband, Daniel Martin by his employer, Montana
Rank of Butte, N.A. After Daniel Martin's death, the insurer,
Crown Life paid Louise C Martin the $44,000 life insurance benefit
.
described in the master policy. She brought this action believing
she was entitled to the $104,000 life insurance benefit set out in
Daniel Martin's individual certificate of insurance. Both sides
moved for sumnary judgment. In addition to granting summary
iudgment in favor of Louise C. Martin for the $60,000 difference,
with interest from January 29, 1979; the trial court awarded
attorney fees to Louise C. Martin of 33 1/3 percent of the total
recovery plus interest from the date of judgment. Crown Life
appeals both the summary judgment and the award of attorney fees.
Crown Life challenges the trial court's ruling that the C r m
Life master policy together with Daniel Martin's individual
certificate of insurance constitute a single contract of insurance.
Based on this ruling the trial court held that the differing m u n t s
of life insurance coverage derived from those two dcaments created
a ambiguity which should be resolved i favor of the insured,
n n
Daniel Martin and his beneficiary, Louise C Martin.
. Crown Life
argues that the error was clerical and should not have been resolved
i favor of the insured and his beneficiary and that equity would
n
require this Court to correct the mistake. Crown Life also claims
that the trial court erred in awarding attorney fees to Louise C.
Martin without benefit of a specific contract provision o r of
statutory authority. W e af firm the t r i a l c o u r t ' s summary judgment
t h a t Louise C. Martin is e n t i t l e d t o a t o t a l l i f e insurance benefit
of $104,000, plus interest, but we reverse t h e award of attorney
fees t o Iauise C. Martin.
This dispute involves t h e amount of l i f e insurance coverage the
insured, Daniel Martin had under a qroup insurance policy issued by
Crown Life Insurance Conrpany t o Daniel Martin's employer, I!bntana
Bank of Butte, N.A. In 1975, Crown Life sold a group insurance
p l i c y t o the Montana Bank System which became effective January 1,
1976. As an o f f i c e r of the Montana Bank of Butte from the time t h e
Crown Life policy became effective on January 1, 1976, u n t i l h i s
death on January 29, 1978, Daniel Martin w s insured under the group
a
policy. The p l a i n t i f f , lhuise C. Martin is Daniel Martin's widow
and beneficiary under the group policy.
To acquaint employees w i t h the benefits of the group policy,
Y~ntanaBank conducted an employee m e t i n g on D e c a r 4 , 1976 which
Daniel Martin attended. A brochure explaining the benefits was
distributed t o each employee; however, Louise C. Martin did not find
such a booklet i n Daniel Martin's e f f e c t s a f t e r h i s death. The
Montana Bank System paid the e n t i r e premium and the Bank's employees
w e r e not individually responsible f o r the paymat of any premiums.
Crown Life issued one master policy which w s kept a t Montana Bank's
a
main o f f i c e i n Billings. The master policy contained a formula f o r
calculating a bank offi.cerVs l i f e insurance benefit by taking 300
percent of annual earnings, and rounding t o the nearest thousand.
There is no evidence t h a t Daniel Martin ever went t o Billings t o
read t h e master policy.
Section 33-20-1208, MCA, requires a group insurer t o issue
individual c e r t i f i c a t e s of insurance containing c e r t a i n information:
"Section 33-20-1208, MCA. 'Certificate. The
group life insurance policy shall contain a
provision that the insurer will issue to the
policyholder for delivery to each person insured
an individual certificate setting forth a
statement as to the insurance protection to
which he is entitled, to wm the insurance
h
benefits are payable, and the rights and
conditions set forth in 33-20-1209 through
33-20-1211.'"
Based on this statute, Crown Life provided the Montana Bank with
certificates of insurance to be issued to employees of the bank.
Daniel Martin received his first certificate of insurance with
an effective date of January 1, 1976. The certificate d.id not set
out the formula for calculating a bank officer's life insurance
benefit. Instead, the certificate merely stated that his life
insurance benefit was $42,000.
In 1977, Daniel Martin's salary increased to $14,700. Because
of the salary increase, Crown Life issued Daniel Martin another
certificate of insurance with an effective date of January 1, 1977.
Based on the formula set forth in the master policy, the correct
m u n t of Daniel Martin's life insurance coverage would have been
$44,000. The second certificate, like the first, did not mention
the formula used to ccanpute an officer's life insurance benefit. It
merely stated that Daniel Martin's life insurance benefit was
$104,000. Montana Bank paid premiums to Crown Life based on the
$104,000 coverage.
It is undisputed that the error on the second certificate is
solely attributable to C r m Life. Both the 1976 and the 1977
certificates of insurance informed the insured that, "If you die
while insured for this Benefit, the m u n t of life insurance shown
on the FRONT PAGE of this certificate will be payable to your
designated beneficiary."
Daniel Martin died on January 29, 1 9 8 The record shms that
.7.
on January 6, 1978 an employee of Montana Bank of Butte and a Crown
Life empl-oyeediscussed the fact that Daniel Martin was overinsured.
Though the Bank h . been paying premiums for $104,000 worth of life
ad
insurance, the correct amount of Daniel Martin's life insurance
based on his income, was $44,000. On January 10, 1978, Crown Life
sent Montana Bank of Butte a corrected certificate of insurance
which stated that Daniel Martin's life insurance benefit was
$44,000. Crown Life failed to inform Daniel Martin of the error on
his certificate of insurance before his death. On March 3, 1978,
more than a mnth after Daniel Martin died, Vince Fisher, Montana
Bank of Butte's president delivered the new, corrected certificate
of insurance to Daniel Martin's widow.
Louise C Martin accepted a payment of $44,000 from Crown Life,
.
but reserved her right to bring an action for the $60,000 balance to
which she believed she was entitled. Crown Life contends that when
there is a conflict between the master policy and the certificate of
insurance, the master policy controls. A provision of the master
policy states that, "[ilf there is any discrepancy between the
provisions of any employee's certificate and the provisions of this
policy, the provisions of this policy shall govern." Crown Life
also contends that even though Daniel Martin never went to Billings
to read the master policy, he knew or should have known that the
master policy controls because of a statement on the front of his
certificate of insurance that, "[tlhe insurance is subject to the
tern of the group policy, and all provisions of the group policy
apply to the insurance whether mtioned in this certificate or
not. "
It has long been the general rule that "[a] certificate issued
to an employee is a part of the insurance contract under a group
.
policy, and in case of a conflict between the terms of the
certificate and the master policy, the construction which is m s t
favorable to the employee should be adopted." Couch on Insurance 2d
5 82.7. In 1942, even before the enactment of a statute requiring
the issuance of individual certificates of insurance for group
policies, we held that an insured had a. right to rely on coverage
described in a benefit certificate issued by a benefit association;
and that ambiguities in the policy should be resolved a-gainstthe
benefit association because they are responsible for the form of the
contract. McDonald v Northern Benefit Ass'n. (1942), 113 Mont.
.
595, 131 P.2d 479. This principle also applies to a certificate of
insurance issued by an insurance company.
In 1976, after the Montana legislature had enacted a statute
requiring individual certificates of insurance for group policies,
we held that the certificates of insurance are a part of the
contra.ctof insurance and tha.t an individual insured had the right
to expect the coverage described i the certificate where a change
n
in the master policy was not reflected in the individual's
certificate of insurance. Fassio v Montana Physicians' Service
.
.543
(1976), 170 Mont. 320, 5fBVP.2d 998. We held that the insured had
the right to be reimbursed for certain medical treatrents which were
covered by the terms of his certificate of insurance, even though a
change in the master policy specified that those medical treatments
would no longer be covered. The policy reasons for our holding in
Fassio are equally applicable here. Because an insured under a
group policy contracts only indirectly (via his employer) with the
insurer, and because the certificate of insurance is the insured's
primary source of information about his essential rights under the
group policy, the insured should he able to rely on tha.tcertificate
of insurance to correctly state the extent of his insurance
coverage. Unless the certificate of insurance contains an accurate
statement of coveraqe, the insureds and their beneficiaries would be
deprived of the opportunity to supplement their coverage should they
find it inadequate.
California has a statute similar t o section 33-20-1208, MCA,
requiring c e r t i f i c a t e s of insurance t o be provided t o the group
pol-icyholder for distribution t o the individual insureds. The
California Supreme Court has held t h a t the individual c e r t i f i c a t e s
of insurance issued pursuant t o a group policy are a p a r t of the
insurance contract. Humphrey v. Equitable Life Assurance Soc. of
America (Ca. 1967), 432 P .2d 746. The California court disregarded
language drafted by the insurer which would have the master policy
control when a conflict exists between the master policy and the
c e r t i f i c a t e of insurance. W disregard similar language here.
e In
holding t h a t the certifica-te of insurance is a p a r t of the insurance
contract, the California Supreme Court reasoned t h a t the purpose of
the c e r t i f i c a t e of insurance i s to:
"provide persons insured under group policies
with information regarding the coverage
afforded. Obviously, only accurate information
w i l l s a t i s f y the statutory requirement. To hold
that an incorrect description of coverage i s
adequate would thwart the legislative purpose."
Humphrey, 432 P.2d a t 750.
The California Court noted (432 P.2d a t 751) t h a t although there are
some contrary decisions the weight of authority holds t h a t the terms
of the c e r t i f i c a t e of insurance are binding on the insurer.
(Citations omitted. ) Based on sound policy reasons, and on McDonald
and Fassio, supra, w hold t h a t the group master policy and the
e
c e r t i f i c a t e of insurance are elements of a single contract of
insurance.
The dollar m u n t of Daniel Martin's insurance coverage is the
essence of the policy. As an employee of the Montana Bank, Daniel
Martin dealt only indirectly with Crown Life and had. essentially no
bargaining power. Martin and h i s beneficiary, Louise Martin,
properly relied on h i s c e r t i f i c a t e of insurance t o correctly s t a t e
the m u n t of h i s l i f e insurance benefit. Crown Life could easily
have s e t out the f o m l a for camputing Martin's l i f e insurance
benefit i his certificate of jnsurance, just as it was set out i
n n
the master policy. The formula was simple: 300 percent of the bank
officer' s annual i n c m , rounded to the nearest thousand. Instead,
Crown Life chose to state only the specific amount of coverage on
the certificate of insurance and to remain silent as to how that
amount was determined. Based on the master policy formula, Daniel
Martin's life insurance benefit would have been $44,000. But his
certificate of insurance stated unequivocally that he was entitled
to $104,000.
Crown Life argues that the error is clerical and should not be
resolved in favor of the insured. But Crown Life chose to set out a
formula for calculating the benefit in the master policy and to
state only the specific dollar m u n t of coverage in the certificate
of insurance. It makes no difference whether the ambiguity was
caused by design or by accident. The drafters had the opportunity
to express the terms in clear unambiguous language, and could have
used the s m language in both the master policy and in the
certificate of insurance. They m s t then bear the burden of the
mhiguity they created. ,
Fitzgerald v Aetna Ins. Co. (1978) 176
.
Mont. 186, 577 P.2d 370. See also, Meagher v. Benefit Trust Life
Insurance Campany (1972), 160 Mont. 333, 502 P.2d 415.
Crown Life has also argued that equity would require this Court
to reform the contract to correct the mistake. The effective date
of the incorrect certificate of insurance was January 1, 1977.
Daniel Martin died January 28, 1978, more than a year later. In
that year, Crown Life could have corrected the mistake, but failed
to do so. It was only after Martin died that the corrected
certificate of insurance was delivered by the Montana Bank president
to Daniel Martin's widow. Equity does not require us to reform a
contract to correct an error in favor of Crown Life when due
diligence would have uncovered and corrected the error before Daniel
Martin died.
Although we have affirned the trial court on the insurance
question, we reverse the award of attorney fees to Louise C. Martin.
The general rule is that in the absence of a specific contract
provision or statutory grant, the prevailing party is not entitled
to an award of attorney fees either as costs of the action or as an
element of a g e . See McMahon v Falls Mobile Home Center, Inc.
.
,
(1977) 173 Mont. 68, 566 P.2d 75; Bitney v. School District No. 44
(1975), 167 Mont. 129, 535 P.2d 1273. Louise C. Martin does not
claim attorney fees under a contract provision or a statutory right.
We have on rare occasions allowed attorney fees in extreme
situations without a contract provision or a statutory right. (See
State ex rel. Florence-Carlton Consolidated Schools v. District
.
,
Court (1981), - Mont - 632 P.2d 318, 38 St.Rep. 1204.) This
is not one of those extreme situations and we are unwilling to
extend the exceptions to this well established. rule. Crown Life
contested and appealed this action in g o d faith. Louise C. Martin
has prevailed on the merits, but we see no compelling reason to
award her attorney fees.
Affirmed in part, reversed in part.
We Concur:
Chief Justice