No. 87-26
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
MARYETTA F. BAUER,
Plaintiff and Respondent,
-vs-
KAR PRODUCTS, INC., LIFE INSURANCE
COMPANY OF NORTH AMERICA, GREAT-WEST
LIFE ASSURANCE, CHARLES W. LEA AND
HERBERT MAYBERRY,
Defendants and Appellants.
APPEAL FROM: District Court of the Twentieth Judicial District,
In and for the County of Lake,
The Honorable C.B. McNeil, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
James M. Ramlow argued; Murray, Kaufman, Vidal & Gordon,
Kalispell, Montana
S. Y. Larrick, Kalispell, Montana
Mark A. Squires, Philadelphia, PA
For Respondent:
Douglas J. Wold argued, Polson, Montana
Submitted: November 5, 1987
Decided: February 29, 1988
~i led :
FEO 2 9 1988
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.
In this case, we determine that the District Court,
Twentieth Judicial District, Lake County, properly granted
partial summary judgment against defendant Life Insurance
Company of North America (LINA) and in favor of Maryetta F.
Bauer, holding that an accident policy issued by LINA to
Maryetta F. Bauer provided policy coverage for her accidental
injuries.
On May 14, 1986, while LINA's accident policy was in
effect, plaintiff Maryetta F. Bauer was accidentally thrown
from a horse and she suffered a severe spinal cord injury
which resulted in total paralysis below her midback,
including total loss of use of both legs. The uncontradicted
affidavit of Dr. R. Stephen Irwin, filed in support of her
motion for summary judgment, stated that Maryetta Bauer's
spinal cord has been severed at T-8 (midback) and that she
remains permanently and totally paralyzed below midback. Dr.
Irwin concluded that "for all practical purposes Ms. Bauer
has lost her legs."
In September and October, 1982, while Maryetta F. Bauer
was an employee of Kar Products, Inc., an Illinois
corporation, she was furnished a brochure entitled "Personal
Accident Insurance for Fulltime Employees of Kar Products,
Inc. and Their Families." After examining the brochure and
receiving representations concerning coverage, Maryetta F.
Bauer applied for the personal accident insurance, which was
underwritten by LINA. On October 1, 1982, LINA issued its
certificate of insurance on a family plan to Maryetta F.
Bauer, wherein the principal sum was designated to he
$100,000.00. The policy of insurance was in effect when
Maryetta F. Bauer sustained her injuries.
The certificate of insurance contains a "Description Of
Coverage" which in pertinent part provides as follows:
Loss of Life, Limb, or Sight Indemnity: If such
injuries shall result in any one of the following
specific losses within one year from the date of
accident, the company will pay the benefits
specified as applicable thereto, based upon the
Principal Sum stated in the Schedule of Insureds;
provided, however, that not more than one (the
largest) of such benefits shall be paid with
respect to injuries resulting from one accident.
Loss of two or more members ... the principal
sum.
"Member" means hand, foot or eye. "LOSS" means
with regard to hand or foot, actual severance
through or above the wrist or ankle joints ..
.
Maryetta F. Bauer made a claim under LINA's certificate
of insurance contending that the severance was the cause of
the total paralysis below her midback, the complete loss of
the use of her legs, and was a "loss of two or more members."
Coverage was denied by LINA, and she brought suit in the
District Court for the recovery of insurance benefits, and
for other claims. Both Maryetta F. Bauer and LINA moved the
District Court for a partial summary judgment on her claim
under the certificate of insurance. On December 17, 1986,
the District Court issued partial summary judgment in favor
of Maryetta F. Bauer and against LINA, holding that she was
entitled to the principal sum under the accident insurance
policy on three grounds: (I) that her claim was supported
by the objectively reasonable expectation test; (2) that a
grammar analysis of the policy language provided her
coverage; and, (3) if there was any ambiguity, the policy as
a whole should be construed against LINA.
The District Court certified in its order granting
summary judgment that it was granted as a final judgment
between Maryetta F. Bauer as to the issue of coverage for
plaintiff's injuries by the insurance policy, and that there
was no just reason for delay. Thus, under Rule 54 (b),
M.R.Civ.P., appeal was taken by LINA to this Court from the
order granting partial summary judgment.
On appeal, LINA contends that to establish a loss under
the certificate of insurance, the "member" must be actually
severed, not "some part of the body." It relies on the
holdings in Sitzman v. John Hancock Mutual Life Insurance
Company (Or. 1974), 522 P.2d 872; Juhlin v. Life Insurance
Company of North America (Minn. 1980), 301 N.W.2d 59; Reid v.
Life Insurance Company of North America, Inc. (4th Cir.
1983), 718 F.2d 677; Francis v. INA Life Insurance Company of
New York (S.D.N.Y. 1986), 638 F.Supp. 1117; Horvatin v.
Allstate Life Insurance Company (C.D. Cal. 1986), 631 F.Supp.
1271; and Perry v. Connecticut General Life Insurance Company
(E.D. Va. 1982), 531 F.Supp. 625.
LINA further contends that the informational brochure
first shown to Maryetta F. Bauer did not create an
objectively reasonable expectation that the policy would
cover paralysis of the limbs. Upon this issue, LINA contends
that "dismemberment" cannot mean "paralysis," relying on
Cunninghame v. Equitable Life Assurance Society of the United
States (2d Cir. 1981), 652 F.2d 306.
Finally, LINA contends that the policy is not ambiguous,
relying on Universal Underwriters Insurance Company v. State
Farm Mutual Automobile Insurance Company (1975), 166 Mont.
128, 136, 531 P.2d 668, 673.
A case similar to this came before the Supreme Court of
the State of Washington in Neer v. Fireman's Fund, American
Life Insurance Company (Wash. 1985), 692 P.2d 830. In that
case Neer fell 50-60 feet to the ground while topping a tree
and as a result his spinal column was severed depriving him
of all nerve and muscle function below his midback. The
policy coverage in Neer defined "loss" as "complete severance
through or above . .. ankle joint. I (In this case, loss is
'
defined with regard to a hand or foot as "actual severance
through or above the wrist or ankle joints.) In Neer, as
here, the respondent insurance company urged the court to
adopt an interpretation that required a complete separation
of the feet from the body before payment on the policy was
required. The court considered many of the cases relied on
in this case by LINA, and in determining, made the following
statement:
In the policy language in dispute, complete
severance has no direct object after it. As a
result, the policy does not require "severance of
the feet" but rather accidental loss resulting from
severance of some portion of the body through or
above the ankle. Moreover, severance does not
require separation from the body. "Severance does
not mean amputation. A hand may be severed but
need not be amputated. Amputation is irreparably
cutting off of a limb while to sever may limit its
use, but not necessarily cause amputation." Mifsud
v. Allstate Insurance Company (1982), 116 Misc. 2d
720, 721, 456 N.Y.S. 316, 317 (bone of upper arm
detached from shoulder in revolving door and left
hanging was a covered loss when policy provided
coverage for loss defined as "severance at or above
the wrist. " 1
If ambiguous, the policy language must be
construed in a manner most favorable to the insured
(citing a case). Were we to consider the term loss
defined as a complete severance ambiguous, reading
the contract in a manner most favorable to the
petitioner, we would have to find coverage. Read
as a whole, however, the contract is not ambiguous.
It provides broad coverage for loss resulting from
complete severance through or above the ankle.
Neer lost the use of both feet as the result of a
complete severance of the spinal column, a
severance above the ankle. A practical and
reasonable interpretation of the contract requires
coverage.
We adopt the holding of the Washington Supreme Court in
its interpretation of the contract in Neer as applicable t.o
the certificate of insurance issued by LINA to Maryetta
Bauer. The interpretation is reasonable and entirely
consistent with the language of the certificate of insurance
which nowhere mentions "amputation" or "dismemberment," hut
rather speaks of "severance." Because we agree with this
interpretation, the resolution of the issue is dispositive
and there is no need for us to consider the other objections
raised by LINA to the partial summary judgment. We therefore
affirm the partial summary judgment as entered by the
District Court.
While this case was pending on appeal, LINA moved this
Court for leave to file a supplemental brief in which LINA
sought to argue an entirely new theory of the case based on
the Employment Retirement Income Security Act (ERISA).
Maryetta Bauer objected to the consideration of the
application of ERISA on the grounds that the issue had not
been raised and discussed by the District Court when it
entered partial summary judgment.
In submitting its supplemental brief, IIINA contended
that two recent cases of the United States Supreme Court,
Metropolitan Life Insurance Company v. Taylor (1987), -
,
U.S. - 107 S.Ct. 1542, 95 L.Ed.2d 55 and Pilot Life
Insurance Company v. Dedeaux (1987), - U.S. - 107 S.Ct.
1549, 95 L.Ed.2d 39, had determined that ERISA was the
exclusive vehicle for actions asserting improper denial of
benefits under ERISA-covered employee benefit plans.
When this case was in the District Court, plaintiff had
filed a complaint alleging purely state-law claims. In its
answer, LINA raised the possibility of ERISA application.
Plaintiff thereupon amended her complaint so as to add an
ERISA count as the basis for recovery. The motions for
summary judgment were presented to the District Court and
argued upon state law, and without reference to ERISA. The
partial summary judgment entered by the District Court made
no reference to ERISA. After LINA had appealed the District
Court ruling to this Court, it filed a motion for removal of
the cause to the Federal District Court. The Federal
District Court considered the removal, and remanded to the
state court upon the grounds that the delay of LINA in
removing the cause to the Federal District Court had the
effect of waiving any right of removal. It was only after
the Federal District Court had remanded the cause to the
state court that LINA filed its briefs in this Court seeking
now to raise the ERISA issues.
Title 29 U.S.C. 1132(e) establishes state court
jurisdiction over accidents brought to recover benefits under
an ERISA-covered insurance policy. There are, however,
before us insufficient facts to determine whether in fact
ERISA applies to this cause. This Court has established a
policy that it will not decide upon appeal issues not first
presented to a district court. Whether ERISA applies is a
change in theory from that advanced by LINA in the trial
court for partial summary judgment and under Chamberlain v.
Evans (1979), 180 Mont. 511, 591 P.2d 237, we do not consider
on appeal a theory changed or different from that on which
judgment was entered in the District Court. We therefore
decline at this point to determine or decide any ERISA issues
until the District Court has an opportunity to consider the
same based upon facts adduced before it.
Counsel for Maryetta F. Bauer have requested sanctions
in the form of attorney fees under Rule 11, M.R.Civ.P.
because LINA attempted to raise ERISA issues in this appeal.
She requested attorney fees because LINA attempted to justify
its argument on ERISA on the basis that it "could not have
known that ERISA standards applied to the claims raised in
Maryetta Bauer's pleadings."
Plaintiff's counsel contends that LINA argued to the
federal court when it attempted to remove the cause from the
state court that it was unaware of the ERISA application and
the removability of the state law claim until the Supreme
Court decision in Pilot Life, supra. The Federal District
Court, however, ruled that LINA should have known that ERISA
may apply because the pleadings clearly raised an ERISA
claim.
While the attempted raising of the ERISA claims on
appeal required extensive briefing and documents to be filed
by counsel for Maryetta F. Bauer in this Court as well as
oral argument thereon, it appears that the raising of the
issues in this Court came from appropriate caution by LINA's
counsel and accordingly sanctions in the form of attorney
fees will not be required.
The partial summary judgment of the District Court in
favor of Maryetta F. Bauer and against LINA is affirmed. The
cause is remanded to the District Court for further
proceedings.
We Concur:
Chief Justice