Sanborn v. Pacific Mutual Life Insurance

J. This is an appeal from a judgment for de- fendant company in an action to recover disability indemnity under three health insurance policies. The subject of dispute is the difference between disability indemnity at the full rate, as provided in the policies as originally issued by The Pacific Mutual Life Insurance Company of California, and that at the limited rate of twenty per cent as paid by respondent, the successor to that

company. In 1921, The Pacific Mutual Life Insurance Company of California, hereinafter called the original or old company, issued three non-cancellable income insurance policies, referred to as “non-can” policies, to plaintiff, Harvey Hackett Sanborn. Among other things they provided for indemnity “against disability . . . resulting from sickness; such disability. ... to be such as will result in continuous total loss of business time”. Provision was also made that in case of such disability “the company will pay indemnity . . . during the continuance of disability as defined above until such time as the Insured engages in a gainful

occupation”. In January, 1934, appellant suffered an attack of angina pectoris, combined with arteriosclerosis. Upon proper notification in accordance with the terms of the policies, the

After appellant’s return to work no disability payments were claimed and none were made. In January of 1938, appellant suffered a “cerebral hemorrhage, hypertension” and he has not been able to resume work since that time. On February 1, 1938, he notified the new company of his illness and made a claim for disability indemnity. The company declined to pay the full rate as provided in the policies as written by the old company, contending that the disability had not commenced prior to July 22, 1936, and that claim had not been made therefor within twenty days after that date. The new company did, however, pay the limited indemnity of twenty per cent, $100, as provided in the rehabilitation and reinsurance agreement.

In connection with the above agreement, the situation as it existed prior to the rehabilitation of the old company is set forth in Carpenter v. Pacific Mut. Life Ins. Co., 10 Cal. (2d) 307 , where, at pp. 336, 329, 331, 332 and 322 [ 74 Pac. (2d) 761 ], the court said: “The non-can policies were draining the old company to disaster. If any plan of rehabilita

In this case the following questions arise: What was the effective date of the agreement between the new company and the insurance commissioner as conservator of the old company? Did appellant’s present disability commence prior to such date? Was notice of claim filed in accordance with the agreement?

The commissioner, as conservator or liquidator, may enter into rehabilitation agreements subject to the approval of the court. (Insurance Code, sec. 1043.) The effective date of the agreement herein was designated as “July 22, 1936, at the hour of one o’clock P. M. Pacific Standard

Appellant contends that until such time as the agreement was finally upheld by the United States Supreme Court— the adoption of which date as the "effective date” of the agreement would be of assistance to appellant—the provisions of the old policy prevailed, and that, notice of claim of the later disability having been filed before the date of such affirmance, he is entitled to disability indemnity in accordance with the provisions of the policy as originally written and not as provided in the rehabilitation and reinsurance agreement. It is true that the decision of an appellate on an appeal. Unless an issue is determined contrary to the order as originally made, in whatever form it may be, the order stands. In this case the appellate courts simply affirmed the order of the lower court. That order was an approval of the rehabilitation and reinsuring agreement, which provided, as we have seen, that the effective date thereof was July 22, 1936. The appeals did not delay this effective date, which was necessarily fixed in accordance with the agreement of the parties. While the agreement did not become actually operative until approved by the court, an effective date of December 4, 1936, would be of no benefit to appellant as the notice and claim in connection with his later illness were not filed until long thereafter.

Appellant also contends that as long as the appeals were pending the commissioner of insurance could not turn over the properties of the old company to the new company. This contention may have been technically correct, a matter which we do not feel it necessary to pass upon on this appeal for the reason that appeals to the Supreme Court of Calif or-' nia and the Supreme Court of the United States are in no sense trials de novo as is sometimes the case under statutory

In the Carpenter case, (Carpenter v. Pacific Mut. Life Ins. Co., supra) referring to the contents of the petition for rehabilitation, also here involved, the court (pp. 319, 320) said: “ . . . that it is in the interests of all concerned to preserve the good will, the agency organization and the going concern value of the old company; that in order to accomplish these ends the commissioner organized the new company and on July 22, 1936, purchased all its stock with $3,000,000 of old company funds, and on the same date transferred to the new company all the other assets of the old company except the stock of the new company and certain described claims; that ‘since said July 22, 1936, your petitioner, as conservator, and through the agency and instrumentality of the new company, has continued to carry on and conduct the business and affairs of the old company, and to preserve, so far as possible, its good will, going concern value, and agency organization.’” A number of ob

Moreover, the contention that the effective date of the agreement was January 3, 1939, is not available to appellant. His complaint alleges: “That the disability had commenced prior to the effective date of said reinsurance agreement, that is to say, had commenced prior to July 22, 1936.” The merits of the case having been tried by each side upon the theory that July 22, 1936, was. the effective date of the agreement, and the judgment having been rendered with that date as the basis of the decision, appellant is not permitted upon appeal to substitute some other date, and thereupon urge a reversal; nor, assuming that it could be maintained as the date of actual effectiveness, can an appellate court substitute such date of January 3, 1939. (McNeny v. Touchstone, 7 Cal. (2d) 429 [ 60 Pac. (2d) 986 ] ; Wall v. Equitable Life Assur. Soc., 33 Cal. App. (2d) 112 [ 91 Pac. (2d) 145 ] ; Papineau v. Security-First Nat. Bank, 6 Cal. (2d) 668 [ 59 Pac. (2d) 131 ].) In Ernst v. Searle, 218 Cal. 233 , 240, 241 [ 22 Pac. (2d) 715 ], the court said: “The rule is well settled that the theory upon which a cause is tried must be adhered to on appeal. A party is not permitted to change his position and adopt a new and different theory on appeal. To permit him to do so would not only be unfair to the trial court, but manifestly unjust to the opposing litigant.” If appellant’s present theory is correct, he should have pleaded and proven it. Assuming the presentation to the trial court of the opinions on appeal in the Carpenter ease, or their introduction in evidence, if such introduction occurred, there is nothing therein proving the effective date of the agreement to be January 3, 1939. The only effect in

Up to this point the effective date of the agreement has been considered particularly with reference to the parties thereto, namely, the old company and the new. The approved agreement provided: "Policy holders and policy claimants of the Old Company may elect to accept or reject the reinsurance and assumption hereunder of his policy, contract, or claim at any time within seventy-five (75) days after the entry of the order approving this agreement. The filing with the New Company after the entry of the order of the Court approving the agreement of any claim or proof of loss shall constitute an acceptance of this agreement and a waiver of any right to reject the same. Any policy holder or policy claimant who shall fail to notify the New Company, in writing, of his rejection within said period shall automatically be deemed to have assented to and become bound by this agreement, and entitled to the benefits hereof. ’ ’

Appellant was officially informed of the provisions of the rehabilitation and reinsurance agreement on December 16, 1936. No notice of rejection was presented by him, although at some indefinite date he communicated to a representative of the defendant company that he “did not consider his reorganization agreement very good” and that he would take them to court if they did not pay claims “that were ever due me under those original contracts”.

Appellant points out that there is a distinction between disability and the right to indemnity therefor under a policy. His claim is that under the rehabilitation agreement, where an insured has been disabled and his condition is such that in the exercise of due care for his health he should not return to work, the fact that he does so should not prevent him from claiming that the disability under which he now suffers is no more than a prolongation of the original disability. In other words, that the effect of resuming work is merely to suspend the right to indemnity payments for the period of such resumption. The disability as described in the policies is such “as will result in continuous total loss of business time”.

Appellant cites cases holding in effect that an insured may claim total disability and total loss of business time, for which he may recover indemnity, where, notwithstanding he

Assuming that a disability had occurred prior to July 22, 1936, as in fact one had, still appellant is not in the same situation as the insured in the above cited cases. Appellant’s lack of health may have hampered him and may have reduced his earning capacity; he may have continued to suffer from his old illness. He could have continued with the $500 a month indemnity payments, but he did not choose to do so. The court found that between March 7, 1935, and January 21, 1938, he was fully able to and did gainfully employ all business time in the practice of his profession; that he did not suffer such disability as resulted in continuous or total or any loss of business time or any disability whatsoever. The evidence is strong enough to support this finding. According to his own testimony, appellant’s net income from the practice of law in 1935 was $15,851.10; in 1936, $19,225.87, and in 1937, $22,193.01. In behalf of clients he appeared in many trials and proceedings in the federal and state courts, also before the Railroad Commission and legislative committees. He may not have been able to stand the strain of work as he did when he was younger, but his labor was far beyond the performance of trivial acts (Sherman v. Continental Casualty Co., supra) ; it was of a continuous and substantial character. His return to work not only suspended the right to indemnity payments, but under the circumstances of this case broke the chain of disability. In Martin v. Postal Union Life Ins. Co., 31 Cal. App. (2d) 329 [ 87 Pac. (2d) 897 ], the court had before it a similar policy. At pages 332, 333 of its opinion, the court said: “It will be noted that the terms of the insurance policy quoted

The determinative question in this case is not whether appellant was entitled to indemnity during the period in which he actually worked, but whether had he not worked during that period he would have been entitled to full payments in accordance with the terms of the policies prior to the rehabilitation of the company. Upon his return to work, on receipt of the payment of $1500 by the company, he waived under the first claim of disability all rights to benefits that might have accrued prior to August 24, 1935. The notice of appellant’s second illness was presented to the reinsuring company February 1, 1938. No claim was therein made of illness prior to January, 1938, nor is there any claim that the illness complained of was a continuation of a previous illness. The attending physician reported that the sickness was “cerebral hemorrhage, hypertension”, contracted on January 21, 1938. The same physician testified that the heart condition causing angina pectoris and the cerebral hemorrhage both evidence arterial degeneration, but answered “Yes” in response to the following question: “And this cerebral hemorrhage that he suffered in 1938, in January, was an entirely new thing, wasn’t it?” The witness further testified that it was the cerebral hemorrhage that incapacitated appellant in 1938. The court found: “The aforesaid disability suffered by plaintiff between the 21st day of January, 1938, and the commencement of this action did not commence prior to July 22, 1936, and no claim or notice of claim by reason thereof was filed or given to said Old Company or the defendant herein on or before July 22, 1936, or within twenty days after July 22, 1936.” The evidence amply supports the finding. We are precluded from disturbing the judgment. (Ives v. Prudential Insurance Co., 12 Cal. App. (2d) 306 [ 55 Pac. (2d) 273 ]; Dietlin v. General American Life Ins. Co., 4 Cal. (2d) 336 [ 49 Pac. (2d)

The judgment is affirmed.

Peters, P. J., and Knight, J., concurred.

Appellant’s petition for a hearing by the Supreme Court was denied on February 24, 1941. Edmonds, J., and Carter, J., did not participate.