Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-85-01970/USCOURTS-ca10-85-01970-0/pdf.json

Parties Involved:
Pamela J. Burak
Appellee
General American Life Insurance Company
Appellant

Document Text:

PUBLISH 

FILED 

UNITED STATES COURT OF APPEALS 

United States Court of Appeals 

Tenth Circuit 

FOR THE TENTH CIRCUIT 

PAMELA J. BURAK, ) 

) 

Plaintiff-Appellant/ ) 

Cross-Appellee, ) 

) 

v. ) 

) 

GENERAL AMERICAN LIFE INSURANCE ) 

COMPANY, ) 

) 

Defendant-Appellee/ ) 

Cross-Appellant. ) 

JAN 12 19S8 

ROBERT L. HOECKER 

Clerk 

Nos. 85-1970 

85-1971 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. Civil Action No. 84-K-782) 

Kent N. Campbell (Samuel L. Anderson with him on the briefs) of 

Anderson, Summermeyer, Wick & Dow, Fort Collins, Colorado, for 

Plaintiff-Appellant/Cross-Appellee. 

Donald M. Burkhardt (Charles H. Haines, Jr. with him on the 

briefs) of Grant, McHendrie, Haines and Crouse, Denver, Colorado, 

for Defendant-Appellee/Cross-Appellant. 

Before McKAY and BALDOCK, Circuit Judges, and BROWN, District 

Judge.* 

McKAY, Circuit Judge. 

*Honorable Wesley E. Brown, United States Senior District Judge 

for the District of Kansas, sitting by designation. 

Appellate Case: 85-1970 Document: 01019290372 Date Filed: 01/12/1988 Page: 1 
.· 

In this nonjury case, two issues are presented on appeal: 

(1) whether Ronald J. Burak was covered under a company group life 

insurance policy when he died, and if so, (2) what amount of death 

benefits are payable to the beneficiary. 

I • 

Ronald J. Burak began employment with Monolith Portland Cement Company (Monolith) on September 16, 1983. On October 4, 

1983, Mr. Burak signed an enrollment card for coverage under a 

noncontributory group life insurance policy (Policy) issued to 

Monolith by defendant, General American Life Insurance Company. 

Mr. Burak named plaintiff, Pamela J. Burak, as the Policy's beneficiary. On October 27, 1983, Mr. Burak was pronounced dead at 

the scene of a single car collision with a bridge abutment. An 

autopsy revealed that Mr. Burak had suffered a nonsuivivable basilar skull fracture from the collision. The autopsy also revealed 

that Mr. Burak was having a myocardial infarction or "heart 

attack" when the collision occurred. 

Plaintiff filed a claim with defendant for $42,000 in death 

benefits on the Policy and for an additional $42,000 in benefits 

pursuant to the accidental indemnity clause contained in the 

Policy. Defendant denied plaintiff's claim on the ground that 

Mr. Burak's death preceded the effective date of the Policy. 

Defendant also denied that the cause of death was accidental. 

-2-

Appellate Case: 85-1970 Document: 01019290372 Date Filed: 01/12/1988 Page: 2 
Plaintiff filed suit to collect the death and accidental 

death benefits in state district court, and defendant removed the 

suit to federal district court on the basis of diversity of citizenship. 28 U.S.C. S 1332 (1982). On October 12, 1984, the district court granted "summary judgment for plaintiff. The district 

court ruled that the provision establishing the effective date of 

the Policy (Effective Date Provision) was ambiguous and allowed an 

interpretation that coverage existed at Mr. Burak's death. The 

court also ruled that Mr. Burak's death resulted from the accident 

and that plaintiff was entitled to an additional payment under the 

Policy's double indemnity clause. 

Upon reconsideration, the district court amended the 

October 12th order by requiring the parties to litigate the benefits granted under the double indemnity clause. After hearing 

evidence, the district court dismissed plaintiff's double indemnity claim. Final Amended Judgment was entered on June 11, 1985, 

nunc pro tunc May 29, 1985. This judgment awarded plaintiff 

$42,000 in death benefits plus interest, but denied the double 

indemnity benefits. 

Plaintiff now appeals the district court's denial of her 

double indemnity claim. Defendant cross-appeals the district 

court's summary judgment ruling that the Policy was effective at 

Mr. Burak's death. Because the issue of whether Mr. Burak was 

covered by the Policy is determinative, we need not reach the 

double indemnity claim. 

-3-

Appellate Case: 85-1970 Document: 01019290372 Date Filed: 01/12/1988 Page: 3 
II. 

In considering defendant's challenge of the summary judgment, 

we apply a de novo standard of review. Wheeler v. Hurdman, 825 

F.2d 257, 260 (lOth Cir.), cert. denied, ___ U.S. ___ (1987); 

Hydro Conduit Corp. ·v. American-First Title & Trust Co., 808 F.2d 

712, 714 (lOth Cir. 1986). Summary judgment was proper if, as a 

matter of law, Mr. Burak was covered under the Policy when he 

died. Coverage under the Policy becomes effective when the individual belongs to an eligible class, the individual completes the 

one-month waiting period, and the Policy is activated by the 

Effective Date Provision. See Record, vol. 1, at 15. The parties 

do not contest that Mr. Burak satisfied the eligibility class and 

waiting period criteria. The sole question then is to determine 

Mr. Burak's effective date under the Policy. 

The Policy provides that its provisions are to be governed by 

California law. Record, vol. 1, at 37. The basic Policy is a 

standard form insurance contract issued by defendant. The Effective Date Provision states that "personal insurance shall be made 

effective on the date the employee is eligible." Id. at 15. The 

individual eligibility date could be established when an employee 

completed full-time work for the required waiting period~-one 

month--or at "the effective date of this [P]olicy, if later.'' Id. 

The face of the Policy states that "[t]he first premium is 

due on the effective date. Future premiums are due each month on 

the first of the month. Policy months after the first [month] 

-4-

Appellate Case: 85-1970 Document: 01019290372 Date Filed: 01/12/1988 Page: 4 
begin on the first of the month." Id. at 14 (emphasis added). 

Thus, it appears at first reading that Mr. Burak should have been 

eligible when his one-month waiting period ended on October 16th, 

and that his insurance should have become effective on that date; 

his first premium would have been due on October 16th with subsequent premiums payable on the first of each month thereafter. 

However, as is true with most form contracts, a company 

choosing a policy may also select various endorsements that modify 

particular policy provisions. Monolith's Policy contains not only 

the standard Effective Date Provision but also an endorsement. 

The endorsement provides: 

that the insurance of an individual shall be effective 

on the earlier of: 

a) the first day of the policy month which 

coincides with the day it would otherwise be 

effective, or 

b) the first day of the policy month which 

next follows the day it would otherwise be 

effective. 

Record, vol. 1, at 16. The parties agree that "the day it would 

otherwise be effective" is the end of the waiting period or 

October 16th in Mr. Burak's case. However, the effect that this 

date has in establishing "the first day of the policy month," or 

effective date, remains in conflict. 

Plaintiff asserts that the Policy could have easily been 

revised to incorporate the endorsement language into the Effective 

Date Provision. Since this was not done, plaintiff claims that 

the "'original policy' and the 'endorsement' appear to be mutually 

-5-

Appellate Case: 85-1970 Document: 01019290372 Date Filed: 01/12/1988 Page: 5 
effe~tive at the same time, thereby constituting an ambiguity" 

that should be resolved in her favor. Plaintiff-Appellant's Reply 

Brief at 7; see Beaumont-Gribin-Von Dyl Management Co. v. 

California Union Ins. Co., 63 Cal. App. 3d 617, 622, 134 Cal. 

Rptr. 25, 27 (1976) ·(ambiguities are to be construed against the 

drafter). 

Plaintiff's argument strikes upon a serious problem in the 

insurance industry. Insurance providers routinely issue standard 

policies and when those policies need to be amended, the insurer 

does not rewrite the appropriate provisions but merely attaches an 

endorsement to the standard policy. The result of this practice 

is that the body of the policy may offer a type of coverage that 

is expressly taken away by a subsequent endorsement. In addition, 

insurance companies frequently fail to calculate how the endorsement may affect nonreferenced sections of the policy. 

Despite their great potential for misleading consumers, the 

use of endorsements is allowed and accepted. Moreover, under 

California law, an endorsement to a policy becomes part of the 

policy and "if there is conflict in meaning between an endorsement 

and the body of the policy, the endorsement controls." 

Continental Casualty Co. v. Phoenix Constr. Co., 46 Cal. 2d 423, 

431, 296 P.2d 801, 805 (1956); Southwestern Funding Corp. v. 

Motors Ins. Corp., 59 Cal. 2d 91, , 28 Cal. Rptr. 161, 162, 378 

P.2d 361, 362 (1963). Therefore, based upon California law, an 

endorsement which conflicts or varies from the standard policy 

-6-

Appellate Case: 85-1970 Document: 01019290372 Date Filed: 01/12/1988 Page: 6 
does not create an ambiguity in terms, but must instead control. 

Accordingly, the effective date of Mr. Burak's Policy is governed 

primarily by the language of the Policy's endorsement, and to the 

degree that the endorsement conflicts with or varies from the 

standard Policy, the endorsement must stand. The terms of the 

endorsement provide the key to whether Mr. Burak was ccvered by 

the Policy at the time of his death. 

Defendant contends that the endorsement means that, if the 

policy holder completes his one-month waiting period on the first 

day of a calendar month, the insurance coverage begins that day. 

If, however, he completes his waiting period on the second day of 

the month or on any day thereafter in the month, he must wait 

until the first day of the next calendar month before coverage 

begins. Since Mr. Burak ended his waiting period on October 16, 

1983, a day which does not coincide with the first day of the 

month, subparagraph (a) would not apply. Thus, Mr. Burak's 

effective date would be controlled by subparagraph (b) and would 

be the "first day of the policy month which next follows," or 

November 1, 1983. 

Plaintiff maintains that the endorsement can be interpreted 

in at least two other ways. First, plaintiff argues that the 

policy month may not be the same as the calendar month, but could 

be interpreted to mean the day the waiting period ended, or 

October 16, 1983. Thus, under this interpretation of subparagraph 

(a), the "first day of the policy month" and the "day it would 

-7-

Appellate Case: 85-1970 Document: 01019290372 Date Filed: 01/12/1988 Page: 7 
otherwise be effective .. would coincide on October 16, 1983, and 

make the policy effective. Second, even if the policy month is 

synonymous with a calendar month, plaintiff suggests that subparagraph (a) can also be understood to mean that the Policy is effective on the first day of the particular month in which the individual satisfies his waiting period. Thus, since the first day of 

the policy month or calendar month that coincided with October 16, 

1983, was October 1, 1983, the Policy could have.become effective 

the first day of October. 

Plaintiff also contends that subparagraph (b) "can be read as 

either November 1, 1983 (the first day of the policy month which 

next follows the day it would be effective), or as October 17, 

1983 (if 'policy month' is not read to be the same as a calendar 

month~ •. ). 11 Plaintiff-Appellant's Reply Brief at 14. Therefore, under either of the alternative interpretations which plaintiff proposes, subparagraph (a) would always establish an effective date before that established by subparagraph (b). 

Having reviewed plaintiff's and defendant's interpretations 

of the endorsement, the Policy, and the record; we find that 

plaintiff's interpretations cannot withstand detailed scrutiny. 

Plaintiff's first interpretation requires the policy months to be 

other than calendar months, when the face of the Policy expressly 

provides that policy months are to "begin on the first of the 

month. 11 Record, vol. 1, at 37. Plaintiff's second interpretation 

inappropriately uses the word "coincide" to modify policy month 

-8-

Appellate Case: 85-1970 Document: 01019290372 Date Filed: 01/12/1988 Page: 8 
rather than ''the first day of the policy month." Even if we did 

not find that plaintiff's interpretations strained the language of 

the endorsement, they do not give effect to each of the subparagraphs. Thus, plaintiff's interpretations of the endorsement 

effectively read th~ ''earlier of" language and subparagraph (b) 

out of the contract. 

While California law requires us to interpret the policy to 

indemnify the plaintiff's losses if "semantically permissible, 

Crane v. State Farm Fire and Casualty Co., 5 Cal. 3d 112, 115, 95 

Cal. Rptr. 513, 514, 485 P.2d 1129, 1130 (1971), we are notallowed to achieve this result by writing out parts of the contract. 

We are bound to give each subsection effect if possible. Holz 

Rubber Co. v. American Star Ins. Co., 14 Cal. 3d 45, 56, 120 Cal .. 

Rptr. 415, 421, 533 P.2d 1055, 1061 (1975) ("An insurance policy, 

like any other contract, must be construed as an entirety, with 

each clause lending meaning to the other."); Jurd v. Pacific 

Indemnity Co., 57 Cal. 2d. 699, , 21 Cal. Rptr. 793, 795, 371 

P.2d 569, 571 (1962); see Cal. Civ. Code, § 1641 (Deering 1987) 

("The whole of a contract is to be taken together, so as to give 

effect to every part, if reasonably practicable, each clause helping to interpret the other."); see also Harborside Refrigerated 

Services, Inc. v. IARW Ins. Co., 759 F.2d 829, 830 (11th Cir. 

1985) ("If possible, the court must adopt a construction which 

will give effect to the total instrument and its provisions."). 

The endorsement is poorly written and obscure. However, because 

plaintiff's interpretations of the endorsement fail to give the 

-9-

Appellate Case: 85-1970 Document: 01019290372 Date Filed: 01/12/1988 Page: 9 
''earlier of" language and subparagraph (b) effect, we reject 

plaintiff's interpretations in favor of the one proposed by 

defendant which does give effect to the entire endorsement. We 

conclude that summary judgment was improperly entered against 

defendant. Mr. Burak was not covered under the Policy and, 

accordingly, plaintiff's appeal as to her right to double 

indemnity benefits is dismissed.* 

REVERSED and REMANDED to the district court with directions 

to vacate its amended judgment and enter judgment in favor of the 

defendant. 

* We note that the plaintiff makes reference to a public policy 

argument that insurance companies should not be allowed to hold 

out coverage in the policy and then limit the coverage through 

exceptions or endorsements that are hidden in the fine print of 

the contract. Plaintiffs-Appellant's Reply Brief at 11. The 

record on appeal does not indicate that the district court was 

asked to make a factual determination of whether the endorsement 

at issue was inconspicuous so as to mislead consumers and thus 

violate public policy. Accordingly, we do not reach the issue. 

-10-

Appellate Case: 85-1970 Document: 01019290372 Date Filed: 01/12/1988 Page: 10