Case Name: Philip J. MILITELLO v. BANKERS LIFE & CASUALTY COMPANY
Court: Louisiana Court of Appeal
Jurisdiction: Louisiana
Decision Date: 1962-05-07
Citations: 141 So. 2d 454
Docket Number: No. 468
Parties: Philip J. MILITELLO v. BANKERS LIFE & CASUALTY COMPANY.
Judges: Before REGAN, YARRUT and JANVIER, JJ.
Reporter: Southern Reporter, Second Series
Volume: 141
Pages: 454–464

Head Matter:
Philip J. MILITELLO v. BANKERS LIFE & CASUALTY COMPANY.
No. 468.
Court of Appeal of Louisiana. Fourth Circuit.
May 7, 1962.
Rehearing Denied June 4, 1962.
Brumfield & Organ, Donald V. Organ, New Orleans, for plaintiff-appellant.
Porteous & Johnson, Parnell J. Hyland, New Orleans, for defendant-appellant.
Before REGAN, YARRUT and JANVIER, JJ.

Opinion:
YARRUT, Judge.
This suit was brought originally by Plaintiff for certain benefits, plus penalties and attorney's fees, claimed to be due under two policies of insurance; a hospital indemnity policy, and a preferred family hospital-surgical policy, issued to Plaintiff by Defendant.
Plaintiff's wife, daughter and son were substituted as Plaintiffs when he passed away before the trial.
The district court rendered judgment in favor of Plaintiffs on the hospital indemnity policy for $785.67, and on the preferred family hospital-surgical policy for $698.00, plus x-ray benefits for $10.00, or a total judgment of $1493.67, along with costs and expert witness fee for $100.00. The court denied Plaintiffs the penalties and attorney's fees.
Both parties have appealed, Plaintiffs because they were refused penalties and attorney's fees, notwithstanding payment was refused by Defendant "without just and reasonable grounds," under LSA-R.S. 22:-657; and Defendant because Plaintiffs' claim had arisen after the policies were cancelled, and after all claims arising prior to such cancellation had been paid.
The only question involved is whether the illness originated after cancellation. The facts, not disputed, are: The hospital indemnity policy covered indemnity for sickness contracted while the policy was in force, defining sickness, viz.:
" 'Sickness' as used in this policy, means sickness, illness, or disease, other than mental disturbance without demonstrable organic disease, which is contracted and begins and causes loss beginning while this policy is in force. Normal childbirth is not sickness. Any one sickness shall be construed to include sickness from the same cause at various times or sickness from various causes at the same time."
The preferred family hospital-surgical policy insures against certain hospital and surgery expenses caused by "sickness, illness or disease which is contracted and begins and causes loss beginning while the policy is in force and after it has been in force for not less than thirty days from the date of the issuance
Sickness as used in the preferred family hospital-surgical policy is defined, viz.:
" 'Sickness' as used in this policy means sickness, illness, or disease, which is contracted and begins and causes loss beginning while this policy is in force and after it has been in force for not less than thirty days from its date of issue. Any one sickness shall be construed to include sickness from the same cause at various times or sickness from various causes at the same time."
The hospital-surgical policy provides for hospital residence expenses up to 100 hospital days for any one accident or any one sickness. The hospital indemnity policy provides indemnity of $100.00 per week, up to 50 weeks, when insured is confined to the hospital as result of any one accident, or any one sickness.
The policies were in effect from July 30, 1957, to March 5, 1959, when Defendant cancelled both, as was its undisputed right.
On December 22, 1958, while these policies were in force, insured was confined to Touro Infirmary, New Orleans, for a coronary condition; and was so confined until January 18, 1959. Defendant paid benefits under that period of hospitalization for 27 of the 100 allowable days; and under the hospital indemnity policy paid three weeks and six days of the 50 weeks allowable benefits. Insured was re-hospitalized on February 16, 1959, until February 27, 1959, for the same heart condition.
Defendant paid the policy benefits for February 16 through 27, 1959. On February 16, 1959, when insured was required to go into Baptist Hospital for his second period of hospitalization, Defendant wrote insured it was cancelling his policies, and would not accept any further premium payments. Defendant specifically advised him that the cancellation was "without prejudice to any loss beginning prior to the expiration of the time for which premiums had been accepted."
On March 2, 1959, Defendant wrote Baptist Hospital (copy to insured) giving a complete outline of the policy benefits, with the advice that insured was entitled to 100 days hospital expenses for any one sickness; that he had already expended 27 days, and had 73 more days confinement due to "this illness." Defendant also advised the Hospital that insured's hospital indemnity policy provided indemnity for $100.00 per week for 50 weeks due to any one sickness, and that insured had received three weeks and six days of hospital confinement due to that illness. A copy of this letter invited insured's wife to file a claim for his hospital confinement. This was done, and the claim for the second hospitalization period was paid by Defendant. After discharge from the Hospital insured went home. On March 18, 1960 insured re-entered Baptist Hospital and remained there until May 9, 1960. A claim was made to Defendant for this hospitalization period as the remaining benefits provided for any "one sickness." On June 2, 1960, Defendant, by letter, denied the claim. The wife wrote Defendant directing its attention to its letter of May 2, 1959, and particularly to the admission that "we are able to provide benefits for 73 more days of confinement due to this illness." Defendant, by letter (June 16, 1960), advised insured was only covered for the period during which he was paying premiums, and it would not consider losses after the termination of the policy.
During the time of the hospitalization coverage the insured suffered hardening of the arteries, for which he had two periods of hospitalization, and for which Defendant paid the benefits. The insured was still entitled to benefits for one sickness, within the meaning of the terms of the policy, that "sickness" as used in the policy means sickness contracted and causing loss while the policy is in force; and that any one sickness is construed to include sickness from the same cause at various times, or sickness from various causes at the same time.
The undisputed medical testimony is to the effect that this was one disease throughout, the basic underlying cause being hardening of the arteries, the immediate result being coronary thrombosis. Insured never recovered as a result of any of these hospitalization periods. It was during the course of this illness that Defendant chose to cancel the policy, without prejudice to any loss beginning prior to the expiration of the time for which premiums had been accepted. There is no question that this loss occurred around December 22, 1958, and was one sickness within the meaning of the policy.
Dr. Eyrich, for Plaintiffs, an internist, the only expert to testify, in so many words makes clear that insured's three episodes of illness and hospitalization stemmed from the initial illness contracted during the period when the policy was in effect and before its cancellation, as follows:
"Q.- The times that you saw him when you had him in the hospital in 1960 was for the same ailment you had him hospitalized for in 1959.
"A. Yes.
'T think the basic underlying process was arteriosclerosis, which produced myocardial infarct. The actual myocardial infarct occurred within one day of admission, or the morning of the second day in the hospital.
"Q. Is that just a step in this progressive condition?
"A. Yes.
"Q. That is the first time that you had made a diagnosis of coronary thrombosis ?
"A. Oh, no.
"Q. That this man has sustained a coronary thrombosis while he was under your care, is that right?
"A. I made a diagnosis of one having occurred at least on February 19, 1959.
"Q. It will be noted in the record, during the times you were seeing him, that you were treating him for this ' heart condition?
"A. Right.
"Q. Was that the only ailment?
"A. I feel it was the same ailment throughout."
Defendant contends that, since there was' no claim pending on the termination date, the reason for the subsequent hospitalization is immaterial. This is in direct conflict with the definition of "sickness" in the policy, namely, that "any one sickness shall be construed to include sickness from the same cause at various times."
Defendant further contends that the sickness was not the same, because one was an anterior myocardial infarct, while the last was a posterior myocardial infarct or, that that one affected the front and the other the rear of the heart. This appears to be a distinction without a difference, developed by Defendant without any supporting medical testimony.
As the disability arose while the policy was in effect the subsequent cancellation could not affect a claim which had already arisen. Pete v. Metropolitan Life Insurance Co., La.App., 171 So. 868; Dossey v. Life & Casualty Insurance Co. of Tennessee, La.App., 177 So. 427.
We agree with the district court in allowing recovery under the policies. The remaining issue is whether penalties and attorney's fees should b.e allowed.
With respect to 'the statutory penalties (under LSA-R.S. 22:657) where the insurer fails to make payment upon "just and reasonable grounds, such as would put a reasonable and prudent business man on his guard," we agree with the district court that the penalties and attorney's fees should not be allowed.
In considering the statutory basis for assessing penalties and attorney's fees, we find in LSA-R.S. 22:656 (limited to' life insurance) that penalties are assessable only if the failure is "without just cause." Under LSA-R.S. 22:657 (limited to health and accident policies) the penalties are as stated supra. LSA-R.S. 22 :658, provides that all insurers, issuing any type of contract other than those specified in LSA-R.S. 22:656 and 22:657, who fail to make payment within the time specified, are subject to penalties if such failure is found to be "arbitrary, capricious, or without probable cause."
While the district court and we agree the Defendant was legally wrong in refusing payment we, in agreement again with the district court, cannot say such refusal was unreasonable, arbitrary or capricious; otherwise the insurer in a justifiable, though unsuccessful, contest over its liability, would be assessed the statutory penalties. Such holding would, in effect, deny an insurer its day in court. Each case must depend upon its own facts and circumstances. Jones v. Standard Life & Accident Insurance Co., La.App., 129 So.2d 84; Thibodeaux v. Pacific Mutual Life Insurance Co., 237 La. 722, 112 So.2d 423, 75 A.L.R.2d 1228; Finley v. Hardware Mutual Insurance Co., 237 La. 214, 110 So.2d 583.
In view of the 15-month interval between the second and last recurrences of the same illness Defendant was justified in resisting the claim and in requiring judicial proof.
Penal and punitive statutes are strictly construed against those who invoke them. Such statutes are not favored by the courts. Luce v. New Hotel Monteleone, La.App., 106 So.2d 121.
It would be inequitable to impose the statutory penalties here, in view of the finding by the district judge and two of the three judges of this appellate panel that insurer's refusal was neither unreasonable, arbitrary or capricious.
In the case of Phelps v. Southern National Insurance Company, La.App., 83 So.2d 463, the court held that the insurer could not escape liability for statutory penalties (under LSA-R.S. 22:657) for delay in payment of claim, merely because insurer misinterpreted cause of insured's illness and legal effect of policy provisions, as insurer must take the risk of such interpretation.
The difference between the cited case and this case is that the insurer recognized liability and paid for the original illness without question, only challenging the last episode occurring more than 15 months after the last payment; while in the cited case, the insurer refused ab initio to recognize the claim or make any payment based on its misinterpretation of the policy and the origin of the disease. McKinney v. American Security Life Insurance Co., La. App., 76 So.2d 630; Strauss v. New York Life Insurance Co., 204 La. 202, 15 So.2d 61.
For the reasons assigned, the judgment of the district court is affirmed; Defendant to pay all costs in district court, and each party to pay their respective costs on appeal.
Affirmed.