Court Opinion

ID: 9728303
Source: CourtListenerOpinion
Date Created: 2023-08-26 14:04:20.528905+00
Date Added: 2024-06-11T18:25:47.520031
License: Public Domain

Dissenting Opinion by
Mr. Justice Pomeroy:
This case presents the question whether a contract of life insurance is to be interpreted and performed in accordance with the intent of the contracting parties as *229expressed in terras which are neither unclear nor ambiguous, or whether it is to be rewritten by this Court through benefit of hindsight to afford a benefit where none was provided. Specifically, the question is whether a 90-day clause in a double indemnity provision means 90 days, or whether, in a “hard” case, it can be stretched beyond that period (in this case to some 1640 days), or ignored altogether as violative of public policy. It was the opinion of the lower court that the intent of the parties was as expressed in the policy and that no public policy restraints on the freedom of contract had been violated; the majority of this Court holds to the contrary. I believe the court below correct, and I accordingly dissent.
In 1949 a policy of insurance was issued by appellee insurance company on the life of Bartholomew E. Burne, then 22 years of age, in the face amount of $15,-000. Attached to and forming part of the policy was a supplemental agreement entered into on the date of issuance of the main policy, providing for an additional benefit, likewise in the amount of $15,000, in the event that death was accidental. This double indemnity provision read in part: “Such Accidental Death Benefit shall be due and payable only if the Company shall receive due proof ... (4) that such death occurred prior to the anniversary of said Policy on which the Insured’s age nearest birthday was sixty years and within ninety days from the date of the accident.” (Emphasis supplied.)1 Burne’s death in October, 1963 is conceded to have resulted solely from the injuries he sustained by accident four and one-half years earlier in January, 1959. Today’s decision allows the additional recovery *230for this accidental death (i.e., $15,000 in addition to the basic $15,000 face amount of the policy).
The majority, in reversing the summary judgment below in favor of the insurer, necessarily attempts to hurdle two obstacles: first, it seeks a rationale that will permit recovery under the above quoted accidental death benefit provision, notwithstanding the fact that the insured died well beyond the 90-day period; and secondly, it tries to avoid in some manner a provision in the accidental death benefit endorsement which would make double indemnity unavailable should death occur “while any premium is being waived under any disability benefit attached to .. . [the policy],” notwithstanding that premiums were being waived at the time of the insured’s death. I am of the opinion that the majority has not successfully jumped either hurdle but instead has trampled on some fundamental principles of contract law in the attempt.2
I. The 90-Day Provision, The Intent of the Parties, and Public Policy
a. Intent of the Parties
In construing contracts arguably violative of public policy, we traditionally begin by determining the intent of the parties and only reach the question of public policy if then necessary. Block v. Mylish, 351 Pa. *231611, 41 A. 2d 731 (1945); Pocono Manor Association v. Allen, 337 Pa. 442, 12 A. 2d 32 (1940); Restatement (Second) of Contracts §233, at 105 (Tent. Draft No. 5, March 31, 1970). The majority, however, first invalidates the 90-day provision of the accidental death benefit endorsement on public policy grounds, and only then advances a “well settled” principle of law that “if a provision in an insurance policy cannot reasonably be applied to a certain factual situation [,] it should be disregarded.” In support of this principle, three of our past decisions are cited: Grandin v. Rochester German Ins. Co., 107 Pa. 26 (1884); Tennant v. Hartford Steam Boiler Inspection and Ins. Co., 351 Pa. 102, 40 A. 2d 385 (1944); Norlund v. Reliance Life Ins. Co., 282 Pa. 389, 128 A. 93 (1925). An examination of these decisions reveals that in all of them the court sought to interpret the language of a contract to arrive at the intention of the parties. In Grandin, for example, the insured sought coverage of oil which was either stored in or passing through a pipeline system which he operated. The insurer issued a policy which was not adapted to that purpose, but rather contained a term which required the insured to be “the sole, absolute and unconditional owner.” The court there was “driven to an examination of the character of the condition and the reason upon which it is founded, in order to ascertain whether it could have been in the contemplation of the parties when the contract of insurance was made.” 107 Pa. at 35 (emphasis added). The court in Grandin concluded that it was the intent of the parties to write a contract of indemnity insurance whereby the insured would be recompensed for loss caused by destruction of oil in his pipelines, oil of which he was not the sole owner.3 The term requiring that Grandin be *232the sole owner was not “within the contemplation of the parties”, was not part of the contract.4 Both Tennant, supra, and Norlund, supra, are of similar import; both turn on the intention of the parties.5
*233I take no exception to the implicitly stated view of the majority that in interpreting contracts, courts should be careful not to defeat the intention oí the parties by applying terms and conditions appearing in the writing to situations in which the parties could not have intended that they apply. Unlike the majority, however, I do not find that proposition of any help in this case. For I have no doubt—indeed, the parties do not argue otherwise—that not only the insurer but the insured intended that the additional recovery for an accidental death would be precluded if death in the normal acceptation of the term should occur more than 90 days after the date of the accident. Whatever else this appeal presents, therefore, it does not in my judgment present a problem in determining the intent—as of the time of contracting—of the parties,
*234b. Public Policy
The Court’s public policy argument itself suffers from an ambiguity. Is the reader to understand (1) that all 90-day provisions in accidental death benefit endorsements are invalid as violative of public policy, or (2) only those found in policies owned by insureds who in fact die outside 90 days but without “some possible uncertainty” as to causation? There is ample support for either reading.
The opinion of the court observes that to enforce the 90-day limitation would permit “a gruesome paradox indeed—it would permit double indemnity recovery for the death of an accident victim who dies instantly or within 90 days of an accident, but would deny such recovery for the death of an accident victim who endures the agony of prolonged illness, suffers longer, and necessitates greater expense . . . .” This type of “gruesome paradox” in no way depends on a distinction between those after 90-day deaths that present “some possible uncertainty” as to causation and those that do not. Neither does the evocation of the specter of human greed shaping medical decisions depend upon whether or not the insured in fact died outside the 90-day period and without uncertainty as to causation.
On the other hand, the opinion of the court goes to some length to distinguish the case at bar from Sidebothom v. Metropolitan Life Ins. Co., 339 Pa. 124, 14 A. 2d 131 (1940), where there was “inherent uncertainty” as to whether in fact death was caused by the accident. Were the first interpretation intended (all 90-day provisions void), then it would be idle to distinguish a case in which a 90-day provision appeared; the case would simply be overruled. It would appear to follow that not all such clauses are meant to be stricken, and that the validity of such a provision thus depends entirely upon whether the insured, like Bartholomew *235Burne, died beyond the time limitation and without “gome possible uncertainty” as to causation.
It is obvious that the Court is here determining the validity of a contract by means of hindsight. In so doing it fails to observe the fundamental principle that the judicial function in determining the validity of contractual terms must be limited to examination of circumstances known to the parties at the time of contracting. Thus the American Law Institute, in its section dealing with unconscionable contracts or terms, provides: “If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may limit the application of any unconscionable term as to avoid any unconscionable result.” Restatement (Second) of Contracts §234 (Tent. Draft No. 5, March 31, 1970) (emphasis added).6 Contrary to what the Court apparently holds, it is my view that we must allow persons to make contracts which are reasonable in the light of circumstances known to them at the time of contracting. More we cannot ask; more we should not impose. Absent a violation of some external rule limiting freedom of contract, a court should not presume *236to intervene and redraft contracts which were reasonable at the time they were entered into.
The majority finds, however, that such an external rule is here present and that it is violated: “To predicate liability under a life insurance policy upon death occurring only on or prior to a specific date, while denying policy recovery if death occurs after that fixed date, offends the basic concepts and fundamental objectives of life insurance . . . .” The “basic concept and fundamental objective” of life insurance, I should have supposed, was to provide a fund of money payable upon one’s death to a designated beneficiary in accordance with terms and conditions and for the considerations mutually agreed upon between the insurer and the purchaser of the insurance (usually the insured). Here the basic policy was one for “ordinary life”, and the proceeds of $15,000 were paid upon Burne’s death to his widow, the appellant, as beneficiary. The present suit is to compel payment of the additional $15,000 under the accidental death benefit endorsement added to the policy for a small additional premium (less than 10% of the basic premium). This additional benefit was subject to two limitations as to time: (1) that death occur prior (in effect) to the insured’s 60th birthday, and (2) that it occur “within 90 days from the date of the accident.”
The court gratuitously attributes unworthy motives to spouses and relatives and suggests (with no support in the record) that medical decisions in hospitals might be influenced by the existence of the 90-day clause. Specifically, the majority argues that the decision whether or not to try to keep a patient alive might be dictated by the venal interest of the beneficiary in having death occur within 90 days of an accident. This rationale, however, would not be limited to the 90-day clause, but would apply as well to the 60-year-old *237clause. Indeed, it would reach beyond the accidental death coverage to the basic policy, and, a fortiori, to term insurance. For example, the wife in a situation such as the one at bar might well decide to forego further treatment of a comatose and certainly dying husband rather than allow additional costly medical treatment to consume not only the patient’s estate but also the wife’s life insurance proceeds (assuming that they would be available, or that the wife would make them available, for medical expenses). Other situations can easily be imagined in which a family medical decision might be made, quite understandably, in the light of financial limitations. Certainly no court should attempt to pass judgment on these possibilities under the rubric of “public policy”; no more should we strike down the clause in issue because of unfounded and conjectural fear that the greed of a beneficiary will be allowed to deny proper medical treatment to the insured patient.
The court states, without benefit of legal or medical authority, that the Sidebothom holding, supra, like the 90-day clause itself, has been rendered obsolete by the advances in medical science in the last 30 years. I disagree. There is nothing in this record to suggest that Bartholomew Burne might not have lived four and one-half years after this accident had it occurred, say, in 1943 rather than in 1958. There is nothing to suggest that so few deaths now occur within 90 days of an accident as to make 90 days an unreasonable or unconscionable span by which to measure the attachment of coverage. A degree of arbitrariness may be involved in the stipulation of 90 days; that factor would be present in any time period, whether shorter or longer. The concededly valid purpose of the provision is to minimize uncertainty and dispute as to cause of a death allegedly *238due to accidental means by preventing the accident from becoming too remote in time. While no controversy on that subject exists here, we should not overlook the fact that insurance companies have set their rates in reliance on the actuarial statistics and other data pertaining to deaths within 90 days. Whether or not the agreed-upon terms comport in every situation with the possibilities today offered by current medical practice, they were contracted for voluntarily in 1949, with the approval of the Pennsylvania Insurance Commissioner, and it cannot be said that they were then or are now either unfair or contrary to public policy.7
*239In my view the holding that the clause here in question is unenforceable as against public policy is not only without precedent in judicial decisions, but is also without justification in fact.8
II. The Waiver of Premium Provision
The claim of the appellant should fail for yet another reason quite independent of what has been discussed before. Even assuming the invalidity of the 90-day provision, the beneficiary is, in my view, precluded from recovery by an exception in the accidental death endorsement referred to earlier, and quoted herewith: “Exceptions: This Accidental Death Benefit shall not be payable if the death of the Insured shall result.... (10) ... while any premium is being waived under any disability benefit attached to or incorporated in said Policy . . . .”9 The policy did have a disability benefit attached which provided that the company would— “waive the payment of each premium becoming due under said Policy after the commencement of such disability, provided however, that no premium shall be waived, the due date of which is more than six months prior to the date of receipt [by the Company] of written notice of claim hereunder . . . .10 “Disability” is defined in the endorsement as a condition which prevents the insured from “performing any work or trans*240acting any business for compensation or profit” and which “has already continued uninterruptedly for a period of at least six months”.
Contrary to the majority, I am unable to read this waiver-of-premium benefit and the accidental death benefit as producing an ambiguity.11 If, as I think clear, the insured’s death prior to the expiration of a 90-day period following the date of accident was intended by the parties as a necessary condition to recovery under the accidental death benefit endorsement, then it is evident that the two provisions mesh well. Because the insured’s disability following what the majority would refer to as the “first accident” must continue uninterruptedly for six months in order to activate the waiver-of-premium benefit, there can be no recovery under the accidental death benefit, if the “first accident” eventuates in the death of the insured since the death did not occur within the required 90-day period. As to the result when death is caused by accidental means while premiums are being waived due to a previous disability (what the majority calls the “second accident”) the situation is equally clear: The insured’s death because of the “second accident” will not entitle the beneficiary to double indemnity; indeed, this is the precise situation against which the insurer drafted this language.
Any uncertainty which the majority finds in the interrelationship of the two clauses (accidental death and waiver-of-premium) is due altogether to the majority’s own and, as I believe, erroneous invalidation of the 90-*241day limitation. It is understandable that the policy language is not well adapted to the situation resulting from that invalidation. It is only because the majority allows double indemnity for a death resulting beyond the 90-day period that it finds it necessary also to circumvent, on the theory of ambiguity, the waiver of premiums clause. Nevertheless, as I have indicated, it seems to me that even with the 90-day clause ruled out, the deliberate invocation by the insured of the waiver-of-premiums provision operates as a bar to double recovery by the beneficiary appellant. “This Accidental Death Benefit shall not be payable if the death of the Insured shall result . . . while any premium is being waived. .
Being completely satisfied that the lower court was correct in disallowing the claim in this case, notwithstanding the obvious appeal to one’s sympathies which it contains, I would affirm the judgment for appellee.
Mr. Chief Justice Jones joins in this dissenting opinion.

 The premium for the double indemnity feature was $31.05 per year. This was in addition to the annual premium of $476.55 for the basic $15,000 coverage.

 Another issue, not reached by the Court, is whether the typographical format of the accidental death benefit provision, including particularly the 90-day clause, violated §617 of The Insurance Company Law of 1921, Act of May 17, 1921, P. L. 682, art. VI, as amended, 40 P.S. §752 (A) (4). That section requires that “the style, arrangement and over-all appearance of the policy give no undue prominence to any portion of the text” The lower court found no such violation, and I agree completely. A close examination of page 8 of the policy, whereon appears the double-indemnity provision, fails to disclose anything even remotely misleading about either the placement or print employed in setting forth the 90-day provision.

 The majority quotes and emphasizes the following sentence from Grandin: “We are not to suppose that conditions involving for*232feitures are introduced into policies by insurance companies, wbieli are purely arbitrary and without reason, merely as a trap to the insured or as a means of escape for the company in case of loss.” This passage is entirely apt when dealing with a clause which is obviously extraneous, out of place, and contrary to that which the insured requested. It is inapposite when referring to a coverage specifically requested and paid for.

 Today the Grandin result would no doubt be reached under the Restatement (Second) of Contracts §237, at 131 (Tent. Draft No. 5, March 31, 1970), which provides:
“§237 Standardized Agreements.
“(1) Except as stated in Subsection (3), where a party to an agreement signs or otherwise manifests assent to a writing and has reason to know that like writings are regularly used to embody terms of agreements of the same type, he adopts the writing as an integrated agreement with respect to the the terms included in the writing.
“(3) Where the other party has reason to know that the party manifesting such assent believes or assumes that the writing does not contain a particular term, the term is not part of the agreement.” In Grandin the insured specifically requested coverage of petroleum of which he was not the sole owner; he assumed that the contract he received did not require him to be sole owner. The insurer, author of the contract, had reason to know that the “party manifesting assent” would assume that such a term was not in the policy. Therefore, the term, although in fact included in the writing, is not a term of the contract because it was not so intended. See also U.C.C. §2-207(2) (b), 12A P.S. §2-207(2) (b).

 The majority cites two cases from states other than Pennsylvania in support of its proposition that courts have the power to read general conditions out of a contract if they have “no relevance to a particular fact situation”: Westenhover v. Life & Casualty Ins. Co., 27 So. 2d 391 (La. App. 1946) ; Interstate Life & Accident Co. v. Waters, 213 Miss. 265, 56 So. 2d 493 (1952).
Neither of those decisions, however, stands for the proposition for which the majority cites them. Both hold that a clause in a disability policy which insures against “loss of limb” means ‘loss *233of use of a limb” and does not mean “loss of limb by severance”. Thus tiie fact that an amputation occurred after the 60-day period following the accident was irrelevant when loss of use of the limb had in fact occurred before the end of the 60-day period. In the policy at bar, the “loss” that is required prior to the end of the 90-da.y period is “loss of life”; that is to say, “death”. Although it is possible to draft varying definitions of death, see Capron & Kass, A Statutory Definition of the Standards for Determining Human Death: An Appraisal and a Proposal, 321 U. Penn L. Rev. 87 (1972), a court should not undertake to attribute a meaning other than the normally accepted meaning to the term when it appears in a contract and there is no indication whatever that the parties meant anything other than the normal usage.
When an insurance company does define “loss” within a policy as meaning “loss by complete severance of a limb”, only a complete severance within the policy time period will suffice. Cornellier v. American Casualty Co., 389 F. 2d 641 (2d Cir. 1968) ; Huffman v. Occidental Life Ins. Co., 264 N.C. 335, 141 S.E. 2d 496 (1965) ; Shelton v. Equitable Life Assurance Society, 28 Ill. App. 2d 461, 171 N.E. 2d 787 (1961). Cf. Huff v. Vulcan Life & Accident Ins. Co., 281 Ala. 615, 206 So. 2d 861 (1968) (held: whether “loss by severance” includes severance at the wrist of all but a shard of skin is a jury question). See generally Anno., 39 A.L.R. 3d 1311.

 See also the prospective approach of the Restatement as to the enforceability of an agreement fixing damages (enforceable if the amount fixed is “a reasonable forecast” of just compensation). Restatement of Contracts §339 (1932).
In commenting on the enforceability of liquidated damage clauses in general, Professor Corbin has noted that the requirement is for a “reasonable pre-estimate”, and that “Reasonableness in retrospect is not always the same as reasonableness in prospect. Hindsight sometimes demonstrates the error in foresight. Here, too, it is often said that it is enough that it was a reasonable forecast and that it is immaterial what the later event turned out to he.” A. Corbin, Corbin on Contracts §1059, at 346-347 (1964) (emphasis added).

 Under The Insurance Company Law of 1921, Act of May 17, 1921, P. L. 682, art. Ill, §354, as amended, 40 P.S. §4776, a policy of life insurance such as that involved here must have been filed for “formal approval” with the Insurance Commissioner of the Commonwealth. If the Commissioner disapproves of policy language or terms, judicial review may be sought by the insurer.
It thus appears that the General Assembly has placed primary responsibility for determining which insurance policy provisions are in accord with public policy in the Commissioner of Insurance. A review of the regulations published by that official reveals that (1) insurance policies are given close examination, (2) many provisions and types of policies are proscribed altogether, and (3) the 90-day clause which the majority here strikes down has not been condemned by the Commissioner. We must assume that this particular contract was approved by the Commissioner. Longenberger v. Prudential Ins. of America, 121 Pa. Superior Ct. 225, 183 A. 422 (1936).
Although the appellee-insurer has not advanced the proposition, I venture to suggest that the doctrine of primary administrative jurisdiction might well apply here and require the plaintiff-appellant to obtain first the views of the Commissioner of Insurance through an administrative proceeding as to whether the 90-day limitation at issue here violates public policy. See Weston v. Reading Company, 445 Pa. 182, 282 A. 2d 714 (1971). Even were the Commissioner inclined to view this provision as violative of public policy, it is most unlikely that he would attempt to give his opinion retroactive effect, thus upsetting the statistical balance through which insurance rates have been established.

 Anno., Validity and Construction of Provision in Accident Insurance Policy Limiting Coverage for Death or Loss of Member to Death or Loss Occurring within specified Period after Accident, 39 A.L.ii. 3d 1311 (1971) (all cases therein cited); J. Appleman, Insurance Law §612, at 746 (1941 ed.).

 This provision was in consideration of an additional premium of $7.80 per year.

 Although the record does not reveal on what date the waiver of premium provision of Burne’s policy was activated by notification of disability, it is clear that premiums have been waived under that clause prior to Bume’s death 4% years after the date of the accident.

 The opinion of the court describes the ambiguity thus: “It is unclear whether the policy provisions preclude double indemnity recovery only in those cases where death is caused by a second accident which occurred after the six month period, or whether the policy bars double indemnity recovery in all cases where the insured dies by accidental means during a period when premiums are being waived”.