Colonial Life & Accident Insurance Co. v. Newman

288 N.E.2d 195 (1972) COLONIAL LIFE & ACCIDENT INSURANCE COMPANY, Defendant-Appellant, v. James W. NEWMAN, Plaintiff-Appellee. No. 1071A217. Court of Appeals of Indiana, Second District. October 24, 1972. *196 C. Dickson Faires, Jr., White, Raub, Reis & Wick, Indianapolis, for defendant-appellant. Thomas F. Gibson, Jr., Miller, Gibson, Peden, Peters & McElfresh, Indianapolis, for plaintiff-appellee. OPINION UPON PETITION FOR REHEARING PER CURIAM. In the decision and opinion of this court as reported in 284 N.E.2d 137, the following holding was enunciated which gives rise to the assertions made by appellant in its Petition for Rehearing: "Indiana decisional law dictates that where liability has attached under a contract of insurance, but where liability has been denied by the insurer, the insured may treat the contract as repudiated and may pursue his remedy to recover all that is due him in a single suit on a lump-sum basis. Prudence Life Ins. Co. v. Morgan (1966), 138 Ind. App. 287, 213 N.E.2d 900; Illinois Bankers' Life Ass'n v. Armstrong (1934) 100 Ind. App. 696, 192 N.E. 901." We therefore deem it appropriate to render the following clarification: Where liability has been denied by reason of an honest dispute concerning facts which constitute a condition precedent to the insurer's duty to pay benefits pursuant to terms of a policy of insurance, repudiation will not be found. The Prudence Life Insurance Company v. Morgan (1966), 138 Ind. App. 287 at 304, 213 N.E.2d 900. Under such circumstance, recovery for future benefits will not be allowed in a total lump-sum amount. On the other hand, an action for total future benefits may be maintained where there has been a total breach of performance. In such instance the contract will be said to have been repudiated. Corbin, Contracts (1951) § 969. Thus, if the insurer's denial of liability goes "to the essence" of the agreement and amounts to a "frustration of the ends it was expected to subserve," the contract may be treated as repudiated, good faith and good intentions of the insurer notwithstanding. New York Life Ins. Co. v. Viglas (1936), 297 U.S. 672, 56 S.Ct. 615, 80 L.Ed. 971. In the case before us, the denial of liability based upon the defense of "pre-existing condition" coupled with Colonial's attempted self-exoneration from the effect of the statutory time limit on certain defenses, (I.C. 1971, 27-8-5-3, Ind. Ann. Stat. *197 § 39-4253 (Burns 1965)) constitutes a sufficient deprivation of the basis of Colonial's bargain with Mr. Newman to require that the contract be treated as totally breached. Such does not, to us, amount to a refusal to pay based upon mere mistake or misunderstanding. Cf. Mobley v. New York Life Ins. Co. (1935), 295 U.S. 632, 55 S.Ct. 876, 79 L.Ed. 1621. ORDER UPON PETITION FOR REHEARING HOFFMAN, Chief Judge. The appellant on July 13, 1972 filed its Petition for Rehearing, together with a Brief in support thereof, and its Motion for Oral Argument. Said Petition alleges that the opinion decision of this Court heretofore rendered on June 23, 1972 is erroneous in that: "1. It contains an erroneous statement of the Indiana law in regards to repudiation of a contract; "2. Colonial Life did not repudiate the insurance contract, and, therefore, Newman is not entitled to recover future periodic payments on a lump sum basis; and "3. Colonial Life is not liable to Newman, and, therefore, Newman is not entitled to recover the judgment rendered in the sum of Six Thousand Three Hundred Sixteen Dollars ($6,316.00), plus costs." And the Court, being duly advised, now finds that appellant's said Motion for Oral Argument and Petition for Rehearing should be denied. It is therefore ordered that appellant's said Motion for Oral Argument and its Petition for Rehearing be, and the same are hereby denied.