Life Insurance – Persons Entitled To Benefits

Dallas life insurance attorneys need to know about the case issued by the Eastland Court of Appeals in 1981. Here is some relevant information:
Pilot Life Insurance Company sought a judgment declaring that it had no duty to pay life insurance proceeds to Lawrence A. Koch because of the death of his wife. Pilot Life had issued a policy of group insurance to Koch’s employer. The policy afforded life insurance coverage for employees and their eligible dependents. Eligible dependents were defined to include “your husband or wife, unless you were legally separated or divorced.” Pilot Life alleged that Mr. and Mrs. Koch were legally separated on the date of her death. Koch filed a counterclaim seeking the policy proceeds of $5,000, 12% penalty and reasonable attorney’s fees. The jury found that Mr. and Mrs. Koch were separated at the time of her death. Although that separation was pursuant to a “temporary” court order entered in the pending divorce proceedings between Mr. and Mrs. Koch, the trial court entered judgment for Koch notwithstanding the verdict on the theory that under Texas law there is no status of legal separation of a husband and wife before the marriage is dissolved by a decree of divorce. Pilot Life Insurance Company appealed and lost his appeal.
Pilot Life contends that the trial court erred in granting judgment notwithstanding the verdict because the evidence established that Mr. and Mrs. Koch were separated pursuant to an order of a district court and thus they were legally separated on the date of Mrs. Koch’s death; and, were, therefore, legally separated within the contemplation of the policy.
Mr. and Mrs. Koch separated and began living apart on December 23, 1977. On March 23, 1978, Mrs. Koch filed suit for divorce. Temporary orders were entered on March 24, 1978, in the district court of Travis County. The orders set aside a residence to Mrs. Koch, divided the household goods and furnishings, set aside certain vehicles for the parties and provided for the discharge of debts.
Mrs. Koch died September 16, 1978. It was much in dispute whether there was a reconciliation between the parties prior to her death. The evidence did show that the parties lived in separate residences until Mrs. Koch died.
The issue is whether the parties were legally separated at the time of Mrs. Koch’s death. The term “legally separated” as used in the insurance policy is not specifically defined in the policy, nor is there a Texas case that defines the term.
Although contracts of insurance are said to be construed strictly in favor of the insured, they are to be construed generally as other contracts, in that unambiguous words and phrases are to be taken in their ordinary meaning unless there is something in the contract that would indicate a contrary intention.
With no definition in the policy, it must be determined whether the term has a readily ascertainable meaning in the plain, ordinary and popular sense of the words themselves. When terms of an insurance policy are unambiguous, they are to be given their plain, ordinary and generally accepted meaning unless the instrument itself shows that the terms have been used in a technical or different sense.
Since the policy in issue was not specifically drafted for Texas but was intended for use in every state that Pilot Life is authorized to do business, the words “legally separated” should not be considered only on the basis of Texas law which does not recognize legal separation. The meaning of the words have been examined by both state and federal courts in cases in which the decision turns on whether a party is legally separated for insurance and tax purposes. All such cases are concerned with final judgments and decrees. There is not a single case where a court has held that a temporary order, as distinguished from a final judgment or decree, is a legal separation.
It is a settled rule that policies of insurance will be interpreted and construed liberally in favor of the insured and strictly against the insurer, and especially so when dealing with exceptions and words of limitation. When the language of a policy is susceptible of more than one reasonable construction, the courts will apply the construction which favors the insured and permits recovery.
Thus, the court found in favor or Koch.
Since this case, the Texas Family Code, Section 9.301 has made this issue more clear.