Anticipatory Breach Of Insurance Contract – Disability Claims

Weatherford insurance lawyers who handle insurance related matters need to understand that an anticipatory breach of the insurance contract has remedies under the law.   This is best illustrated in disability policies where the insurance company is obligated to make monthly payments to the insured.

According to the 1937, Texas Supreme Court opinion styled, Universal Life & Accident Insurance Co. v. Sanders, when an insurance company is obligated by contract to make monthly payments of money to another absolutely repudiates the obligation without just excuse, the obligee is “entitled to maintain his action in damages at once for the entire breach, and is entitled in one suit to receive in damages the present value of all that he would have received if the contract had been performed, and he is not compelled to resort to repeated suits to recover the monthly payments.”  Repudiation is conduct that shows a fixed intention to abandon, renounce, and refuse to perform the contract.

Another Texas Supreme Court is opinion is from 1976, and styled, Republic Bankers Life Insurance Company v. B.L. Jaeger.

In 1974, B. L. Jaeger applied for benefits under a disability insurance policy issued to him by Republic.  Jaeger contended that he had injured his back while at work and, as a result, was totally and continuously disabled.  He claimed that he was entitled to benefits of $300.00 per month for 60 months, the maximum recovery allowed under the policy.  When Republic refused to pay, Jaeger filed suit.

The trial court concluded that Republic had repudiated the policy and thus rendered judgment for Jaeger.  The trial judge found that the “present value of all benefits under the contract of insurance is $18,000.00 including unaccrued installments.”  On this appeal, the judgment was affirmed except as to the calculation of damages, where it was remanded to the trial court to enter a judgment in the amount of the present value of the money.

The measure of damages in an action for breach of contract by repudiation is the total of all accrued payments plus interest, plus the present value of all unaccrued payments that the Jaeger would have received if the contract had been performed.  The “present value” is not merely the sum of all future contract payments for which the defendant will be liable.  Rather it gives the breaching party the benefit of the earning power of his money.  Therefore the proper measure of damages in a case such as this is a sum which, if invested at a reasonable rate of interest, will yield an annual income from both principal and interest, during the policyholder’s disability equal to the monthly benefits which Republic would have paid if it had not repudiated the policy.  The amount actually awarded will be less than the sum of all future payments because it includes a discount which approximates the earning capacity of Republic’s money.