A lot of people in Grand Prairie, Arlington, Irving, Fort worth, Dallas, and other areas in Texas will have a disability policy. Sometimes these policies are from work and other times a person will purchase one for themselves. But what happens if the insurance company refuses to pay benefits under one of these policies when a person becomes eligible for benefits.
What happened in one case is discussed by the Houston Court of Appeals, in a 1976 case styled, Republic Bankers Life Insurance Company v. B.L. Jaeger.
This lawsuit concerned a disability insurance contract. B.L. Jaeger sued Republic Bankers Life Insurance Company to recover accrued and unaccrued disability benefits for an accidental injury.
In the lawsuit, Jaeger testified that he was injured on September 10, 1974, and that Republic refused to pay benefits due him on his disability insurance policy issued March 20, 1973. At the trial a letter was introduced from Republic to Jaeger’s attorney stating:
As the policy contract is still within the contestable period, we feel it to be in the best interests of all concerned to rescind the policy and refund all the premiums paid by Mr. Jaeger since the contract’s inception. Enclosed find our check in the amount of $429.75 which represents a refund of all premiums paid ….
Jaeger initially brought suit only for accrued benefits under the policy, however, before judgment a trial amendment was allowed whereby Jaeger pled anticipatory breach and sought recovery of all benefits under the policy accrued and unaccrued. The trial judge permitted the trial amendment.
At this point the appeals court began a discussion as to whether or not the trial judge should have allowed the trial amendment and got into a discussion of the ways this can be allowed or disallowed, depending on the circumstances of the case. The statute that deals with this issue is found in the Texas Rules of Civil Procedure, Rule 66.
For there to be recovery of unaccrued benefits, there must have been a renunciation of the contract.
In order to justify the adverse party in treating the renunciation as a breach, the refusal to perform must be of the whole contract or of a covenant going to the whole consideration, and must be distinct, unequivocal and absolute.
The letter introduced in this case showed Republic’s distinct, unequivocal and absolute intent to refuse to perform its obligation under the insurance contract.
As the court pointed out, “This is not a case where the insurance company did nothing and was sued on the theory of repudiation, …. In this case, Republic took action by writing a letter repudiating their contract with Jaeger. Jaeger is justified in treating the renunciation as a breach enabling him to sue for accrued and unaccrued benefits under the policy.”
One thing relevant here, to Insurance Law Attorneys, is the measure of damages in an action for breach of contract by repudiation is the present value at the time of trial of all that the plaintiff would have received if the contract had been performed. This involves a calculation of all that would have been received under the insurance contract, then reducing that amount to its present value. This calculation is a calculation that involves interest rates, but is not something that is usually very hard to figure.
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