Petition for Writ of Certiorari — Burak v. General American Life Insurance

IN THE SUPREME COURT OF THE UNITED STATES

October Term, 1987

PAMELA J. BURAK, Pezztioner,

v.

GENERAL AMERICAN LIFE INSURANCE COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

SAMUEL LEE ANDERSON

323 South College Avenue,

Suite 3

Fort Collins, CO 80524

(303) 482-4011

Counsel of Record

KENT N. CAMPBELL

323 South College Avenue,

Suite 3

Fort Collins, CO 80524

(303) 482-4011

Counsel for Petitioner

QUESTION PRESENTED

The parties filed early cross motions for summary judgment

to resolve a life insurance coverage issue. The sole issue raised was

the effective date of coverage. Petitioner beneficiary was granted

summary judgment. The court of appeals reversed and granted

respondent insurer summary judgment.

The question presented is:

1. Whether a federal appeals court may, consistent with

the requirements of the Fifth Amendment Due Process

Clause, the Seventh Amendment right to jury trial and

Fed. R. Civ. P. 56, grant summary judgment to an

appellant rather than remand for trial when there are

genuine litigable issues of material fact that were rendered

moot by the trial court’s grant of summary judgment but

which were revived when the appeals court reversed?

The circuit courts of appeals are in conflict as to this issue and

the Tenth Circuit Court of Appeals’ directive appears to conflict

with an applicable decision of this Court on this federal question.

{Note: Petitioner reserves the right to argue the following ques-

tion in the event certiorari is granted on the above question, but

does not include the following question among the reasons for the

grant of certiorari. |

2. Whether a court of appeals violates the Eve Doctrine

when it construes an ambiguous life insurance policy

endorsement against a widow beneficiary despite that con-

trolling state law requires any ambiguity be construed

against the insurer?

3

TABLE OF CONTENTS

Page

QUESTION PRESENTED ..........000cccccccscceseeens ;

TAME OF AUITHOMITIOS 5.05. nee

OPSNONS BOW. SO eee 1

JURBENCTION ....... eee 2

CONSTITUTIONAL PROVISIONS AND RULE

BIVOLVED nunc ee eee 2

STATEMENT OF THE CASE .............:..+:+0s+.-+: 3

REASONS FOR GRANTING THE WRIT ................ 7

I. The Tenth Circuit’s Order Granting Summary

Judgment to An Appellant Rather Than Remand-

ing for Trial Where There Remain Genuine Litig-

able Issues of Material Fact Conflicts With a Prior

Decision of This Court and Presents an Important

Question of Federal Law Which Should Be Settled

If Ic Is Noe Alseadt (00... cone eee eee we 7

II. The Tenth Circuit’s Decision Conflicts With the

Decisions of Other Federal Courts of Appeals on

the Same Matter For Which There Is Need for a

Uniform Rule «ox cik<cxecece ee eee 10

Ill. The Decision Below Creates an Intra-Circuit

Conflict Relating to a Recurring and Important

Ween woe ck a open ea eee 15

CONCLUSION «wo 66 6cnud kesh ee ee 16

APPENDIX (Opinion and Judgment of Court of Appeals,

Order Denying Petition for Rehearing, Opinion and Order

of the District Court, Judgment of the District Court,

Amended Order of the District Court, Minute Order of

the District Court and Fed. R. Civ. P. 56) ........... la

aie

TABLE OF AUTHORITIES

Constitutional Provisions: Page

United States Constitution, Fifth Amendment ......... 2, 13

United States Constitution, Seventh Amendment ...... 3, 14

Cases:

UNITED STATES SUPREME COURT DECISIONS:

Commissioner v. Bilder, 369 U.S. 499 (1962) ............ 13

Dickinson v. Petroleum Conversion Corporation,

I TION nc cca ccavscavececvces 16

Flonda v. Rodnquez, 469 U.S. 1 (1984) ................ 14

Fountain v. Filson, 336 U.S. 681 (1949) ............ 7, 8, 10

Goldberg v. Kelly, 397 U.S. 254 (1970) ........0 0.2.2... 13

Hanna v. Plumer, 380 U.S. 460 (1965) ................. 10

Hickman v. Taylor, 329 U.S. 495 (1947) ............4.-.. 10

Horme/ v. Helvering, 312 U.S. 552 (1941) ...... 7,9, 10, 11

John Hancock Mutual Life Insurance Company v.

a ee 15

Kennedy v. Silas Mason Company, 334 U.S. 249 (1948) .... 9

Lehman v. Lycoming County Children’s Services

NG ME IE, PE OUD 5 6a do cee seas cs cccedeas 10

Lugar v. Edmonson Oil Company, 457 U.S. 922

oe ohne 7

Mathews v. Eldridge, 424 U.S. 319 (1976) ............... 13

McNabb v. United States, 318 U.S. 332 (1943) .......... 14

Montoya v. Kennedy, 366 U.S. 308 (1961) .............. 14

Poller v. Columbia Broadcasting System, Inc.,

ee aaa pee adecanswanwan oe 12

-Li-

Scarborough v. United States, 431 U.S. 563 (1977) .......

Southern Construction Company v. Pickard,

WOO WEE, SF TROON on ona cece ace cesssescscise

United States v. Doe, 465 U.S. 605 (1984) ...............

United States v. Rio Grande Dam and Irngation

Company, 184 U.S. 416 (1902) ................

CIRCUIT COURTS OF APPEALS DECISIONS:

Black Warnor Electric Membership Corporation

v. Misstssippt Power Company, 413 F.2d 1221

Fs als ae aeons gle wees Gates ete ees.6

Burak v. General Amencan Life Insurance Company,

ee Ret Le | errr rer rr erre

Capital Temporanes, Inc. of Hartford v. Olsten

Corporation, 506 F.2d 658 (2d Cir. 1974) ......

Case and Company, Inc. v. Board of Trade of the

City of Chicago, 523 F.2d 355 (7th Cir. 1975) .......

Eagle v. Louisiana and Southern Life Insurance

Company, 464 F.2d 607 (10th Cir. 1972) ...........

Jones v. Nelson, 484 F.2d 1165 (10th Cir. 1973) .........

M. Snower & Company v. United States, 140 F.2d

OF ee A a ok ee ieee ean isco ea

Machinery Center, Inc. v. Anchor National Life

Insurance Company, 434 F.2d 1 (10th

Cio Or ee eer ee ts ct to 2a,

Ozark Milling Company, Inc. v. Allied Mills, Inc.,

pe 8 Te Le eo: eae renner

Redhouse v. Quality Ford Sales, Inc., 511 F.2d

et ee, ee a eee

Roberts v. Hollandsworth, 582 F.2d 496

ie I her tent ty eee

Smith v. United States, 362 F.2d 366 (9th Cir.

re line EIR I No eal 5 Sa AA are

Tomalewski v. State Farm Life Insurance Company,

Ro ee Es ae |: ee ere errr es

United States Trotting Association v. Chicago

Downs Association, Inc., 665 F.2d 781 (7th

Ga ROO eS oe hap icabbusackoeer en aioe en

UNITED STATES DISTRICT COURT DECISION.

Robertson v. White, 635 F. Supp. 851 (W. D.

SER. WD bo xceacndeaviadesseutreerueeee

STATE COURT DECISION:

Ponder v. Blue Cross of Southern California,

145 Cal. App. 3d 709, 193 Cal. Rptr. 632

(Gm. CE. HO: TO esis sewr'a a b ak cea es aes

Statutes:

30 US. OFGNN .3-. os cos occ es

BU6E Oe as eee ae

SUSE: BN eee 2,

BUS. Co eee

USC ee Ne ae

Rules:

Pee: §: Bee. 9. Se os ooae ss aune eee

POs. B. Gs Boe tae ieee eee 5,

MisceHlaneous:

6 J. Moore, Federal Practice Patt 2, 956.27(2]

Gel CROs eee

IN THE SUPREME COURT OF THE UNITED STATES

October Term, 1987

PAMELA J. BURAK, Petitioner,

v.

GENERAL AMERICAN LIFE INSURANCE COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

The Petitioner Pamela J. Burak respectfully prays that a writ

of certiorari issue to review the judgment and opinion of the United

States Court of Appeals for the Tenth Circuit, entered in the above-

entitled proceeding on January 12, 1988.

OPINIONS BELOW

The opinion of the Court of Appeals for the Tenth Circuit ts

reported at 836 F.2d 1287, and is reprinted in the appendix hereto,

p. la, snfra.

The order of the Court of Appeals denying rehearing has not

been reported. It is reprinted in the appendix hereto, p. 8a, fra.

The order and opinion of the United States District Court for

the District of Colorado (Kane, J.) has not been reported. It is

reprinted in the appendix hereto, p. 9a, sefra.

The judgment of the district court, amended order and minute

order have not been reported. They are reprinted in the appendix

hereto, pp. 17a, 18a and 19a, infra.

JURISDICTION

Petitioner brought this suit in the District Court for the Eighth

Judicial District of Colorado. Respondent removed the action to the

United States District Court for the District of Colorado invoking

jurisdiction under 28 U.S.C. §1332 because of diversity of citizen-

ship, the plaintiff being a citizen of Colorado and the defendant

a Missouri corporation with its principal place of business at St. Louis,

Missouri.

On October 12, 1984, the district court granted petitioner's

motion for summary judgment determining that life insurance

coverage existed. Judgment was entered October 15, 1984 and

amended November 2, 1984. The November 2 order was modified

December 14, 1984. See pp. 9a, 12-14a, 16a, 17a, 18a and 19a,

infra.

On respondent's appeal, the Tenth Circuit on January 12, 1988,

entered an opinion reversing the district court's amended surnmary

judgment and directing that judgment be entered in favor of the

respondent. See p. 7a, infra.

A timely petition for rehearing was filed by petitioner on

February 9, 1988. The Tenth Circuit denied the petition for rehearing

on March 10, 1988. See p. 8a, infra.

On May 24, 1988, Justice White ordered that the time for fil-

ing this petition for writ of certiorari be extended to and including

July 8, 1988

The jurisdiction of this Court to review judgment of the Tenth

Circuit is invoked under 28 U.S.C. §1254(1).

CONSTITUTIONAL PROVISIONS AND RULE INVOLVED

United States Constitution, Amendment V — Grand Jury Indict.

ment for Capital Crimes; Double Jeopardy; Self-Incrimination; Due

Process of Law; Just Compensation for Property

No person shall be held to answer for a capital, or otherwise

infamous crime, unless on a presentment or indictment of a Grand

Jury, except in cases arising in the land or naval forces, or in the

Militia, when in actual service in time of War or public danger; nor

shall any person be subject for the same offense to be twice put in

> »

jeopardy of life or limb; nor shall be compelled in any criminal case

to be a witness against himself, nor be deprived of life, liberty, or

property, without due process of law; nor shall private property be

taken for public use, without just compensation.

Umited States Constitution, Amendment VII — Civil Trials

In Suits at common law, where the value in controversy shall

exceed twenty dollars, the right of trial by jury shail be preserved,

and no fact tried by a jury, shall be otherwise reexamined in any

Court of the United States, than according to the rules of che

common law.

Fed. R. Cw. P. 56. Summary Judgment

Due to the length of the provision, the pertinent text of Rule

56 is reprinted in the appendex hereto, p. 20a, infra.

STATEMENT OF THE CASE

Upon removal of this action from the state court by respon-

dent, the jurisdiction of the United States District Court was in-

voked under 28 U.S.C. §1332 because of diversity of citizenship,

the petitioner being a citizen of Colorado and the defendant a citizen

of Missouri.

Petitioner is the surviving wife of decedent Ronald James Burak

who died on October 27, 1983 as the result of injuries sustained

in an automobile accident as decedent was driving to work at

Laramie, Wyoming from his Fort Collins, Colorado home. The com-

plaint alleged that petitioner's decedent was insured under respon-

dent's group life insurance policy for life and accidental death in-

surance coverage in the amount of $42,000 for each coverage. The

complaint further alleged that respondent had breached its cove-

nant of good faith and fair dealing by refusing to process any claim

by or on behalf of petitioner. Petitioner sought recovery of monetary

damages including coverages under the life and accidental death

provisions of the insurance policy.

Respondent answered by denying that coverage was in effect

on the decedent's date of death. Respondent petitioned the district

court for removal of the action on the basis of diversity of citizen-

ship under 28 U.S.C. §1332 and on the basis of federal question

a

jurisdiction pursuant to the Employee Retirement Income Security

Act (“‘ERISA’’), 29 U.S.C. §1001.

Petitioner demanded a jury trial. Because of the precarious

financial condition of the petitioner and in the interest of judicial

economy, petitioner filed an early motion for summary judgment

on the ‘‘coverage’’ issue seeking a determination that the effective

date of coverage pre-dated decedent's death.' The effective date

of the policy was January 1, 1983. Petitioner's decedent was

employed by the respondent on September 16, 1983. Decedent died

on October 27, 1983.

The insurance policy provided that the ‘individual eligibility

date’ required active work on a full-time basis for one month and

further provided that the ‘‘effective date of personal insurance’’ was

on the date the employee was eligible. Petitioner contended that

insurance coverage for decedent became effective October 17, 1983.

Respondent contended that the effective date of insurance was

November 1, 1983, four days after decedent's death. Respondent

contended that the ‘effective date of personal insurance’’ was con-

trolled by an endorsement which stated:

The following provisions of the policy are changed as follows:

1) The ‘‘Effective Date of Personal Insurance’’ and Part 2) of the

' Prior to commencement of the action, petitioner could not obtain any informa-

tion from respondent's office in Laramie, Wyoming concerning the group policy.

All information, such as it was, had to be obtained from the home office of respon-

dent in St. Louis, Missouri, which was limited to a pamphlet entitled "Your Group

Insurance Plan (for Monolith Portland Cement Company employees]"’, petitioner's

Exhibit 2 in the dastrict court, which was received by petitioner's counsel in January,

1984. Because of the denial of coverage and refusal to process a claim by respon-

dent, the action was commenced on March 23, 1984. A copy of the document

represented by respondent to be the actual policy which was held in the respon-

dent's office in Glendale. California was identified to the petitioner's counsel by

respondent's attorney on April 6, 1984. It was later obtained from respondent's

office in California. Based on the apparent strength of obtaining summary judg-

ment based solely on the so-called ‘‘actual’ policy, petitioner elected to file her

motion for summary judgment which was filed May 31, 1984. The idea behind

proceeding with a motion for summary judgment was to resolve the coverage issue

more quickly and limit discovery and expenses. An issue still to be litigated con-

cerns what the true policy consists of and whether any informaiion regarding

coverage of policy terms was brought to decedent's attention.

4.

‘Effective Date of Dependent Insurance’’ are changed to provide that

the insurance of an individual shall be effective on the earlier of:

a) the first day of the policy month which coincides with the day

it would otherwise be effective, or

b) the first day of the policy month which next follows the day

it would otherwise be effective.

Petitioner contended that the aforementioned endorsement was

ambiguous and must be construed against the insurer and in favor

of coverage, according to controlling California law.

Respondent filed a cross-motion for summary judgment on the

coverage issue. The issue as thereby joined concerned only the

ambiguity or non-ambiguity of the policy language as it pertained

to the effective date of coverage. The cross-motions for summary

judgment left unresolved all other litigable issues, fact questions

and discovery concerning coverage, including the questions of

whether the endorsement relied on by respondent was ‘‘con-

spicuous’’ which, if not, would render it unenforceable under

applicable California law, and what information, if any, decedent

received when he signed his enrollment card with respondent on

October 4, 1983, concerning when coverage would take effect.

These and other issues were mooted by the trial court’s order

entered October 12, 1984, holding that the above-quoted endorse-

ment was ambiguous and therefore to be construed against the

respondent in favor of coverage on the effective date of coverage

question.

The district court’s order granting petitioner summary judg-

ment allowed $42,000 under the life insurance provision and an

additional $42,000 for accidental death. On October 15, 1984, the

district court entered summary judgment in the amount of $84,000

plus interest. On November 2, 1984, the district court amended

its October 12 order allowing judgment in favor of petitioner in

the amount of $42,000, the coverage under the life insurance

provision, and leaving the parties to litigate the applicability of the

double indemnity accidental death provision in the state court. On

December 14, 1984, the district court further amended its initial

judgment of October 12 by modifying the November 2, 1984 order

to reflect that the district court retained jurisdiction for deter-

r, &

mining the remaining issue, the applicability of double indemnity

under the accidental death provision.

Trial on the accidental death provision was held on May 29,

1985 before the district court, petitioner having waived her jury

demand as to the remaining issue of accidental death coverage only.

Upon completion of the trial the district court entered judgment

in favor of the respondent and against the petitioner by order dated

May 29, 1985. On June 11, 1985, the district court amended its

judgment to reflect that the petitioner be awarded $42,000 under

the life insurance provision and that the claim for double indem-

nity was dismissed.

In due course, the parties filed cross-appeals with the United

States Court of Appeals for the Tenth Circuit. Petitioner appealed

the trial court’s dismissal of her double indemnity accidental death

claim and respondent appealed the grant of summary judgment to

petitioner on the life insurance coverage effective date question.?

The parties invoked the Tenth Circuit’s jurisdiction under 28 U.S.C.

§1291 to review ‘‘final decisions’ of district courts.

The Tenth Circuit, applying a de movo standard of review, inter-

preted the key endorsement language as precluding coverage on the

date of decedent’s death. Having concluded that summary judg-

ment was improperly entered against respondent on the underly-

ing coverage question, the court of appeals declined to address the

double indemnity issue. The appellate court accordingly reversed

and remanded to the district court. However, instead of remanding

for trial on the issues which were mooted by the district court’s grant

of summary judgment, the appellate court directed the district court

2 In accordance with Fed. R. App. P. 28(h), petitioner (plaintiff in the district

court) was designated as the appellant in the court of appeals. However, respon-

dent was in reality an appellant as to the coverage issue.

> The court of appeals applied a test of ‘‘detailed scrutiny’’ to petitioner rather

than subjecting the policy language to the rule required by applicable California

law that if the policy language is ambiguous it must be construed against the insurer

and in favor of coverage. According to California law, an exclusion in coverage

must be stated in language which is plain and clear in the sense it is comprehen-

sible to lay persons including the use of words which are part of the working

vocabulary of average lay persons. Pomder v. Blue Cross of Southern Cahfornia,

145 Cal. App. 3d 709, 193 Cal. Rptr. 632, 643 (Cal. Ct. App. 1983).

hs

to vacate its amended judgment and ‘‘enter judgment in favor of

the defendant.’’ See p. 7a, infra.

Petitioner filed a timely petition for rehearing wherein she raised

the constitutional deprivation caused by the Tenth Circuit’s deci-

sion not to remand to the district court for a trial of the remaining

issues which could establish insurance coverage. Petitioner pointed

out that the effect of the Tenth Circuit’s direction on remand was

to grant summary judgment to an appellant. Petitioner sought

remand to the district court for a retrial on the coverage and

accidental death issues.

The Tenth Circuit, by order entered March 10, 1988, denied

the petition for rehearing.

REASONS FOR GRANTING THE WRIT

I.

The Tenth Circuit's Order Granting Summary Judgment

to An Appellant Rather Than Remanding for Trial Where

There Remain Genuine Litigable Issues of Material Fact

Conflicts With a Prior Decision of This Court and Presents

an Important Question of Federal Law Which Should Be

Settled If It Is Not Already

The Tenth Circuit has established a dangerous precedent by

denying a litigant a full trial on the merits concerning issues as to

which the deprived party had no opportunity to present evidence

before the trial court by granting summary judgment to an appellant

instead of remanding for trial. This decision conflicts with this

Court’s holding in Fountain v. Filson, 336 U.S. 681 (1949) and with

the reasoning underlying Horme/ v. Helvenng, 312 U.S. 552 (1941).

Such a drastic decision sacrifices rules of fundamental justice and

threatens to deprive future litigants of judicial consideration of legal

theories not able to be presented in the trial court by virtue of the

manner of development of the case. This threat to fundamental

justice deserves this Court’s attention. See, e.g., United States v.

Doe, 465 U.S. 605, 610 (1984) (certiorari granted due to conflict

with reasoning underlying prior decision); Lugar v. Edmonson Oil

Company, 457 U.S. 922, 926 (1982) (certiorari granted due to con-

flict with prior decision).

'

|

'

The Tenth Circuit, in a footnote to its opinion, p. 7a, imfra.,

noted that petitioner had argued on appeal that public policy

disallows insurance companies to mislead consumers through in-

conspicuous endorsements. The Tenth Circuit did not address the

issue, however, as ‘‘[t]he record on appeal does not indicate that

the district court was asked to make a factual determination of

whether the endorsement at issue was inconspicuous so as to mislead

consumers... .’’ Id. Rather than remanding to the trial court for

determination of this and other issues not necessary to the cross-

motions for summary judgment on the ambiguity question, the

Tenth Circute directed entry of judgment in favor of respondent.

See p. 7a, infra.

The district court could not have been asked to make a factual

determination on the conspicuousness of the endorsement as the

case developed. The parties pursued early cress-motions for sum-

mary judgment to determine the effective date of coverage only.

Factual issues concerning whether the endorsement was ever brought

to the attention of the decedent and whether it was conspicuous

were rendered moot by the trial court’s grant of summary judgment

to petitioner on the effective date question. Had the trial court

denied petitioner summary judgment on the effective date of

coverage question, that issue and all other issues, including con-

spicuousness of the endorsement, would have proceeded to trial.

Had the endorsement been determined to be inconspicuous it could

not have been enforced and the effective date of coverage would

have been as provided in the policy thereby allowing coverage.

The Fountain Court held that an appellate court erred in depriv-

ing a litigant of an opportunity to dispute facts material to a claim

by ordering summary judgment against that litigant when the litigant

against whom summary judgment was ordered had no opportunity

to present a defense before the trial court on a new issue which had

not been raised as part of the motion for summary judgment in

the district court. The Court explained:

There was no occasion in the trial court for Mrs. Fountain to dispute

the facts material to a claim that a personal obligation existed, since

the only claim considered by that court on her motion for summary

judgment was the claim that there was a resulting trust.

336 U.S. at 683.

In the instant case there was no occasion for petitioner to litigate

in the trial court the questions concerning whether the policy en-

dorsement was brought to the decedent’s attention and whether

it was inconspicuous as against public policy. The cross-motions for

summary judgment were strictly limited to construing the endorse-

ment language to determine the effective date of coverage. Since

the only issue considered by the trial court on the motions for sum-

mary judgment was the effective date of coverage question, the Tenth

Circuit erred by not remanding to the trial court for a trial on the

remaining issues.

The Court in Horme/ announced that “‘[t]here may always be

exceptional cases or particular circumstances which will prompt a

reviewing or appellate court, where injustice might otherwise result,

to consider questions of law which were neither pressed nor passed

upon by the court or administrative agency below.’’ 312 U.S. at

557. The Horme/ Court added, in words particularly relevant to the

Tenth Circuit’s refusal to remand for trial,

[rlules of practice and procedure are devised to promote the ends

of justice, not to defeat them. A rigid and undeviating judicially

declared practice under which courts of review would invariably and

under all circumstances decline to consider all questions which had

not previously been specifically urged would be out of harmony with

this policy. Orderly rules of procedure do not require sacrifice of the

rules of fundamental justice.

ld.

The Horme/ Court cited approvingly other cases which have

been remanded because the lower courts failed to give considera-

tion to a phase of the case involving legal theories not presented,

including United States v. Rio Grande Dam and Irngation Com-

pany, 184 U.S. 416, 423 (1902) (remanding for further develop-

ment of the record). 312 U.S. at 558 and n.7.

Good judicial administration requires that this important issue

be resolved in such a way that the case be remanded to the district

court and that decision of the ultimate questions involved in this

case be reserved until the record presents a more solid basis of com-

plete findings following a trial. See Kennedy v. Silas Mason Com-

pany, 334 U.S. 249, 257 (1948).

The conflict between the instant case and the important

-9-

principles articulated in Fountain and Horme/ presents an ideal op-

portunity for this Court to reaffirm an important principle of federa!

law. This principle is that an appellate court may not order sum-

mary judgment for an appellant where issues remain to be tried.

We submit that Fountain, having reversed the court of appeals

for ordering summary judgment for the appellant, has settled this

issue.‘ If the issue raised has not already been settled by this Court,

this case presents an important question of federal law which should

be settled by this Court. See Lehman v. Lycoming County Children’s

Services Agency, 458 U.S. 502, 507 (1982).

II.

The Tenth Circuit’s Decision Conflicts With The Deci-

sions of Other Federal Courts of Appeals on the Same

Matter For Which There is Need for a Uniform Rule

Because of the ‘‘threat to the goal of uniformity of federal pro-

cedure posed by the decision below,’’ Hanna v. Plumer, 380 U.S.

460, 463 (1965), this Court should review this case involving con-

struction of the Federal Rules of Civil Procedure. See Hickman v.

Taylor, 329 U.S. 495 (1947).

The decision below is in conflict with the decisions of numerous

other federal courts of appeals. The Ninth Circuit Court of Appeals,

for instance, has remanded for a full trial in a situation virtually

indistinguishable from that presented by the instant case. Sth

v. United States, 362 F.2d 366, 368 (9th Cir. 1966). That case

involved a motion to dismiss which, because matters outside the

record were submitted, was treated as a motion for summary judg-

ment. During oral argument in the court of appeals there was a

suggestion made that another possible legal theory existed apart from

that raised in the motion. The court there stated that ‘‘[a] full

4 Professor Moore, in his treatise on federal practice, believes that Founsain does

not deny the existence of an appellate court to dispose of a case by reversing with

directions to enter judgment for the appellant. 6 J. Moore, Federal Practice, Part

2, 956.27[2] (2d ed. 1987). However, even Moore recognizes that the power must

be cautiously used to the end that the appellee is not deprived of a trial of gen-

uine issues of material fact underlying her claim or defense. Id.

-10-

—

development of the facts pertaining to these and other cir-

cumstances’ would make it possible to resolve the question raised

in the motion with ‘‘considerably more assurance’ than was possi-

ble on the record then before it, explaining,

[a]s this case was presented in the district court it was not apparent

that any such issue of fact was involved. As the case unfolded in this

court, however, genuine issues of material fact, as noted above, have

been revealed. Under these circumstances we think the proper course

is to send the case back for a full trial.

Id. at 367, 368.

The Ninth Circuit dealt with this issue again in Roderts v.

Hollandsworth, 582 F.2d 496 (9th Cir. 1978). That case reached

the court of appeals on appeal from the grant of a summary judg-

ment. Not until arguments on appeal did counsel advance another

legal theory than that raised in the motion. The Ninth Circuit noted

that the new legal theory could well provide a valid claim for relief

and concluded that the trier of the facts, the court or a jury, had

to pass on the issue of fact thereby created. Jd. at 499. The court

there mentioned its awareness of the rule that a federal appellate

court does not generally consider an issue not passed upon by the

lower court, but that the doctrine as set forth in Horme/ v. Helver-

ing, supra — that where justice might otherwise result, such an

unraised issue will be considered — is equally well-recognized. 582

F.2d at 500. The Ninth Circuit held that a ‘‘substantial injustice’

might result if it did not remand for clarification of the newly raised

issue. Id.

Equally in conflict with the decision below is Tomalewski v.

State Farm Life Insurance Company. 494 F.2d 882 (3d Cir. 1974).

There the Third Circuit, faced with an appeal of cross-motions for

summary judgment, held that if the pleadings present a genuine

issue as to a material fact, there can be no valid summary judgment

of the disputed facts. Jd. at 884. The Third Circuit rejected an argu-

ment that a party by motion for summary judgment waives any right

to assert a claim when an issue of fact is clearly presented by the

pleadings. Id. at 885. It accordingly reversed the judgment and

remanded for further proceedings in the district court. Id.

The Fifth Circuit is also in conflict with the decision below.

In Black Warnor Electnc Membership Corporation v. Mississippi

oh.

Power Company, 413 F.2d 1221, 1226 (Sth Cir. 1969), the Fifth

Circuit, recognizing that the district court had not reached a ques-

tion not raised in a motion for summary judgment, remanded for

further proceedings explaining that ‘‘[i]f this issue requires decision

it is initially for the district court.’’

The extent of the inter-circuit conflict is made manifest by M.

Snower & Company v. United States, 140 F.2d 367 (7th Cir. 1944),

which involved cross-motions for summary judgment and judgment

on the pleadings. The court of appeals concluded there was still a

material issue of fact before the trial court after the motions had

been made. Accordingly, the judgment for plaintiff entered by the

trial court on its motion for summary judgment was reversed and

the cause remanded for further proceedings. Jd. at 371.

Only the Tenth Circuit has deprived a litigant of litigating

material factual questions not necessary to nor raised in the motions

for summary judgment heard in the trial court. The Tenth Circuit

seeks justification for this deviation by noting that the record does

not indicate that the district court was asked to make a factual deter-

mination of the issue first raised on appeal. See p. 7a, infra.

That rationale reflects a fundamental misunderstanding about

the policy and purpose of summary judgment as embodied in Fed.

R. Civ. P. 56. It is well-established that ‘‘the purpose of the rule

is not to cut litigants off from their right of trial by jury if they really

have issues to try.’’ Poller v. Columbia Broadcasting System, Inc ,

368 U.S. 464, 467 (1962). No matter how reasonable, a surmise

that a party is unlikely to prevail at trial is not a sufficient basis for

refusing her her day in court. Robertson v. White, 635 F. Supp.

851, 872 (W. D. Ark. 1986).

Relief by way of summary judgment is drastic, and should be

applied with caution to the end that litigants will have a trial on

all bona fide factual disputes. Jones v. Ne/son, 484 F.2d 1165, 1168

(10th Cir. 1973); Machinery Center, Inc. v. Anchor National Life

Insurance Company, 434 F.2d 1, 6 (10th Cir. 1970). Summary judg-

ment is not to be entered unless the movant has established his right

to a judgment with such clarity as to leave no room for controversy

and that the other party is not entitled to recover under any discern-

ible circumstances. Ozark Milling Company, Inc. v. Allied Mulls,

Inc., 480 F.2d 1014, 1015 (8th Cir. 1973). Summary judgment

72.

does not serve as a substitute for trial. Redhouse v. Quality Ford

Sales, Inc., 511 F.2d 230, 234 (10th Cir. 1975).

The Tenth Circuit's decision emasculates these fundamental

principles of federal civil procedure and undermines predictability

and confidence in federal jurisprudence. If allowed to stand, the

Tenth Circuit's decision will subvert the goals of just, speedy and

inexpensive determination of actions in the Tenth Circuit which goals

are articulated in the rules of civil procedure. Litigants will be reluc-

tant to test legal issues with early summary judgment motions if

they are to be precluded from litigating other issues not necessary

to be raised as a predicate to the motion. This uncertainty will no

doubt frustrate federal practice which relies heavily on the mechanism

of summary judgment for early disposition of cases and may cause

litigation costs to rise sharply as litigants pursue costly discovery

instead of seeking quick determinations on threshold legal issues.

The national impact of letting the lower court decision stand

would be widespread confusion and encouragement of forum shop-

ping. Cautious litigants will seek to file federal cases in those cir-

cuits which elevate concepts of fundamental justice over procedure.

It is vital that the question presented be decided finally by this Court

in order that there be a uniform rule on the point. Commissioner

v. Bilder, 369 U.S. 499, 501 (1962).

The requirements of due process of law as set forth in the Fifth

Amendment to the United States Constitution, like the rules of civil

procedure, demand uniformity in application. As stated by the Court

in Mathews v. Eldndge, 424 U.S. 319, 333 (1976), ‘‘[t]he fundamen-

tal requirement of due process is the opportunity to be heard ‘at

a meaningful time and in a meaningful manner.’ *’ Fulfillment of

this requirement is accomplished by providing the recipient timely

and adequate notice detailing the reasons for the proposed depriva-

tion and an effective opportunity to defend by confronting any

adverse witnesses and by presenting one’s own afguments and

evidence orally. Goldberg v. Kelly, 397 U.S. 254, 267-68 (1970).

“e\ttioner here had no notice that the appellate court would

deprive her of the opportunity to litigate remaining factual and legal

issues should it reverse the district court’s grant of summary judg-

ment to her. It is beyond argument that she has been denied the

opportunity to present her own arguments and evidence on the

‘$4

remaining issues, including public policy considerations connected

with the inconspicuousness of the insurance policy endorsement,

which has deprived her of substantial life and accident insurance

benefits.

Not only does the Tenth Circuit’s decision deprive the peti-

tioner of her constitutional rights; it also has so far departed from

the accepted and usual course of judicial proceedings as to call for

an exercise of this Court’s power of supervision.»

In the words of Justice Stevens, ‘‘[a]s the Court of last resort

in the federal system, we have supervisory authority and therefore

must occasionally perform a pure error-correcting function in federal

litigation.’’ Flonda v. Rodnquez, 469 U.S. 1, 7 (1984) (Stevens,

J., dissenting); accord, McNabé v. United States, 318 U.S. 332, 341

(1943).

The result reached below is unduly harsh in its impact. This

Court should grant certiorari to correct the injustice and insure that

it is not repeated in a multitude of future cases. See, e.g., Montoya

v. Kennedy, 366 U.S. 308, 309 (1961) (where certiorari was granted

‘‘in view of the apparent harshness of the result entailed’’); see a/so

Southern Construction Company v. Pickard, 371 U.S. 57, 60 (1962)

(where certiorari was granted to consider the applicability of a federal

rule of civil procedure in unusual circumstances).

The Tenth Circuit has created a confusing precedent, likely to

disrupt the uniformity of federal civil procedure by undermining

predictability and encouraging forum shopping. It is a precedent

directly at odds with the decisions of numerous other circuits and

this Court. Plenary consideration of the matter by this Court is

essential.

> 28 U.S.C. §2072 states in relevant part that “‘[t}he Supreme Court shall have

the power to prescribe by general rules, . . . the practice and procedure of the

. courts of appeals of the United States in civil actions. . . ."’ The section also

provides that ‘‘{sJuch rules shall not abridge, enlarge or modify any substantive

right and shall preserve the right of trial by jury as at common law and as declared

by the Seventh Amendment to the Constitution.”’

-14-

The Decision Below Creates an Intra-Circuit Conflict

Relating to a Recurring and Important Issue

The Tenth Circuit has previously dealt with this issue by stating

that ‘‘[t}he rights of the parties should be determined after a full-

fledged trial of the merits.’’ Eagle v. Loussiana and Southern Life

Insurance Company, 464 F.2d 607, 609 (10th Cir. 1972). In that

case, like here, a widow brought suit to recover on a group life

insurance policy for the death of her husband. Both sides moved

for summary judgment. The court granted plaintiff's motion and

denied that of defendant's. The opinion acknowledged that presen-

tation of cross-motions for summary judgment does not concede

the absence of a material issue of fact. Jd. at 608; accord, United

States Trotting Association v. Chicago Downs Association, Inc., 665

F.2d 781, 785 (7th Cir. 1981) (stating that the filing of a cross-motion

for summary judgment does not prevent a plaintiff from contend-

ing on appeal that there is a dispute as to material facts); Case and

Company, Inc. v. Board of Trade of the City of Chicago, 523 F.2d

355, 360 (7th Cir. 1975) (holding that the filing of a cross-motion

for summary judgment does not preclude a plaintiff from contend-

ing that summary judgment was inappropriate because there are

certain disputed questions of fact); Capital Temporanes, Inc. of Hart.

ford v. Olsten Corporation, 506 F.2d 658, 667 (2d Cir. 1974)

(accepting plaintiff-appellant’s argument that the fact that the plain-

tiff himself cross-moved for summary judgment does not bar his

raising on appeal material issues of fact which could not be deter-

mined without a trial by jury).

The Eag/e court, unlike the panel below, permitted the widow

a full-fledged trial of the merits where a genuine controversy of a

material fact concerning policy coverage existed. This irreconcilable

conflict relates to a recurring and important issue concerning the

power of an appellate court to order summary judgment be entered

for the appellant, thus depriving the other party of her right to trial

on remaining issues which, if litigated, could spell victory for the

deprived party. Certiorari should be granted to resolve this intra-

circuit conflict. See, e.g., John Hancock Mutual Life Insurance

-15-

Company v. Bartels, 308 U.S. 180, 181 (1939) (certiorari granted

because of intra-circuit conflict and the importance of the question);

Dickinson v. Petroleum Conversion Corporation, 338 U.S. 507, 508

(1950) (certiorari granted ‘‘because of this intracircuit conflict’):

Scarborough v. United States, 431 U.S. 563, 567 n.4 (1977) (cer-

tiorari granted because of ‘‘split among the Circuits,’’ one circuit

being noted as having an intra-circuit conflict).

CONCLUSION

For these various reasons, this petition for certiorari should be

granted. Petitioner reiterates that Question 2 is presented herein,

not as a reason for granting certiorari, but because of the posture

of this case this is the only opportunity for petitioner to seek review

of the ultimate ruling of the Tenth Circuit directing entry of judg-

ment against her. If the petitioner is correct in urging that the Tenth

Circuit has improperly deprived her of the right to proceed to trial

on the merits, the matter should be remanded to the district court

for appropriate disposition, after a full development of the facts con-

cerning insurance coverage. Indeed, in view of the conflict of the

decision below with past decisions of this Court, the Court may wish

to consider summary reversal.

Respectfully submitted,

SAMUEL LEE ANDERSON

323 South College Avenue,

Suite 3

Fort Collins, CO 80524

(303) 482-4011

Counsel of Record

KENT N. CAMPBELL

323 South College Avenue,

Suite 3

Fort Collins, CO 80524

(303) 482-4011

Counsel for Petitioner

APPENDIX

FILED

PUBLISH United States Court of Appeals

Tenth Circuit

UNITED STATES COURT ,

OF APPEALS JAN 12 1988

FOR THE TENTH CIRCUIT ROBERT L. HOECKER

Clerk

PAMELA J. BURAK.

Plaintiff-Appellant

Cross Appellee ,

)

)

)

)

)

v. ) Nos. 85-1970

) 85-1971

GENERAL AMERICAN LIFE)

INSURANCE COMPANY, )

)

}

)

Defendant-Appellee

Cross- Appellant

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT GF COLORADO

(D.C. Civil Action No. 84-K-782)

Kent N. Campbell (Samuel L. Anderson with him on the briefs)

of Anderson, Sommermeyer, Wick & Dow, Fort Collins, Colorado,

for Plaintiff-Appellant/Cross-Appellee.

Donald M. Burkhardt (Charles H. Haines, Jr. with him on the briefs)

of Grant, McHendrie, Haines and Crouse, Denver, Colorado, for

Defendant-Appellee/Cross-Appellant.

-la-

Before McKAY and BALDOCK, Circuit Judges, and BROWN,

District Judge.*

McKAY, Circuit Judge.

In this nonjury case, two issues are presented on appeal: (1)

whether Ronald J. Burak was covered under a company group life

insurance policy when he died, and if so, (2) what amount of death

benefits are payable to the beneficiary.

Ronald J. Burak began employment with Monolith Portland

Cement Company (Monolith) on September 16, 1983. On October

4, 1983, Mr. Burak signed an enrollment card for coverage under

a noncontributory group life insurance policy (Policy) issued to

Monolith by defendant, General American Life Insurance Company.

Mr. Burak named plaintiff, Pamela J. Burak, as the Policy's

beneficiary. On October 27, 1983, Mr. Burak was pronounced dead

at the scene of a single car collision with a bridge abutment. An

autopsy revealed that Mr. Burak had suffered a nonsurvivable basilar

skull fracture from the collision. The autopsy also revealed that Mr.

Burak was having a myocardial infarction or ‘‘heart attack’’ when

the collision occurred.

Plaintiff filed a claim with defendant for $42,000 in death

benefits on the Policy and for an additional $42,000 in benefits pur-

suant to the accidental indemnity clause contained in the Policy.

Defendant denied plaintiff's claim on the ground that Mr. Burak’s

death preceded the effective date of the Policy. Defendant also

denied that the cause of death was accidental.

Plaintiff filed suit to collect the death and accidental death

benefits in state district court, and defendant removed the suit to

* Honorable Wesley E. Brown, United States Senior District Judge for the District

of Kansas, sitting by designation

-2a-

federal district court on the basis of diversity of citizenship. 28 U.S.C.

§1332 (1982). On October 12, 1984, the district court granted sum-

mary judgment for plaintiff. The district court ruled that the pro-

vision establishing the effective date of the Policy (Effective Date

Provision) was ambiguous and allowed an interpretation that

coverage existed at Mr. Burak’s death. The court also ruled that Mr.

Burak’s death resulted from the accident and that plaintiff was

entitled to an additional payment under the Policy’s double indem-

nity clause.

Upon reconsideration, the district court amended the October

12th order by requiring the parties to litigate the benefits granted

under the double indemnity clause. After hearing evidence, the

district court dismissed plaintiff's double indemnity claim. Final

Amended Judgment was entered on June 11, 1985, munc pro tunc

May 29, 1985. This judgment awarded plaintiff $42,000 in death

benefits plus interest, but denied the double indemnity benefits.

Plaintiff now appeals the district court’s denial of her double

indemnity claim. Defendant cross-appeals the district court’s sum-

mary judgment ruling that the Policy was effective at Mr. Burak’s

death. Because the issue of whether Mr. Burak was covered by the

Policy is determinative, we need not reach the double indemnity

claim.

Il.

In considering defendant’s challenge of the summary judgment,

we apply a de novo standard of review. Wheeler v. Hurdman, 825

F.2d 257, 260 (10th Cir.), cert. dented, 1 EF 8d 5

Hydro Conduit Corp. v. Amencan-First Title & Trust Co., 808 F.2d

712, 714 (10th Cir. 1986). Summary judgment was proper if, as

a matter of law, Mr. Burak was covered under the Policy when he

died. Coverage under the Policy becomes effective when the

individual belongs to an eligible class, the individual completes the

one-month waiting period, and the Policy is activated by the Effec-

tive Date Provision. See Record, vol. 1, at 15. The parties do not

contest that Mr. Burak satisfied the eligibility class and waiting period

criteria. The sole question then is to determine Mr. Burak’s eftec-

tive date under the Policy.

-4a-

The Policy provides that its provisions are to be governed by

California law. Record, vol. 1, at 37. The basic Policy is a standard

form insurance contract issued by defendant. The Effective Date

Provision states that ‘‘personal insurance shall be made effective on

the date the employee is eligible.’’ Jd. at 15. The individual elig-

ibility date could be established when an employee completed full-

time work for the required waiting period — one month — or at

‘‘the effective date of this [P]olicy, if later.’’ Id.

The face of the Policy states that ‘‘[t]he first premium is due

on the effective date. Future premiums are due each month on the

first of the month. Policy months after the first [month] begin on

the first of the month.’’ Jd. at 14 (emphasis added). Thus, it appears

at first reading that Mr. Burak should have been eligible when his

one-month waiting period ended on October 16th, and that his

insurance should have become effective on that date; his first

premium would have been due on October 16th with subsequent

premiums payable on the first of each month thereafter.

However, as is true with most form contracts, a company choos-

ing a policy may also select various endorsements that modify par-

ticular policy provisions. Monolith’s Policy contains not only the

standard Effective Date Provision but also an endorsement. The

endorsement provides:

that the insurance of an individual shall be effective on the earlier of:

a) the first day of the policy month which coincides with the day

it would otherwise be effective, or

b) the first day of the policy month which next foilows the day

it would otherwise be effective.

Record, vol. 1, at 16. The parties agree that ‘‘the day it would other-

wise be effective’ is the end of the waiting period or October 16th

in Mr. Burak’s case. However, the effect that this date has in

establishing ‘‘the first day of the policy month,”’ or effective date,

remains in conflict.

Plaintiff asserts that the Policy could have easily been revised to

incorporate the endorsement language into the Effective Date Pro-

vision. Since this was not done, plaintiff claims that the ‘* ‘origina!

policy’ and the ‘endorsement’ appear to be mutually effective at

the same time, thereby constituting an ambiguity’’ that should be

-4a-

resolved in her favor. Plaintiff-Appellant’s Reply Brief at 7; see

Beaumont-Gribin-Von Dyl Management Co. v. California Union

Ins. Co., 63 Cal. App. 3d 617, 622, 134 Cal. Rptr. 25, 27 (1976)

(ambiguities are to be construed against the drafter).

Plaintiff's argument strikes upon a serious problem in the

insurance industry. Insurance providers routinely issue standard

policies and when those policies need to be amended, the insurer

does not rewrite the appropriate provisions but merely attaches an

endorsement to the standard policy. The result of this practice 1s

that the body of the policy may cffer a type of coverage that is

expressly taken away by a subsequent endorsement. In addition,

insurance companies frequently fail to calculate how the endorse-

ment may affect nonreferenced sections of the policy.

Despite their great potential for misleading consumers, the use

of endorsements is allowed and accepted. Moreover, under California

law, an endorsement to a policy becomes part of the policy and ‘‘it

there is a conflict in meaning between an endorsement and the body

of the policy, the endorsement controls.’’ Continental Casualty Co.

v. Phoentx Constr. Co., 46 Cal. 2d 423, 431, 296 P.2d 801, 805

(1956); Southwestern Funding Corp. v. Motors Ins. Corp., 59 Cal.

2d 91, , 28 Cal. Rptr. 161, 162, 378 P.2d 361, 362 (1963).

Therefore, based upon California law, an endorsement which con-

flicts or varies from the standard policy does not create an ambigu-

ity in terms, but must instead control. Accordingly, the effective

date ot Mr. Burak’s Policy is governed primarily by the language

of the Policy’s endorsement, and to the degree that the endorse-

ment conflicts with or varies from the standard Policy, the endorse-

ment must stand. The terms of the endorsement provide the key

to whether Mr. Burak was covered by the Policy at the time of his

death.

Defendant contends that the endorsement means that, if the

policy holder completes his one-month waiting period on the first

day of a calendar month, the insurance coverage begins that day.

If, however, he completes his waiting period on the second day of

the month or on any day thereafter in the month, he must wait

until the first day of the next calendar month before coverage begins.

Since Mr. Burak ended his waiting period on October i6, 1983,

a day which does not coincide with the first day of the month,

-Ja-

subparagraph (a) would not apply. Thus, Mr. Burak’s effective date

would be controlled by subpatagraph (b) and would be the ‘‘first

day of the policy month which next follows,’’ or November 1, 1983.

Plaintiff maintains that the endorsement can be interpreted

in at least two other ways. First, plaintiff argues that the policy month

may not be the same as the calendar month, but could be inter-

preted to mean the day the waiting period ended, or October 16,

1983. Thus, under this interpretation of subparagraph (a), the ‘‘first

day of the policy month’’ and the ‘‘day it would otherwise be

effective’ would coincide on October 16, 1983, and make the policy

effective. Second, even if the policy month is synonymous with a

calendar month, plaintiff suggests that subparagraph (a) can also

be understood to mean that the Policy is effective on the first day

of the particular month in which the individual satisfies his waiting

period. Thus, since the first day of the policy month or calendar

month that coincided with October 16, 1983, was October 1, 1983,

the Policy could have become effective the first day of October.

Plaintiff also contends that subparagraph (b) ‘‘can be read as

either November 1, 1983 (the first day of the policy month which

next follows the day it would be effective), or as October 17, 1983

(if ‘policy month’ is not read to be the same as a calendar month

...).’’ Plaintiff-Appellant’s Reply Brief at 14. Therefore, under

either of the alternative interpretations which plaintiff proposes, sub-

paragraph (a) would always establish an effective date before that

established by subparagraph (b).

Having reviewed plainuff's and defendant’s interpretations of

the endorsement, the Policy, and the record; we find that plain-

tiff’s interpretations cannot withstand detailed scrutiny. Plaintiff’ s

first interpretation requires the policy months to be other than calen-

dar months, when the face of the Policy expressly provides that policy

months are to “‘begin on the first of the month.’’ Record, vol. 1,

at 37. Plaintiff's second interpretation inappropriately uses the word

‘coincide’ to modify policy month rather than ‘‘the first day of

the policy month.”’ Even if we did not find that plaintiff's inter-

pretations strained the language of the endorsement, they do not

give effect to each of the subparagraphs. Thus, plaintiff's interpreta-

tions of the endorsement effectively read the ‘‘earlier of’’ language

and subparagraph (b) out of the contract.

te.

While California law requires us to interpret the policy to

indemnify the plaintiff's losses if ‘‘semantically permissible, Crane

y. State Farm Fire and Casualty Co., 5 Cal. 3d 112, 115, 95 Cal.

Rptr. 513, 514, 485 P.2d 1129, 1130 (1971), we are not allowed

to achieve this result by writing out parts of the contract. We are

bound to give each subsection effect if possible. Ho/z Rubber Co.

v. American Star Ins. Co., 14 Cal. 3d 45, 56, 120 Cal. Rptr. 415,

421, 533 P.2d 1055, 1061 (1975) (‘‘An insurance policy, like any

other contract, must be construed as an entirety, with each clause

lending meaning to the other.’’); Jurd v. Pacific Indemnity Co.,

57 Cal. 2d. 699, ____, 21 Cal. Rptr. 793, 795, 371 P.2d 569, 571

(1962); see Cal. Civ. Code, §1641 (Deering 1987) (‘‘The whole of

a contract is to be taken together, so as to give effect to every part,

if reasonably practicable, each clause helping to interpret the

other.’’); see also Harborside Refrigerated Services, Inc. v. IARW

Ins. Co., 759 F.2d 829, 830 (11th Cir. 1985) (‘‘If possible, the court

must adopt a construction which will give effect to the total instru-

ment and its provisions.’’). The endorsment is poorly written and

obscure. However, because plaintiff's interpretations of the endorse-

ment fail to give the ‘‘earlier of’’ language and subparagraph (b)

effect, we reject plaintiff's interpretations in favor of the one pro-

posed by defendant which does give effect to the entire endorse-

ment. We conclude that summary judgment was improperly entered

against defendant. Mr. Burak was not covered under the Policy and,

accordingly, plaintiff’s appeal as to her right to double indemnity

benefits is dismissed.*

REVERSED and REMANDED to the district court with direc-

tions to vacate its amended judgment and enter judgment in favor

of the defendant.

* We note that the plaintiff makes reference to a public policy argument that

insurance companies should not be allowed to hold out coverage in the policy and

then limit the coverage through exceptions or endorsements that are hidden in

the fine print of the contract. Plaintiffs-Appellant’s Reply Brief at 11. The record

on appeal does not indicate that the district court was asked to make a factual

determination of whether the endorsement at issue was inconspicuous so as to

mislead consumers and thus violate public policy. Accordingly, we do not reach

the issue.

~)/a-

MARCH TERM - March 10, 1988

Before Honorable Monroe G. McKay, Honorable Bobby R. Baldock,

Circuit Judges, and Honorable Wesley E. Brown, District Judge*

PAMELA J. BURAK,

Plaintiff-Appellant,

Cross-Appellee,

v. Nos. 85-1970 and

85-1971

GENERAL AMERICAN LIFE

INSURANCE COMPANY,

Defendant-Appellee,

Cross-Appellant.

Nem” Nee Ne Nee Nee Nee Nee Nee Nee Nee “See Se

The petition for rehearing filed in the captioned cause by

plaintiff-appellant/cross-appellee Pamela J. Burak is denied.

ROBERT L. HOECKER, Clerk

/s/ Patrick Fisher

Chief Deputy Clerk

* of the United States District Court for the District of Kansas. sitting by

designation.

=%5-

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

CIVIL ACTION NO. 84-K-782

PAMELA J. BURAK,

FILED

Plaintiff, United States District Court

Denver, Colorado

ve 10 12 1984

GENERAL AMERICAN LIFE JAMES R. MANSPEAKER

INSURANCE COMPANY, Clerk

Defendant.

ORDER

KANE, J.

This action was originally brought in the District Court of

Larimer County, Colorado, alleging that defendant, General

American Insurance Company, has breached its covenant of good

faith and fair dealing by refusing to process any claim by or on behalf

of plaintiff. The complaint also alleges that plainuff is entitled to

recover punitive damages under the provisions of Colo. Rev. Stat.

§13-21-102 (1973). Plaintiff also seeks to recover her costs and

attorney fees.

The parties are before me on defendant’s petition for removal

from the Larimer County District Court, plainuff’s motion to remand

the action, and cross motions for summary judgment on the matters

averred in the complaint. All issues have been briefed by the parties.

Plaintiff is the surviving spouse of Ronald J. Burak, who died

October 27, 1983, as a result of injuries sustained in an auto acci-

dent which occurred October 27, 1983, while driving on U.S.

Highway 287 near milepost 355, northwest of Fort Collins, Colorado.

At the time of death, the deceased was employed by Monolith

-9a-

Portland Cement Company, a California corporation doing business

in Laramie, Wyoming where Burak was employed. Burak began

employment with Monolith September 16, 1983. As an employee,

Burak was entitled to benefit from a group insurance plan that was

offered by Monolith to its employees. Availing himself of this

opportunity, Burak executed a General American Group Coverage

Certification Form #4563, an enrollment card, on October 4, 1983.

General American was the insurance company chosen by Monolith,

the policy holder, to administer the group insurance plan. Burak

took out life insurance with coverage of $42,000, naming plaintiff

as the beneficiary of the policy. Upon notification to General

American in a letter dated December 27, 1983 by plaintiff's counsel,

to the effect that Mrs. Burak intended to file a claim to collect the

proceeds of the policy, General American responded, in a letter to

plaintiff's counsel, that it was the position of General American that

the policy in question was not in effect at the time of Burak’s death;

that the effective date of the policy would have been November

1, 1983, four days after decedent’s death. Plaintiff alleges that the

effective date of the policy was October 16, 1983, the completion

of the waiting period under the terms of the policy or, in the alter-

native, October 1, 1983; that the language in the policy lends itself

to this interpretation, and that the court should construe the policy

in favor of plainiff.

PETITION FOR REMOVAL AND MOTION TO REMAND

General American has petitioned the court to remove this action

from the Larimer County District Court to the United States District

Court under the provisions of Title 28 U.S.C. §1441 and 1446, and

Rule 81 (d) of the Federal Rules of Civil Procedure. Defendant's

petition was accompanied by a bond with sufficient surety in the

sum of $1,000 to cover costs and disbursements incurred, should

I determine that this action cannot be properly removed.

As grounds for removal, General American asserts that this court

has jurisdiction under Title 28 U.S.C. §1332 because there exists

complete diversity of citizenship; that plaintiff is a resident of

Colorado and defendant corporation is a corporate resident of

Missouri, with its principal place of business in St. Louis, Missouri

-10a-

for jurisdictional purposes. Defendant has submitted a certificate

of corporate good standing, issued by the Secretary of State of

Missouri, which reflects that General American was incorporated

under the laws of Missouri in June, 1933. The amount in controversy

exceeds $10,000, the $42,000 policy amount. Also, as grounds for

removal, defendant asserts that a federal question is presented

inasmuch as plaintiff's claims are governed by the terms of the

Employee Retirement Income Security Act (ERISA), Title 29 U.S.C.

§1001 e¢ seg. The ERISA contention relates to plaintiff's punitive

damages claim.

Plainuff moves for an order remanding this action to the

Laramie [sc] County District Court on the following grounds: (1)

diversity of citizenship does not exist between the parties, and (2)

no federal question is presented.

In a petition for removal, the burden falls squarely on the

removing party to establish its right to a federal forum by competent

proof. See R.G. Barry Corporation v. Mushroom Makers,

Incorporated, 612 F.2d 651, 655 (2d Cir. 1979). Plaintiff argues

that diversity does not exist because General American is a mutual

insurance company, which is a cooperative enterprise in which its

members constitute both the insurer and the insured; that the

beneficial ownership of the profits and surplus of a mutual insurance

company inure to the policyholders. Plaintiff reasons that since the

policyholder is both the insurer and the insured, each member of

General American is possessed with citizenship of each state in which

the business of General American is conducted. Therefore, accord-

ing to plaintiff, diversity is destroyed since defendant, plaintiff, and

Monolith (the policyholder) are citizens of Colorado. The

metaphysical permutations of this argument are almost overwhelm-

ing. | cannot agree with plaintiff; it is the domicile of the corpora-

tion which is controlling for diversity purposes, and not that of the

shareholders. See Puerto Rico v. Russell & Company, 288 U.S. 476,

479, 53 S.Ct. 447, 77 L.Ed. 903 (1933). Therefore, diversity of

citizenship between the parties does exist for juridictional purposes

under 28 U.S.C. §1332. I need not address the ERISA federal ques-

tion contention at this time with respect to the jurisdictional re-

quirements. Defendant has met its burden.

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CROSS MOTIONS FOR SUMMARY JUDGMENT

It is well established that summary judgment can be granted

only where there is no genuine issue of material fact. Securities &

Exchange Commission v. Murphy, 626 F.2d 633, 640 (9th Cir. 1980).

The same rule applies in cross motions for summary judgment. Bue//

Cabinet Company, Inc., 608 F.2d 431, 433 (10th Cir. 1979). The

standards to be applied in deciding cross motions are the same as

those applied when only one party has filed a summary judgment

motion. Selected Risks Insurance Company v. Schwabenbauer, 540

F.Supp. 22, 24 (E.D. Pa. 1982). The mere fact that inherently con-

tradictory claims have been made does not constitute an agreement

that if one is rejected the other is necessarily justified. Id.

General American denied plaintiff's claim, as beneficiary under

decedent's policy, on the basis that decedent was not covered under

the terms of the policy at the time of his death, October 27, 1983:

that the ‘“‘effective date’’ of coverage would have been November

1, 1983. The language contained in the subject policy that sets forth

the ambit of coverage for an insured is at the core of this dispute.

General American argues that the language which grants coverage

is unambiguous; plaintiff argues it is not; that the disputed coverage

provision is capable of an interpretation to the effect that decedent's

coverage took effect as of October 16, 1983, one month after dece-

dent was hired by Monolith.

The policy states that it shall be governed by California law.

On page thirteen of the policy under the heading of ‘*General Pro-

visions’’ and ‘‘Entire Contract’’ it is stated in the first paragraph

that the subject policy represents the entire contract between the

parties. Under California law, I must determine whether the

language in the disputed provision is ambiguous as a matter of law.

See United States v. Haas and Haynie Corporation, 577 F.2d 568,

572 (9th Cir. 1978) (citations omitted). If the disputed coverage

provision is ambiguous, the insurance contract shall be construed

against the party who prepared it. See Beaumont-Gnbin-Von Dy/

Management Company v. California Union Insurance Company,

63 Cal. App. 3d 617, 134 Cal. Rptr. 25, 27 (2d Dist. 1977); Previews,

Incorporated v. California Union Insurance Company, 640 F.2d

1026, 1029 (9th Cir. 1981). This rule applies to insurance companies

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with special force, and where uncertain language is used, any

reasonable doubt will be resolved against the insurance company,

whether the doubt relates to the extent or fact of coverage (as in

this instance), the peril insured against, the amount of liability, or

other operative provisions. Beaumont, supra, at 27.

The conditions of effective policy coverage of the subject policy

are set forth as follows:

The ‘Effective Date of Personal Insurance’ to provide that insurance

of an individual shall be effective on the earlier of a) the first day of

the policy month which coincides with the day it would otherwise be

effective, or b) the first day of the policy month which next follows

the day it would be effective

Decedent was employed by Monolith, the group policyholder, on

September 16, 1983, and died October 27, 1983. Decedent signed

an enrollment card as an employee of Monolith on October 4, 1983,

and completed his one month eligibility waiting period October

16, 1983. Pursuant to the above provision, the insurance was to be

effective on ‘‘the first day of the policy month which coincides with

the day it would otherwise be effective . . ."’ Given the comple-

tion by decedent of the thirty day waiting period as of October 16,

1983, the policy would ‘‘otherwise"’ have been effective on that date.

The first day of that ‘‘policy month’’ (October) which coincides with

that day, October 16, is October 16. I find that the policy coverage

provision permits such an interpretation and that October 16 was

earlier than November 1. Therefore, section ‘‘b’’ of the provision

yields. Section ‘‘b’’ defines the effective date of the policy as *‘the

first day of the policy month which next follows the day it would

otherwise be effective.’’ Thus, this could be read as either November

1, (the first day of the policy month which next follows), or as

October 16, (which is ‘‘the first day . . . which next follows the

day it would otherwise be effective.’’).

General American contends that the first page of the policy

states that ‘‘policy months after the first [policy month] begin on

the first day of the month,’ and that this language mandates that

decedent's policy as having an effective date of either October |

or November 1, and nothing in between. If this language were stand-

ing alone, that result would follow. But an insurance policy must

be read in its entirety. In reading the policy in its entirety, I conclude

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that the policy coverage effective date provision and the related pro-

vision concerning policy months, which must necessarily be read

in conjunction with the effective date language, are ambiguous and

open to several interpretations. Clearly, one reasonable interpreta-

tion of the cryptic provision presents the effective date of October

1. I construe the ambiguous language against General American

which drafted the policy, and in favor of the plaintiff.

ERISA

Plaintiff seeks punitive damages. Defendant argues chat

punitive damages are not allowed because the Employees Retire-

ment Income Security Act, Title 29 U.S.C. section 1001 ef seq.,

according to defendant, preempts state law actions and remedies

that which otherwise might be available.

I have already found that diversity of citizenship existed be-

tween the parties for jurisdictional purposes. | reserved discussion

of ERISA earlier in this order. | now find and conclude that General

American's assertion that ERISA preempts state law in this action

is unpersuasive. It is well established that ERISA was intended by

Congress to preempt the entire field of employee benefit plan regula-

tion. See Lederman v. Pacific Mutual Life Insurance Company, 484

F.Supp. 1020, 1022 (C.D. Cal. 1980). This action does not, however,

attack in any manner the integrity or administration of the group

insurance plan that Monolith provided for its employees; rather,

the essence of this action is simply to pursue a claim for the pro-

ceeds plaintiff asserts is due her as a beneficiary of the policy in ques-

tion. There is no basis for the conclusion that Congress found it

necessary of appropriate to interfere with the substantial regulation

of insurance companies operating in California, and that every claim

against an insurance company under its group insurance plan should

be litigated in federal court with exclusive ERISA remedies. Jd.

ERISA is not controlling here with respect to plaintiff's punitive

claim.

Under California law, punitive damages may be awarded where

it can be shown that defendant is guilty of oppression, fraud and

malice. Defendant must act with the intent to vex, injure or annoy,

or with a conscious disregard of plaintiff's rights. See Si/berg v.

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California Life Insurance Company, \\ Cal. App. 3d 465, 113 Cal.

Rptr. 711, 718, 521 P.2d 1103 (1974). Even where if General

American violated its duty of good faith and fair dealing, as alleged

here, such does not necessarily establish that it acted with the re-

quisite intent to injure plaintiff. Jd. at 718. There is no evidence

that General American acted with malice in refusing to process plain-

tiff’s claim. Therefore punitive damages under Cal. [Civil] Code

section 3294 are disallowed.

ATTORNEY FEES

Plaintiff seeks to recover attorney fees, costs, aiid expenses aris-

ing from this action. Absent contractual or statutory authorization,

the general rule is that attorney fees are not recoverable either as

damages or costs. See Mustachio v. Ohto Farmers Insurance Com-

pany, 44 Cal. App. 3d 358, 118 Cal. Rptr. 581, 584 (2d Dist. 1975).

Plaintiff has alieged that General American violated its duty

of good faith and fair dealing by refusing to pay the proceeds of

the policy to plaintiff. Under California law, in every insurance con-

tract there is an implied covenant that requires the insurer to deal

in good faith and fairly in handling the insured's claim against it.

This duty is imposed by law and does not arise from the terms of

the contract. See Richardson v. Employers Liability Assurance Com-

pany, 25 Cal. App. 3d 232, 102 Cal. Rptr. 547, 552 (1972). When

an insurer unreasonably and in bad faith withholds payment of the

claim of its insured, it is subject to liability in tort. Mustachio, supra.

118 Cal. Rptr. 584. Where the insurer's tortious conduct makes it

reasonable for the insured to seek protection of counsel, the insurer

is responsible for that item of damages. Jd. But every decision

denying benefits is not evidence of bad faith. See Mason v. Mer.

cury Casualty Company, 64 Cal. App. 3d 471, 134 Cal. Rptr. 545,

547-48 (1976). | earlier found that the disputed provision was suscep-

tible of varied interpretations. | conclude that General American

simply was pursuing its own economic interests in asserting its legal

rights and defenses. It did not act unreasonably or in bad faith in

denying the claim of plaintiff-beneficiary. No malice is shown here,

just sloppy draftsmanship. Based on the foregoing, | deny plaintiff's

-1Sa

request for attorney fees. Since plaintiff has prevailed on her main

claim, she is entitled to recover costs.

THE POLICY AMOUNT

The first page of the #4563 policy states that it is a life and

accidental death and dismemberment insurance coverage policy. On

the enroliment card signed by decedent, the insurance coverage is

listed at $42,000. Under the *‘ Accidental Death"’ provision, it reads

in part on page six of the policy:

1) if injury results in joss of life, the amount of insurance in effect

on the date of injury will be payable to the beneficiary. The beneficiary

is the same as under the Life Insurance unless the insured individual

names a separate beneficiary.

| find that Ronald James Burak died as a result of injuries he received

in an auto accident October 27, 1983, and plaintiff is therefore

entitled, as beneficiary of the life insurance policy, to recover $42,000

under the life insurance and an additional $42,000 for accidental

death. The $42,000 amount recoverable under the accidental death

provision is derived from the provision itself that the amount of

insurance in effect on the date of decedent's death was $42,000.

It is therefore

ORDERED that defendant's motion for summary judgment

is denied; it is further

ORDERED that plaintiff's motion for summary judgment is

granted; it is further

ORDERED that plaintiff shall have and recover from defen-

dant her costs; it is further

ORDERED that judgment shall enter against defendant and

for plaintiff in the amount of $84,000, plus interest at the legal

rate from the date of filing of the complaint.

DATED at Denver, Colorado this 12th day of October, 1984.

/s/ John L. Kane, Jr.

UNITED STATES DISTRICT

JUDGE

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Civil Action No. 84-K-782

PAMELA J. BURAK,

FILED

Plaintiff, United States District Court

Denver, Colorado

sia OCT 15 1984

GENERAL AMERICAN LIFE JAMES R. MANSPEAKER

INSURANCE COMPANY, Clerk

Defendant.

JUDGMENT

PURSUANT TO and in accordance with the Order entered by

the Honorable john L. Kane, Jr., United States District Court Judge,

on October 12, 1984, it is

ORDERED AND ADJUDGED that summary judgment is

hereby entered for the piaintiff, Pamela Burak, and against the

defendant General American Life Insurance Company in the amount

of $84,000.00, plus interest at the legal rate of 11.36% from the

date of the filing of the complaint. It is

FURTHER ORDERED that the plaintiff shall have her costs

upon the filing of a Bill of Costs with the Clerk of the Court within

ten days of the entry of this judgment.

DATED at Denver, Colorado this 15th day of October, 1984.

FOR THE COURT:

JAMES R. MANSPEAKER, Clerk

By: /s/ Stephen P. Ehrlich

Stephen P. Ehrlich, Chief

Deputy

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Civil Action No. 84-K-782

PAMELA J. BURAK,

FILED

Plaintiff, United States District Court

Denver, Colorado

si NOV 2 1984

GENERAL AMERICAN LIFE JAMES R. MANSPEAKER

INSURANCE COMPANY, Clerk

Defendant.

AMENDED ORDER

The motion of defendant General American to this court for

reconsideration of the Order of October 12, 1984 or, in the alter-

native, for a motion to alter the judgment to reflect no determina-

tion of the applicability of the double indemnity provision under

the #4563 policy; it is

ORDERED that the judgment is modified. without prejudice

to the parties to litigate the applicability of the double indemnity

provision in the state court, to reflect that judgment shall enter for

plaintiff and against defendant in the amount of $42,000, the

coverage under the life insurance provision under the policy, plus

costs, and interest at the legal rate from the date of the filing of

the complaint.

DATED at Denver, Colorado this 2nd day of November, 1984.

/s/ John L. Kane, Jr.

UNITED STATES DISTRICT

JUDGE

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Case No. 84-K-782

PAMELA J. BURAK,

Plaintiff,

VS.

GENERAL AMERICAN LIFE

INSURANCE COMPANY,

Defendant.

MINUTE ORDER — JUDGE KANE

Summary judgment as to all parties and claims was entered

October 12, 1984 in the above captioned matter. An order entered

November 2, 1984 modified the initial judgment to reflect that the

issue of the applicability of double indemnity under the accidental

death provision of the policy was left undetermined, and that the

parties could litigate that issue in the state court. The initial judg-

ment of October 12 is deemed not final as to all parties and claims;

that the November 2 order is modified to reflect that partial sum-

mary judgment is entered on the issue of the construction of the

policy; and that the court retains jurisdiction for the purpose of deter-

mining the only remaining issue, the applicability of double indem-

nity under the accidental death provision, which shall be determined

by a trial on the merits, which is set for May 31, 1985 at 9:00 AM

at the United States Courthouse for the District of Colorado, Room

C200. The parties shall submit a pretrial order at least thirty days

prior to the trial date. Defendant's motion for reconsideration or

for alternative relief is Denied.

Mary Clark, Secretary DATED: December 14, 1984

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Rule 56. Summary Judgment

(a) For Claimant. A party seeking to recover upon a claim,

counterclaim, or cross-claim or to obtain a declaratory judgment may,

at any time after the expiration of 20 days from the commencement

of the action or after service of a motion for summary judgment

by the adverse party, move with or without supporting affidavits

for a summary judgment in the party's favor upon all or any part

thereof

(b) For Defending Party. A party against whom a claim,

counterclaim, or cross-claim is asserted or a declaratory judgment

is sought may, at any time, move with or without supporting affi-

davits for a summary judgment in the party’s favor as to all or any

part thereof.

(c) Motion and proceedings thereon

The motion shall be served at least 10 days before the time

fixed for the hearing. The adverse party prior to the day of hearing

may serve opposing affidavits. The judgment sought shall be

rendered forthwith if the pleadings, depositions, answers to inter-

rogatories, and admissions on file, together with the affidavits, if

any, show that there is no genuine issue as to any material fact and

that the moving party is entitled to a judgment as a matter of law

A summary judgment, interlocutory in character, may be rendered

on the issue of liability alone although there is a genuine issue as

to the amount of damages.

(d) Case not fully adjudicated on motion

If on motion under this rule judgment is not rendered upon

the whole case or for all the relief asked and a trial is necessary, the

court at the hearing of the motion, by examining the pleadings and

the evidence before it and by interrogating counsel, shall if practi-

cable ascertain what material facts exist without substantial contro-

versy and what material facts are actually and in good faith contro-

verted. It shall thereupon make an order specifying the facts that

appear without substantial controversy, including the extent to which

the amount of damages or other relief is not in controversy, and

directing such further proceedings in the action as are just. Upon

the trial of the action the facts so specified shall be deemed estab-

lished, and the trial shall be conducted accordingly.

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