Court: Court of Appeals of Georgia; May 4, 1981; Georgia; State Appellate Court
In the case of Georgia International Life Insurance Company v. Harden, decided on May 4, 1981, the Court of Appeals of Georgia addressed a dispute regarding disability benefits following Harden's massive heart attack on May 31, 1975. Harden had purchased a disability insurance policy from Georgia International Life Insurance Company effective December 12, 1974, after suffering health issues beginning in July 1972. The policy stipulated that benefits would be payable only for sicknesses originating after the policy's effective date.
After Harden’s heart attack, he filed a claim for disability benefits, which was denied by the insurance company. They argued that his condition predated the policy's effective date, asserting that the heart condition causing his disability had been present since 1973. Consequently, they claimed that he was not entitled to benefits under the policy's terms.
Harden then initiated legal action against the insurer, seeking the benefits, damages for bad faith refusal, and attorney's fees. The jury ruled in favor of Harden, awarding him $6,482.72 in benefits and $4,500 in attorney’s fees. The insurance company appealed, arguing that the evidence demonstrated Harden's heart condition was a pre-existing issue, referencing the precedent set in Lovett v. American Family Life Ins. Co. The court in Lovett had determined that for coverage to be valid, the illness must have originated during the policy period, regardless of whether actual sickness was present before the policy date.
The diagnosis of a disease occurring after the filing of an insurance application and policy effective date does not imply that the disease originated during the policy term. The policy requires that the disease must originate during the policy term, not merely be diagnosed then. The definition of 'disease' allows for its existence prior to manifestation. In Lovett, the insured was denied benefits because medical evidence indicated that the disease's onset preceded the policy date. In contrast, Harden’s policy with International does not stipulate that a pre-existing disease disqualifies coverage for a disabling sickness, as long as the disabling sickness itself originates after the policy date. The focus is on the origin date of the disabling sickness, which in this case is Harden's heart attack on May 31, 1975. The evidence shows Harden was not disabled at the policy's inception and suffered a disabling heart attack while the policy was active, warranting recovery under the policy. The language of the policy is clear enough for a layperson to interpret that a sickness, like Harden's heart attack, commenced after the policy began. If International intended to exclude coverage for disabilities arising from pre-existing diseases, it could have done so expressly. Therefore, the judgment favoring coverage is upheld, and prior cases, including American Life Ins. Co. v. Stone, do not alter this outcome, as they do not equate 'sickness' and 'disease' in a way that affects the current policy's context.
The terms 'sickness' and 'disease' are defined distinctly in insurance contexts, where 'sickness' involves a condition that disrupts normal activities, while 'disease' may not cause such disruption. Insurance policies that cover losses due to disease or sickness are interpreted favorably for the insured if there is ambiguity. In the case at hand, the interpretation proposed by International contradicts established construction rules.
International contends that the judgment awarding attorney's fees under Code Ann. 56-1206 was erroneous. The appellate review standard for such awards stipulates that the judgment is affirmed if any evidence supports it, unless a reasonable defense justifies the insurer's good faith. A defense is considered reasonable if it raises legitimate legal or factual questions, even if not upheld by the trial court or jury. The intent of Code Ann. 56-1206 is to penalize insurers for unjustified delays in payment.
Harden argues that International's failure to inquire about his health indicates "bad faith." This argument relates to whether International should be liable under the policy, rather than its good faith in denying coverage. "Bad faith" is determined by whether the insurer had valid grounds for resisting payment, based on policy terms and the circumstances surrounding the claims. In this case, International was obligated to pay if Harden became disabled due to sickness after the policy's effective date, and the absence of health inquiries does not diminish this obligation or render the refusal to pay unjustifiable.
Harden's eligibility for coverage under the insurance policy is contingent on whether he was covered as written. The absence of inquiries regarding his health does not prevent International from contesting its interpretation of the policy language. Even if Harden could establish "bad faith," International presented a reasonable legal defense that supported its refusal to pay, as "bad faith" is not applicable when legal questions are ambiguous. The classification of a disabling heart attack, particularly for an individual with a pre-existing condition, remains an unprecedented legal issue regarding credit disability insurance. The court concluded that the insurer acted appropriately in litigating the matter and could not be held liable for statutory penalties under Code Ann. 56-1206.
International's claim that the trial court erred by not instructing that Harden could not recover if his disability originated before the policy's effective date was rejected, as the existing charge sufficiently covered Harden's burden of proof. Moreover, International waived its right to contest this issue on appeal because it did not request additional instructions or object during the trial. The court found no substantial error that would justify a miscarriage of justice. Other claims regarding "bad faith" are moot due to the earlier ruling. The only identified error was the award of "bad faith" attorney's fees; therefore, the judgment is affirmed, with instructions to eliminate the attorney's fee award. Judges Deen and Banke concurred.
