Aetna Life Insurance Company v. Adams , 1969 Tex. App. LEXIS 2370 ( 1969 )

PARKER, Chief Justice.

This is a suit brought by the appellees, Walter H. Adams and wife, M. G. Adams, upon a group hospitalization insurance policy written by the appellant, Aetna Life Insurance Company, to recover benefits as a result of the confinement of appellees’ son, Walter Hagan Adams, Jr., at Beaumont Remedial Clinic, Inc. The basic controversy in the trial court was whether or not there was any evidence that Beaumont Remedial Clinic is a hospital as defined in the policy. That is the only question presented by this appeal. Trial was to a jury, which found, inter alia, that Beaumont Remedial Clinic was a hospital under the policy definition. Appellant’s motion to disregard this jury finding and for judgment was overruled by the trial court. Judgment on the verdict was thereafter entered in favor of appllees in the amount of $3,337.60.

Walter Hagan Adams, Jr. was born August 24, 1958. On January 3, 1968, he was admitted to Beaumont Remedial Clinic. The Aetna Life Insurance Company had issued previously a group insurance policy covering the employees of Kirbyville State Bank and their children. The mother of the boy, Mrs. M. G. Adams, the wife of Walter H. Adams, was such an employee and their son was covered by the policy subject to its terms and exclusions of liability. Appellant, Aetna, specifically denied that Beaumont Remedial Clinic was a “hospital” within the policy definition of that term. The policy definition is:

“The term ‘hospital’ means only an institution which meets fully every one of the following tests, namely, (a) it is primarily engaged in providing — for compensation from its patients and on an inpatient basis — diagnostic and therapeutic facilities for the surgical and medical diagnosis, treatment, and care of injured and sick persons by or under the supervision of a staff of physicians, and (b) it continuously provides twenty-four hour a day nursing service by registered graduate nurses, and (c) it is not, other than incidentally, a place for rest, a place for the aged, a place for drug addicts, a place for alcoholics, or a nursing home.”

In answer to Special Issue No. 1, the jury found that during the period of time Walter Hagan Adams, Jr. was confined in Beaumont Remedial Clinic it was a hospital as defined in the policy.

All three of appellant’s points of error are no-evidence points directed at the jury finding to Special Issue No. 1. Only evidence favorable to such finding of the jury is considered in passing upon each point of error. The evidence is undisputed.

Appellant insurance company denied liability on February 5, 1968, by letter of that date, the material portion thereof reading:

“We have the bill in the amount of $450 for services rendered Walter in the month of January by the Beaumont Remedial Clinic.

“Because of the fact that the clinic is not one that qualified, in accordance with contractual definition of a hospital under the Group Contract, we are unable to accept liability for these expenses. We feel that on reviewing the contract for the definition, you will agree.”

The applicable rules in construing insurance contracts were recently reiterated in State Farm Mutual Automobile Ins. Co. v. Pan American Ins. Co., 437 S.W.2d 542, 544 (Tex.Sup., 1969), where the Supreme Court of Texas adopted and approved the following quotation in Hardware Dealers Mutual Ins. Co. v. Berglund, 393 S.W.2d 309 (Tex.Sup., 1965):

“The language used in the policies ‘must be construed according to the evident intent of the parties, to be derived from the words used, the subject-matter to which they relate, and the matters naturally or usually incident thereto,’ and it is only wne ‘the words admit of two constructions, that one will be adopted most favorable to the insured.’ Brown v. Palatine Insurance Company, 89 Tex. 590, 35 S.W. 1060 (1896). See 13 Tex.Jur.2d 287, Contracts, § 122.” (Emphasis supplied.)

Appellant, in its third point of error, contends there is no evidence that during the confinement of Walter Hagan Adams, Jr. in Beaumont Remedial Clinic that it was a hospital as that term is defined in the certificate and policy of insurance issued by the insurance company which is above quoted. Upon submission of this cause, it was admitted by appellees that no surgery had ever been performed in Beaumont Remedial Clinic. Dr. A. E. Starkey testified by deposition that he was the Administrator and Executive Director of that Clinic. He testified:

“Q. Could you tell us whether or not Beaumont Remedial provides its patients with surgical treatment, if that becomes necessary?

“A. If it became necessary we would, yes, but surgical treatment is not indicated for these children. If surgery were required, it would be because of an accident, not pertaining to their reason for being here. This disorder that we are treating cannot be treated surgically.”

Every one of the tests in the policy definition of “hospital” must be met— not just one. All of the components of each test must be met. To qualify, Beaumont Remedial Clinic was required to be primarily engaged in providing for the surgical diagnosis and treatment of injured and sick persons. The word “treat” in this context is defined in Webster’s Third New International Dictionary, Unabridged (1967):

“treat * * * 5a: to care for (as a patient or part of the body) medically or surgically: deal with by medical or surgical means: to give a medical treatment to * *

For Beaumont Remedial Clinic to be a hospital as defined, it had to be primarily engaged in providing surgery, when needed, in that hospital. Having physical facilities for surgery is not enough.

There is no evidence that Beaumont Remedial Clinic was primarily engaged in providing for the surgical diagnosis and treatment and care of injured and sick persons by and under the supervision of a staff of physicians. The undisputed facts show that Beaumont Remedial Clinic does not fall within the term “hospital,” as defined by the policy. Guardian Life Ins. Co. of America v. Scott, 405 S.W.2d 64, 66 (Tex.Sup., 1966). Appellant’s third point is sustained.

Appellant, in its Point No. 1, contends there is no evidence that, during the confinement of Walter Hagan Adams, Jr., Beaumont Remedial Clinic was primarily engaged in providing for its patients on an in-patient basis. Dr. Starkey testified that the total of in-patients and out-patients was 148. The number of in-patients was the same as the number of out-patients. The evidence shows that in-patients required more time than out-patients. An in-patient was charged $450.00 per month, consisting of $175.00 for therapy, with the remainder of $275.00 being for room, board, and nursing services, but not including laboratory work or medications. An out-patient was only charged $175.00 per month. There were eight nurses — three licensed vocational nurses, two registered nurses, and three nurses’ aids. After the therapy hour, the Clinic had eleven full-time and five part-time women and counselors to be with in-patients. The Clinic owned a building constructed and formerly occupied by a hospital as defined in the policy. Point 1 is overruled.

Appellant, in its Point 2, contends there is no evidence that, during the confinement of Walter Hagan Adams, Jr., Beaumont Remedial Clinic continuously provided 24 hour a day nursing services by registered graduate nurses. The Clinic had two registered graduate nurses. Each regularly worked eight hours a day, five days of the week. They did not work together, but at different hours so that, of 168 hours in a week, a registered graduate nurse was regularly on duty 80 hours. Each nurse was subject to call when not in the Clinic. We consider the definition of hospital in the instant case to be governed or controlled by Guardian Life Ins. Co. of America v. Scott, supra. Point 2 is sustained.

Having so held, the cross-points of error of appellees, contending the trial court erred in holding there could be no anticipatory breach of the contract of insurance between appellees and appellant, is without merit, for Beaumont Remedial Clinic was not a hospital as defined in the insurance policy. Further, appellant’s motion to dismiss appellees’ cross appeal is granted. Appellees filed no appeal bond and, under the holding of this court in our Cause No. 7075, styled Consolidated Underwriters vs. Richardson, of September 4, 1969, on pages 5 and 6, such cross appeal is dismissed.

Judgment of the trial court is reversed and judgment rendered that Walter H. Adams and wife, M. G. Adams, take nothing as against Aetna Life Insurance Company. All costs are adjudged against appellees.