Greguhn v. Mutual of Omaha Insurance Company

Utah Supreme Court
23 Utah 2d 214, 461 P.2d 285 (1969)

ELI5:

Rule of Law:

The doctrine of anticipatory breach does not apply to unilateral contracts for the payment of money in installments; therefore, an insured party cannot recover a lump sum judgment for future benefits when an insurer repudiates a disability policy.

Facts:

The plaintiff, a brick mason with a fifth-grade education, had worked in his trade for over 20 years.
In 1962 and 1964, the plaintiff purchased two separate health and accident insurance policies from defendants United Benefit Life Insurance Company and Mutual of Omaha Insurance Company.
On September 21, 1964, a scaffold plank fell from beneath the plaintiff at work; he caught himself to avoid falling to the ground, hanging until a coworker assisted him.
Approximately one hour after the incident, the plaintiff began to suffer back pain, which was later diagnosed as an aggravation of a pre-existing, dormant back condition called spondylolisthesis.
The plaintiff had never experienced any back problems before the accident.
After the plaintiff's injury, the defendant insurance companies made payments under the policies for approximately one year.
In June 1965, the defendants notified the plaintiff that they would cease payments, classifying his condition as a non-confining illness and offering a final payment of $300.

Procedural Posture:

The plaintiff filed separate actions against each defendant insurance company in a Utah trial court.
The trial court consolidated the two cases.
A jury returned a general verdict for the plaintiff, finding he was totally and permanently disabled under the terms of the policies.
The trial court entered judgment for the plaintiff, awarding both past-due installments and a lump sum for the present value of all future benefits based on his life expectancy.
The defendant insurance companies appealed the trial court's judgment to the Supreme Court of Utah.

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Issue:

Does an insurer's refusal to make future disability payments constitute an anticipatory breach of the insurance contract, allowing the insured to recover a lump sum for all future benefits?

Opinions:

Majority - Tuckett, Justice

No. An insurer's refusal to make future payments under a disability policy does not constitute an anticipatory breach entitling the insured to a lump sum judgment for future benefits. The great majority of jurisdictions hold that the doctrine of anticipatory breach does not apply to unilateral contracts where the only remaining obligation is for the defendant to make periodic payments of money. The court aligns with the Restatement of Contracts, which states that in a unilateral contract for payment in installments, a repudiation cannot amount to an anticipatory breach of installments not yet due. Therefore, recovery under a disability policy is limited to installments that have already accrued and are unpaid, and it was an error for the trial court to award a judgment for future benefits.

Dissenting - Ellett, Justice

Yes. Where an insurer completely repudiates its contractual obligations after a court has found the disability to be total and permanent, the insured should be permitted to recover the present value of all future benefits in a single action. Forcing the insured to sue repeatedly for each missed installment is unjust and promotes a multiplicity of lawsuits. The insurer, having abrogated the contract, is in no position to insist that the insured be bound by the installment payment terms. This is an action for damages for a total breach of contract, not a suit for specific performance, and public policy supports allowing full recovery in one action to resolve the dispute permanently.

Analysis:

This decision solidifies Utah's adherence to the majority common law rule that rejects the application of the anticipatory breach doctrine to unilateral installment contracts, such as disability insurance policies. It establishes that an insurer's wrongful refusal to pay is treated as a series of individual breaches, not a single, total breach of the entire contract. This precedent protects insurers from massive, immediate lump-sum judgments based on life expectancy but places the burden on the disabled insured to potentially bring multiple lawsuits over time to enforce their right to payment for each installment as it becomes due.

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