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Click here for the full text of this decision FACTS:Mesquite police officer Donnie James died in June 1998. His widow, Vicki, applied for benefits under his group life insurance policy at work. Royal Maccabees Life Insurance plaid Vicki $50,000, but refused to pay an additional $50,000 Vicki said she was entitled to. Officers were entitled to elect life insurance coverage in incremental amounts up to $100,000, and Donnie submitted an application for the additional benefits and had paid the premiums. Royal Maccabees did not, however, send a letter to Donnie approving the additional benefits. Instead of paying the full $100,000, Royal Maccabees refunded the premiums it had collected over a four-year period. During the trial on Vicki’s lawsuit to collect the additional benefits, Royal Maccabees testified that it had sent letters to Donnie’s doctor asking for more information, but the doctor denied receiving such a request. Similarly, a letter about Donnie purportedly sent to the police department was not a part of the departments files. Additional testimony indicated that Royal Maccabees had represented that eligible full-time employees would be covered for the supplement benefits. The jury found Royal Maccabees in breach of contract, in violation of the DTPA and the Insurance Code, and that it had breached its duty of good faith and fair dealing and had committed fraud. The jury did not, however, attach liability to Royal Maccabees’ agent. After a bifurcated trial on damages, the jury awarded Vicki $665,450 in benefits, mental anguish, punitive damages, attorneys’ fees, interest and damages under the Insurance Code Art. 21.55. HOLDING:Affirmed in part; reversed and remanded in part. Motion for rehearing granted, and opinion of May 2, 2003, vacated and withdrawn. The court states that its initial opinion did not address the issue of the insurance contract’s ambiguity because neither party urged such an argument at trial. The court not finds that the trial court impliedly found that the policy was ambiguous and that the policy’s interpretation was presented to and determined by the jury. Even if the trial court did not make such an implied finding, the court determines that it could assess ambiguity as a matter of law for the first time on appeal. The court finds the policy is ambiguous as to whether the coverage was in place until the insured was advised in writing of disapproval. The application form and the schedule of benefits conflict with a section requiring applicants’ good health, though its original opinion concluded that the clauses could be reconciled to deny coverage. The court now finds that the provisions are ambiguous, and any ambiguity should be construed in favor of coverage. “While we do not wholly agree with [Vicki's] interpretation of the Schedule of Benefits provision, we do conclude the multiple provisions of the policy can be interpreted in different ways. Further, . . . we cannot conclude Royal Maccabees’ interpretation would give effect to the entire agreement. Accordingly, we conclude there is more than one reasonable interpretation of the contract.” Having found the provisions ambiguous, the court says it can also consider extraneous evidence to determine the true meaning of the policy. Such evidence includes a letter written by Royal Maccabees’ agent that sets enrollment dates, but which does not mention the necessity for evidence of insurability prior to enrollment. The court rules that when the ambiguity is construed in favor of the insured, the trial court did not err in entering judgment on the breach of contract claim. The court next finds the evidence legally and factually sufficient in finding a breach of good faith or fair dealing. Royal Maccabees claimed to have sent letters relevant to Donnie’s coverage but no one recalled receiving them. The DTPA, fraud and Insurance Code violations are all supported by legally and factually sufficient evidence: that Royal Maccabees misrepresented that eligible employees would be covered without further approval or review of insurability by the insurer. The court upholds most of the other trial court findings, some based on this court’s ruling that there was a breach of contract, others because they are moot. The court concludes without much discussion that there was evidence to support the jury’s finding of malice to support the punitive damages award, as well as the evidence supporting the award of attorneys’ fees. The court does, however, find error in the trial court’s jury instruction on mental anguish damages because it allowed the jury to award mental anguish damages for a breach of contract. The error was harmful, too, because it cannot be determined whether the jury actually considered the breach of contract in reaching its final award of damages. Finally, the court rules that the trial court did not err in allowing Joseph Wilkerson to testify as an expert for Vicki. Wilkerson was qualified to testify as an expert, and expert testimony was needed to address the issue of ambiguity and whether Royal Maccabees’ actions constituted bad faith, unfair dealing, fraud and violations of the Insurance Code and DTPA. OPINION:Carolyn Wright, J.; James, Wright and Richter, JJ.

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