Piedmont Southern Life Ins. Co. v. Gunter

• Decision Date: 08 July 1963
• Docket Number: No. 3,Nos. 40189,40190,s. 40189,3
• Parties: PIEDMONT SOUTHERN LIFE INSURANCE CO. v. Josephine C. GUNTER et al. Josephine C. GUNTER et al. v. PIEDMONT SOUTHERN LIFE INSURANCE CO
• Court: Georgia Court of Appeals

Page 527

132 S.E.2d 527

108 Ga.App. 236

PIEDMONT SOUTHERN LIFE INSURANCE CO. v. Josephine C. GUNTER et al.

Josephine C. GUNTER et al. v. PIEDMONT SOUTHERN LIFE INSURANCE CO.

Nos. 40189, 40190.

Court of Appeals of Georgia, Division No. 3.

July 8, 1963.

Rehearing Denied July 24, 1963.

Syllabus by the Court

1. A master policyholder under a group insurance plan covering employees is the agent of the insurance company for every purpose necessary to make effective the group policy, and the insurance company has imputed to it knowledge of facts which the master policyholder knows.

2. A writing signed by an employee covered by a group insurance policy authorizing the insurer to pay benefits directly to a named surgeon or hospital, is a mere power of attorney empowering the insurer thereafter to effectuate a transfer of benefits due, and is not an assignment to the surgeon or hospital.

3. The evidence discussed in Division 3 of the opinion authorized an award of penalty and attorney's fees for bad faith of the insurer in refusing to pay the plaintiffs' claim.

The plaintiffs in this suit were a husband and wife who sought to recover hospital and surgical expenses of the husband allegedly due under a group insurance policy issued to the Georgia Association of Finance & Loan Companies, and penalty and attorneys fees for bad faith of the defendant insurer in refusing to pay their claim. The wife held a certificate under the group policy covering herself as an employee and her husband as a defendant. The defendant's answer denied liability and contended that the wife, in furnishing the company with evidence of insurability to induce the company to extend coverage to her, fraudulently concealed material facts of her husband's medical history. After the plaintiffs had presented evidence at the trial, the court, over the defendant's objections, allowed Dr. Earl Lewis and the City of Macon, acting for the Macon Hospital, to intervene as parties plaintiff. The jury found a verdict for the plaintiffs for the principal sum sued for, $420, and $250 attorney's fees. The defendant, as plaintiff in error in this court, assigns error on several rulings of the trial court which will be discussed in the opinion.

Wiggins & Smith, Atlanta, Kimzey & Crawford, Linton K. Crawford, Cornelia, for plaintiff in error.

Oliver, Oliver & Gunter, Jack N. Gunter, Cornelia, for defendant in error.

HALL, Judge.

1. In support of its motion for judgment notwithstanding the verdict and the general grounds of its motion for new trial, the defendant contends that the evidence showed conclusively that the plaintiff wife in procuring coverage by the group policy knowingly concealed material facts of her husband's medical history, which concealment amounted in law to actual fraud, that the other elements of defense of fraud were proved, and therefore a verdict for the defendant was demanded. The Georgia courts have held that an employer who obtains a group insurance policy covering its employees is the agent of the insurance company for every purpose necessary to make effective the group policy, and that the insurance company has imputed to it knowledge of facts which the employer knows. Cason v. Aetna Life Ins. Co., 91 Ga.App. 323, 85 S.E.2d 568; Pilot Life Insurance Company v. McCrary, 103 Ga.App. 549, 120 S.E.2d 134; Washington National Insurance Co. v. Burch, 293 F.2d 365 (5th Cir.).

In this case the master policyholder was the Georgia Association of Finance & Loan Companies of which the plaintiff wife's employer, Habersham Discount Company, was a member. The employer's comptroller testified that it was a part of his duties to approach new employees and recommend their coverage under the group policy, and to give advice in answering the questions on the evidence of insurability form; and that he did this in the case of the plaintiff employee. His testimony was sufficient to support a finding that he knew the employee's husband had been treated for a gastric ulcer and that he advised her to fill out the form as she did without mentioning it.

The defendant argues that the cases cited above are not applicable because in them it was the knowledge of an employer who was the master policyholder that was imputed to the insurance company; whereas in the present case, the plaintiff's employer not being master policyholder, its knowledge should not be imputed to the insurer. We see no difference in principle and reason between this case, where the employer was a member company in the association which was the named insured in the master policy, and the cases in which the employer itself was the named insured in the master policy. The comptroller of the member company of the master policyholder should accordingly be regarded as the agent of the master policyholder in performing his duties with respect to extending coverage under the policy. See Clauson v. Prudential Ins. Co. of America, 195 F.Supp. 72 (D.C.D.Mass.); Mutual Bank & Trust Co. v. Shaffner, Mo., 248 S.W.2d 585; Neider v. Continental Assurance Co., 213 La. 621, 35 So.2d 237, 2 A.L.R.2d 846. 'Where the insurer seeks to defeat a policy by reason of its fraudulent procurement through false and fraudulent statements made in an unattached application for the insurance, and where the plaintiff suing on the policy shows that the agent of the insurer was aware [of,] or was informed by the insured as to his true condition, * * * the insurer would be estopped from setting up as a defense that the insured was not in good health at the time the policy was issued, on account of the knowledge to the contrary then had by the agent; so, in the instant case, the company could not be permitted to set up that it was deceived on account of the false and fraudulent statements of the insured, when its agent was made fully aware of his true condition. * * *' Metropolitan Life Ins. Co. v. Bugg, 48 Ga.App. 363, 364, 172 S.E. 829; Firemens Fund Ins. Co. of San Francisco v. Standridge, 103 Ga.App. 442, 448, 119 S.E.2d 585.

The defendant contends also that since the new Georgia Insurance Code became effective January 1, 1961, the master policyholder's representative can no longer be held to be an agent of the insurer. This statute, Code Ann. § 56-801a, defines the term 'agent' and provides, '* * * under a group insurance plan, a person who serves the master policyholder of group insurance in administering the details of such insurance for the employees or debtors of such person, or of a firm or corporation by which he is employed, and who does not receive insurance commissions for such service, shall not be deemed to be an agent: * * *.' This Code section is a part of Ch. 56-8a of the new Georgia Insurance Code, which deals with the necessity for licensing of insurance agents. The effect of this provision is that a person who serves the master policyholder in administering the details of group insurance is exempted from the licensing requirements of the chapter. It does not effect a change in the law established by the cases discussed above.

The defendant's contention, that the plaintiff's failure to introduce the master policy in evidence was fatal to the verdict, is without merit, since in its answer the defendant admitted the group policy. The evidence did not demand a verdict for the defendant on its defense of fraud and was sufficient to support the verdict for the plaintiff. The trial court, therefore, did not err in overruling the defendant's motion for judgment n. o. v. and the general grounds of the motion for new trial.

With respect to the award of attorney's fees, the defendant relies on Occidental Life Ins. Co. of Calif. v. Templeton, 107 Ga.App. 322, 326, 130 S.E.2d 168, 171, which held: 'The verdict which expressly stated that no penalty was found against the defendant nullified the award of attorney's fees.' The verdict in the present case, however, was: 'We the jury find in favor of the plaintiff in the amt. of $420.00 plus $250.00 attorney fees.' Continental Aid Assn. v. Hand, 22 Ga.App. 726, 97 S.E. 206, held that where the evidence was sufficient to authorize a finding of bad faith, the fact that the jury did not award the 25 percent damages allowed by statute would not prevent the recovery of attorney's fees. The Continental case rather than the Occidental case, supra, is controlling in the present case.

2. The defendant assigns error on the allowance of the intervention of Dr. Earl Lewis and the Macon Hospital as parties plaintiff. In support of their petition for intervention, the intervenors offered as evidence purported assignments attached to forms filled in and signed by the physician and the hospital,...