Morris v. Mutual Benefit Life Insurance Company

• Decision Date: 19 August 1966
• Docket Number: Civ. No. 9878.
• Parties: Perry B. MORRIS v. The MUTUAL BENEFIT LIFE INSURANCE COMPANY.
• Court: U.S. District Court — Northern District of Georgia

258 F. Supp. 186

Perry B. MORRIS v. The MUTUAL BENEFIT LIFE INSURANCE COMPANY.

Civ. No. 9878.

United States District Court N. D. Georgia, Atlanta Division.

July 29, 1966.

Amendment to Order August 19, 1966.

Cohen, Kohler, Barnwell & Chambers, Atlanta, Ga., for plaintiff.

Hansell, Post, Brandon & Dorsey, Atlanta, Ga., for defendant.

ORDER ON MOTIONS FOR SUMMARY JUDGMENT

SIDNEY O. SMITH, Jr., District Judge.

This is a suit in which plaintiff as beneficiary seeks to recover $10,000.00, the amount of the proceeds of a group life insurance policy issued by the defendant insurance company, plus $2,500.00 penalty, and $3,000.00 attorney's fees. The plaintiff contends that the deceased, Hyman Morris, was covered under an employee group life insurance policy issued by defendant. Defendant contends the deceased was not within the coverage of the policy. Both sides have moved for summary judgment, and the relevant facts are not in dispute.

The insurance policy in question is a one year renewal term policy known as Employee Group Life Certificate Policy Number G 4513-1. This employee group policy pays $10,000.00 upon the death of each covered officer or assistant manager of Morris-Fallaize Insurance, Inc., and its associate agency, the Morris Insurance Agency. The relevant portions of the policy are as follows:

Section A 1(a) of the policy states that all employees are the generally eligible group, and that the covered class within that group includes:

"b. Each active, full-time employee, except any such person employed on a temporary basis.

For the purposes of this policy, any person who works less than 30 hours per week shall not be considered a full-time employee."

Section A 2 requires 30 days continuous service for persons becoming active, full-time employees after the effective date of the policy, but provides that "no service requirement shall be applicable for any such person who is in an eligible class on the effective date of the policy."

Section A 3 provides that the insurance coverage be effective on the effective date of the policy, which was December 7, 1964.

Section A 4 provided:

"The insurance for a member of the general group who otherwise fulfills all the requirements of this section will not take effect at the time described in Section A3 unless he is actively at work on a full-time basis at his usual place of business on that day. If he is not actively at work on a full-time basis at his usual place of business on that day, the insurance will become effective on the first day thereafter upon which he returns to active work on a full-time basis at his usual place of business."

The events leading up to the making of this policy show that Morris-Fallaize Insurance, Inc. applied for more group insurance on their employees. The company with which they had a policy was unable to insure them past their existing limits, and contacted the present defendant insurance company as a supplemental insurer. As a result, on December 7, 1964, a group insurance representative of the defendant was in the office of Perry B. Morris at Morris-Fallaize, for the purpose of working out the coverage of this policy on that day. The policy application was executed by the plaintiff Perry Morris for the policyholder, Morris-Fallaize, and was also executed by Perry Morris as agent for the defendant in connection with the application. The commission on the policy was paid to the company, Morris-Fallaize.

The policy was accepted by the defendant, and issued on January 18, 1965, effective as of December 7, 1964, the date of the application.

The deceased, Hyman B. Morris, was engaged in the insurance business for over 30 years. With his brother Perry, he operated a general insurance business, the Morris Insurance Agency, until September, 1961. He then organized and became president of Morris-Fallaize Insurance, Inc. He continued up to his death to operate Morris Insurance Agency with his brother and to act as President of Morris-Fallaize Insurance, Inc. His duties in these two capacities occupied on an average of 40 hours per week. They were primarily administrative in nature, but he also consulted with his business associates, James Fallaize and Perry Morris, and made calls on prospects and clients. He was an active member of the two insurance businesses, keeping regular office hours, consulting and meeting with business associates and clients, proposing and writing business memorandum and making calls. This schedule, with few exceptions, continued until Monday, November 24, 1964. At that time he entered Emory Hospital for tests to determine the cause of severe and recurring pains in his lower right chest, for which he had previously been examined by his physician on October 28 and November 17, 1964. At the time of his hospitalization, he was weak and had lost weight as the result of a loss of appetite. The physicians were unable to reach a definite conclusion as to the cause of Hyman's condition. However, after 10 days in the hospital, Hyman had regained strength and appetite, and had begun to carry on business activities from the hospital. He was released on Thursday, December 3, 1964, with permission from his physician to do anyhing he felt like doing and within hours of his discharge, he had returned to his office and his regular duties. He worked from 2:00 P.M. to 4:30 P.M. on the day of his discharge; from 9:00 A.M. to 4:00 P.M. on Friday, December 4, 1964; a regular half-day from 9:00 A.M. to 12:15 P.M. on Saturday, December 5, 1964; and from 9:00 A.M. to 4:00 P.M. on Monday, December 7, 1964, the effective date of the insurance policy. He worked from 9:00 A.M. until about 2:00 P.M. on Tuesday, December 8, 1964, at which time he was again stricken with an attack of severe pain while in a conference in the Bank of Georgia Building with a Mr. J. R. Efird. He was again admitted to Emory Hospital on December 9, 1964. After exploratory surgery on December 17, 1964, his condition was diagnosed as hepatoma or cancer of the liver. He was finally discharged from the hospital on December 28, 1964, and died from hepatoma on April 3, 1965.

The plaintiff, Perry Morris, learned of Hyman's condition around December 17, 1964, and Hyman learned of his own condition around December 24, 1964.

There are three issues in this case. First, whether on Monday, December 7, 1964, Hyman P. Morris was an "active, full-time employee" within the meaning of the policy.

Second, if Hyman Morris was otherwise covered, whether the knowledge on the part of plaintiff beneficiary Perry Morris of the physical condition of Hyman prior to January 18, 1965, the date the policy was issued, is a legal bar to Perry's recovery in this suit.

Third, whether the defendant insurance company's refusal to pay the claim was in bad faith under the provisions of Georgia Code Anno. § 56-1206, so as to make defendant liable for a $2,500.00 penalty and attorney's fees.

(1) The first issue is whether Hyman P. Morris was an "active, full-time employee" within the meaning of the policy on Monday, December 7, 1964.

Under the policy provisions there are two conditions to be met before an employee qualified for coverage. First, he had to be an "active, full-time employee" (§ A 1 (b) of the policy) and second he had to be "actively at work on a full time basis at his usual place of business" on the effective date, Monday December 7, 1964 (§§ A 3 and A 4 of the policy).

There can be no dispute that the deceased was "actively at work * * * at his usual place of business" on that day. This issue revolves around the phrase "full-time"—whether, on the facts, Hyman Morris was a "full-time employee" and at work on a "full-time basis" on December 7, 1964, within the meaning of the policy.

The defendant relies on § A 1(b) of the policy, which states that "For the purposes of this policy, any person who works less than 30 hours per week shall not be considered a full-time employee."

Defendant points out that the deceased did not work over 30 hours in the week of his return to work, and according to the statement of Dr. Galambos, was totally disabled after November 25, 1964.

The plaintiff relies on § A 2 of the policy, which states that "no service requirement shall be applicable for any such person who is in an eligible class on the effective date of this policy."

Plaintiff contends that the deceased normally worked over 30 hours per week, and was therefore a full-time employee, and that to require that he have worked over 30 hours on the particular week he was stricken would be in effect to apply a service requirement under the guise of the temporary employee provision § A 1(b).

Under Georgia law, a contract of insurance is construed to carry out the intent of the parties. Georgia Code Anno. § 20-702. However, where there are two inconsistent provisions, in a group insurance contract, the provision most favorable to the insured will be adopted, e. g. McLendon v. Carolina Life Insurance Co., 71 Ga.App. 557, 31 S.E.2d 429 (1944). Where provisions are ambiguous, are subject to doubt, or are reasonably susceptible of two meanings, the interpretation most favorable to coverage of the insured will prevail. American Indem. Co. v. Davis, 155 F.Supp. 47 (M.D.Ga.1957); Continental Casualty Co. v. Robertson, 245 F.2d 604 (5th Cir. 1957); Thornton v. Traveler's Ins. Co., 116 Ga. 121, 126, 42 S.E. 287 (1902). Thus, upon the undisputed facts, if this contract has two provisions in apparent conflict, or if a provision is susceptible of two reasonable interpretations, this issue must be decided in favor of the plaintiff.

The provision in § A 1(b) of the policy, defining an "active, full-time employee" in terms of 30 hours work per week is plainly intended to draw a line between the full-time and temporary employees mentioned in the previous section Section A 1(a). As such, this 30 hour provision must be applied, not on a week by week basis, but on an average basis to determine whether...