Butler v. MFA Life Ins. Co.

• Decision Date: 24 January 1979
• Docket Number: No. 78-1371,78-1371
• Parties: Francille BUTLER, Appellant, v. MFA LIFE INSURANCE COMPANY and MFA Mutual Insurance Company, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 448

591 F.2d 448

Francille BUTLER, Appellant, v. MFA LIFE INSURANCE COMPANY and MFA Mutual Insurance Company,

Appellees.

No. 78-1371.

United States Court of Appeals,

Eighth Circuit.

Submitted Nov. 16, 1978.

Decided Jan. 24, 1979.

Charles E. Hanks, Fayetteville, Ark., for appellant.

James E. Crouch, Crouch, Blair, Cypert & Waters, Springdale, Ark., for appellees.

Before STEPHENSON and McMILLIAN, Circuit Judges, and ROBINSON, ^* Senior District Judge.

RICHARD E. ROBINSON, Senior District Judge.

This case is an appeal from the District Court's ¹ entry of Summary Judgment against the appellant Francille Butler. After a careful examination of the law and the record, we find the appellant failed to raise a genuine issue of material fact. Accordingly, we affirm.

The appellant's husband, Melvin Butler was an insurance agent with the appellee MFA Insurance Company for fourteen years. During his employment, the appellee issued an agent's group life insurance policy to Melvin Butler. A provision in the policy provided a discharged employee with the right to convert the group policy to an individual policy without submitting proof of insurability. ² To effectuate the conversion, a discharged agent must submit an application form within a limited time period specified in the group policy. ³

Prior to Melvin Butler's formal employment termination on July 14, 1975, an employee of the appellee, Stella Ravencraft, mailed a memorandum to Melvin Butler which explained the conversion provision and included the necessary forms. On July 25, 1975, Melvin Butler wrote a letter to appellee in which he requested a price quotation and other information about converting the group policy to an individual policy. Stella Ravencraft replied on July 28, 1975 with another memorandum and additional forms. On August 6, 1975, Melvin Butler sent a second letter to Stella Ravencraft. In an apparent reference to her letter of July 28, 1975, Melvin Butler mentioned the forms and their return date, but claimed he did not receive the forms. He indicated that a third person, "William Looper D.S.M.", was receiving his mail and not forwarding it to him and Melvin Butler again requested the necessary forms and a price quotation. There is no evidence that he gave appellee any address where he could receive his mail. On August 12, 1975, Stella Ravencraft mailed a third memorandum and additional forms. There is no evidence of any further communication between the parties.

When Melvin Butler died on December 20, 1975, the group policy had not been converted to an individual policy. As the beneficiary of the policy, the appellant filed a claim for the proceeds of the policy. The appellee denied the claim for the reason that the insurance coverage ceased after Melvin Butler was discharged.

In the second amendment to her complaint, the appellant alleged that the appellee, or its agents, intentionally or wilfully withheld the insured's mail and communications. This wrongful delay allegedly deprived Melvin Butler of his conversion right. ⁴ After brief discovery, the appellee moved for Summary Judgment.

The Trial Court found Melvin Butler's letters and previous employment indicated "he knew that it was necessary for him to convert the insurance within 31 days after the termination and with this knowledge he utterly neglected to comply with the provisions of the policy relevant to its conversion." Butler v. MFA Insurance Co., 449 F.Supp. 355, 359 (W.D.Ark.1970). The District Court concluded that "all rights and benefits prescribed by the policy (had) ended . . . and since there was no genuine issue as to any material fact, . . . " granted appellee's motion for summary judgment. Id. at 360.

When reviewing the Trial Court's entry of Summary Judgment, the Appellate Court applies the same standard as the Trial Court. 10 Wright & Miller, Federal Practice and Procedure, Civil, § 2716 (1973). Under Fed.R.Civ.P. 56(c) the motion for summary judgment should be sustained "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."

This Circuit has repeatedly emphasized the drastic nature of the summary judgment remedy. It should not be granted unless the moving party has established his right to a judgment with such clarity as to leave no room for controversy and the non-moving party is not entitled to recover under any discernible circumstances. Jackson v. Star Sprinkler Corp. of Florida, 575 F.2d 1223, 1226 (8th Cir. 1978); New England Mutual Life Ins. Co. v. Null, 554 F.2d 896, 901 (8th Cir. 1977); Robert Johnson Grain Co. v. Chemical Interchange Co., 541 F.2d 207, 209 (8th Cir. 1976). The moving party must overcome a heavy burden and the evidence is viewed in the light most favorable to the non-moving party. The Court must give the non-moving party the benefit of all reasonable inferences to be drawn from the facts. Adickes v. S. H. Kress & Co., 398 U.S. 144, 158-59, 26 L.Ed.2d 142, 90 S.Ct. 1598 (1970); Jackson v. Star Sprinkler Corp. of Florida, supra at 1126; Goodman v. Parwatikar, 570 F.2d 801, 803 (8th Cir. 1978). However, this Circuit recognizes the remedy's salutory purpose of avoiding useless and time consuming trials. Percival v. General Motors Corp., 539 F.2d 1126, 1129 (8th Cir. 1976); Lyons v. Bd. of Ed. of Charleston, 523 F.2d 340, 347 (8th Cir. 1975).

Under Arkansas law an insurer is required to include a conversion provision in all group life insurance policies. Ark.Stat.Ann. § 66-3516. ⁵ Since no proof of insurability is required, ⁶ the right to convert the group policy to an individual policy is a valuable contractual right of the discharged employee. Union Life Ins. Co. v. Bolin, 201 Ark. 555, 145 S.W.2d 734, 735 (1940); New York Life Ins. Co. v. Campbell, 191 Ark. 54, 83 S.W.2d 542, 543-44 (1935). See also 17 Couch, Insurance § 69.13 (2d ed. 1967); Vance, Insurance § 98 (3d ed. 1951). To avoid the inadvertent loss of the conversion right, the insurer must give the discharged employee adequate written notice of the provision, Ark.Stat.Ann. § 66-3519, ⁷ and it must act on the insured's application for conversion in a reasonable and timely fashion. New York Life Ins. Co. v. Dandbridge, 202 Ark. 112, 149 S.W.2d 45, 47-48, 134 A.L.R. 1519 (1941); Union Life Ins. Co. v. Bolin, supra, 145 S.W.2d at 735. See Volis v. Puritan Life Ins. Co., 548 F.2d 895 (10th Cir. 1977); Funk v. Franklin Life Ins. Co., 392 F.2d 913 (7th Cir. 1968); Schiel v. New York Life Ins. Co., 178 F.2d 729 (9th Cir.), Cert. denied, 339 U.S. 931, 70 S.Ct. 668, 94 L.Ed. 1351 (1950). ⁸

However, the right to convert the group policy to an individual policy is not an absolute right. The insurance company may properly insist upon the strict performance by the insured of the conditions precedent contained in the conversion provision. Life & Cas. Ins. Co. v. Walters, 207 Ark. 910, 183 S.W.2d 515, 516-17 (1944); Washington Nat. Ins. Co. v. Simmons, 201 Ark. 734, 147 S.W.2d 3, 6-7 (1941); Union Life Ins. Co. v. Bolin, supra, 145 S.W.2d at 735-38; National Aid Life Ins. Co. v. Holland, 199 Ark. 790, 136 S.W.2d 175, 179-80 (1940). See 17 Couch, Insurance §§ 69:13, 69:64. See also Annot., 105 A.L.R. 478 (1936) Supp. 164 A.L.R. 1057 (1946). The insured's nonperformance defeats recovery under the policy. As noted by the Arkansas Supreme Court:

It is true the insured has 31 days in which to exercise the right of conversion, but, during the time he neglects to do so, he is not insured, and, if he dies without having exercised the option, his beneficiary can not recover.

Aetna Life Ins. Co. v. Carroll, 188 Ark. 154, 157, 65 S.W.2d 25, 26 (1933). ⁹

From the evidence in this case, it is clear that Melvin Butler did not perform the contractual conditions necessary to convert the group policy to an individual policy. His letters and previous employment demonstrate his knowledge of the contents of the conversion provision and the need to take some affirmative action. Although he wrote to the appellee on August 6, 1975, and requested information and forms, there is no evidence of any further action or communication before his death on December 20, 1975. In view of the policy's expiration following his employment termination in July 1975 and the limited time period in which to convert, the insured can not stand idly by for four and one half months. ¹⁰ Since the group policy expired and was not converted to an individual policy before Melvin Butler's death, neither a group nor an individual insurance policy was in force at his death. Accordingly, Summary Judgment was properly entered.

In the second and third amendments to her complaint, the appellant alleged that the life of the policy was extended under two disability provisions. The first provision provides for the waiver of premium payments by those insureds who are totally disabled prior to the age of 60. The waiver continues for one year after termination of insurance because of the disability and submission of proof of disability. ¹¹ The second provision provides for the continuation of the policy for those insureds who are discharged from employment because of a total disability until the disability ends. ¹²

The policy's definition of total disability ¹³ is not favorably received by the Arkansas courts, which adopt a more liberal definition:

"To be totally disabled within the meaning of an insurance policy, insuring against such condition, it is not necessary that the insured should be absolutely helpless; he is totally disabled when he is unable to perform the substantial and material acts of his business or occupation in the usual and customary way."

New York Life Ins. Co. v. Danbridge, 204 Ark. 1078, 1083, 166 S.W.2d 1030, 1033 (1943) Quoting Equitable Life Insurance Society v. Barton, 192 Ark. 984, 96 S.W.2d 480 (1936).

With regard...