894 F.2d 1555 (11th Cir. 1990), 89-8218, United of Omaha Life Ins. Co. v. Sun Life Ins. Co. of America

Docket Nº:89-8218.
Citation:894 F.2d 1555
Party Name:UNITED OF OMAHA LIFE INSURANCE COMPANY, Plaintiff-Counter-Defendant-Appellee, v. SUN LIFE INSURANCE COMPANY OF AMERICA, Defendant-Counter-Claimant-Appellant.
Case Date:March 01, 1990
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit

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894 F.2d 1555 (11th Cir. 1990)






No. 89-8218.

United States Court of Appeals, Eleventh Circuit

March 1, 1990

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Michael A. Dailey, Phears & Dailey, Norcross, Ga., for defendant-counter claimant-appellant.

Ben Kingree, III, Carter & Ansley, Atlanta, Ga., for plaintiff-counter defendant-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before VANCE [*] and KRAVITCH, Circuit Judges, and LYNNE [**], Senior District Judge.

KRAVITCH, Circuit Judge:

United of Omaha Life Insurance Company ("United") brought an action against Sun Life Insurance Company ("Sun Life") to recover certain insurance benefits paid to a Sun Life employee under a group insurance policy issued by United to Sun Life and its employees. In a counterclaim, Sun Life sued to recover benefits that United denied to a different employee. Both parties moved for summary judgment on both claims. Sun Life appeals from the grant of summary judgment to United and from the denial of its motion for summary judgment. Because we find that United's claim for reimbursement presents genuine

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issues of material fact, we reverse the grant of summary judgment on that claim. We also reverse the district court's grant of summary judgment in favor of United on Sun Life's counterclaim and direct the court to enter summary judgment in favor of Sun Life on that claim.


Until January of 1986, Sun Life had maintained a group life insurance policy with Life Insurance Company of Georgia ("Life of Georgia") covering its employees. For two years prior to January 1986, negotiations were conducted between Sun Life and United's Sales Manager, Donald Nelson, regarding the possibility of United replacing Life of Georgia as the provider of Sun Life's group policy. After Sun Life refused United's 1984 proposal, United submitted another proposal in August 1985 in an attempt to duplicate as closely as possible the benefits that were provided by Life of Georgia.

Under the proposal, premiums for basic life insurance coverage for all employees were to be paid for entirely by Sun Life, and the benefits were to be based upon an employee's salary. Supplemental coverage could be purchased separately with premiums to be paid by individual employees electing this option.

When the policy went into effect on January 1, 1986, Sun Life had only the 1985 proposal before it. It did not receive United's Master Policy and accompanying Certificate-Booklets spelling out the terms of the policy until several months later.


The instant case involves a dispute over the claims of two employees, Frank Wells and James Del Guidice. The district court found that there were no material facts in dispute regarding either claim and that United was entitled to summary judgment in its favor on both. We find that the district court erred in both cases and review each in turn.

  1. The Wells Claim

    1. Background

    Frank Wells, an employee in Sun Life's Home Office Division, enrolled for supplemental insurance on January 4, 1986. Premiums for supplemental coverage were deducted from his paycheck by Sun Life and remitted to United. At the time he enrolled, Wells was on short-term disability leave, which had begun on November 22, 1985 and continued until his death on February 27, 1986. After Wells' death, his widow submitted a claim to United which United honored by paying the basic benefits in the amount of $36,300 plus $53,306.47 for supplemental death benefits plus interest. 1 After payment, United filed this action alleging that Sun Life, acting as its agent, knowingly or negligently enrolled an ineligible employee for supplemental benefits. United claims indemnification from Sun Life for the violation of the latter's duty to enroll only eligible employees for coverage.

    2. Standards for Summary Judgment

    Under Fed.R.Civ.P. 56(c), summary judgment is proper when the court determines, on the basis of materials submitted by both parties, "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." The burden of establishing the absence of a genuine issue of material fact is on the party seeking summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970).

    Once the moving party has come forward with materials in support of its motion, the party opposing the motion must demonstrate the existence of evidence that would support a verdict in its favor. Celotex, 477 U.S. at 322-23, 106 S.Ct. at 2552. The

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    court must view all evidence in the light most favorable to the non-movant and must resolve all reasonable doubts about the facts in favor of the non-movant. Warrior Tombigbee Transportation Co. v. M/V Nan Fung, 695 F.2d 1294, 1296 (11th Cir.1983). In addition, the Eleventh Circuit held in Washington v. Dugger that "if reasonable minds might differ on the inferences arising from undisputed facts, then a court should deny summary judgment." 860 F.2d 1018, 1020 (11th Cir.1988) (quoting Mercantile Bank & Trust Co. v. Fidelity & Deposit Co., 750 F.2d 838, 841 (11th Cir.1985)). If a review of the evidence presented reveals that the non-movant has failed to produce evidence sufficient to support a jury verdict in his favor, then summary judgment should be granted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). We review the trial court's summary judgment decision de novo. See Hiram Walker & Sons, Inc. v. Kirk Line, 877 F.2d 1508, 1513 (11th Cir.1989); Clemons v. Dougherty, 684 F.2d 1365, 1368 (11th Cir.1982).

    With these standards in mind, we turn to the issues surrounding Wells' claim for supplemental benefits.

    3. Agency

    United contends that Sun Life's negligence in enrolling Wells for supplemental coverage for which he allegedly was ineligible is the basis of United's liability to the beneficiary. United can prevail on its claim for indemnification from Sun Life for the payment of supplemental benefits only if it can show that Sun Life was acting as its agent at the time that it enrolled Wells for this coverage.

    The district court found that the question of agency was "easily answered" in the affirmative by the Georgia Supreme Court's decision in Dawes Mining Company, Inc. v. Callahan, 246 Ga. 531, 272 S.E.2d 267 (1980). In Dawes, the court had to decide whether an employer acts as the agent of the employee or of the insurance company when changing a group policy. The court noted that the agency relationship may change depending on the circumstances:

    Once the group policy has been issued, the employer is the agent of the insurer in determining which persons are its employees and are thereby eligible to participate as a member of the group, Equitable Life v. Florence [47 Ga.App. 711, 171 S.E. 317 (1933) ], supra, in determining which of its employees are regularly performing their duties and are thereby eligible to receive certificates of increased insurance, Cason v. Aetna Life [91 Ga.App. 323, 85 S.E.2d 568 (1954) ], supra, and in determining which of its employees are employed full time, Pilot Life v. McCrary [103 Ga.App. 549, 120 S.E.2d 134 (1961) ], supra. These cases are governed by the rule that the 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 thus the insurance company has imputed knowledge of facts which the employer knows. Cason v. Aetna Life, supra; Piedmont Southern Life v. Gunter [108 Ga.App. 236, 132 S.E.2d 527 (1963) ], supra.

    However, in selecting a group insurer, in selecting a policy, in selecting coverages to be afforded by the insurer, the employer is negotiating with the prospective insurer; there is no contract in force; and the employer cannot be the agent of the insurer. It has been said that " 'When procuring the policy [and] obtaining applications of employees ... employers act not as agents of the insurer but for their employees or for themselves.' " Thigpen v. Metropolitan Life [57 Ga.App. 405, 195 S.E. 591 (1938) ], supra; Blaylock v. Prudential [84 Ga.App. 641, 67 S.E.2d 173 (1951) ], supra.

    Hence, we find that the relationship which is decisive in this case is that in procuring the group policy and obtaining employee applications, the employer acts as an agent of the employees where the employees will be contributing toward payment of the premium.

    Id. at 533-34, 272 S.E.2d 267.

    We agree with the district court that Dawes is controlling. At the time it enrolled

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    Frank Wells for supplemental coverage, Sun Life was no longer in the process of selecting a group insurer or negotiating over types of coverage; it was clear that United would be its insurer as of January 1, 1986. Instead, when enrolling Wells for one of the types of coverage offered by United, it was implicitly determining that Wells was eligible for that insurance.

    In support of its contention that it was acting as Wells' agent and not the insurers', Sun Life points to the language in Dawes stating that when "obtaining applications of employees" an employer acts as an agent of the employees. We agree with United that the process of obtaining applications is distinct from the process of enrolling employees for supplemental coverage. Because Wells was automatically covered by the basic insurance of the group policy, no application was necessary. Consequently, this language in Dawes is inapposite.

    Sun Life also points to the fact that it sent the memorandum sheet on which the employee was to indicate his desire for...

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