Baum v. Massachusetts Mut. Life Ins. Co.

• Decision Date: 25 October 1960
• Docket Number: No. 38696,38696
• Citation: Baum v. Massachusetts Mut. Life Ins. Co., 357 P.2d 960 (Okla. 1960)
• Parties: Fannye L. BAUM, Plaintiff in Error, v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, Defendant in Error
• Court: Oklahoma Supreme Court

Page 960

357 P.2d 960

1960 OK 225

Fannye L. BAUM, Plaintiff in Error, v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, Defendant in Error

No. 38696.

Supreme Court of Oklahoma.

Oct. 25, 1960.

Rehearing Denied Dec. 20, 1960.

Syllabus by the Court.

1. Under facts of this case, incontestable provisions of 36 O.S.1951 § 232, precluded insurer from asserting, in an action by a beneficiary to recover death benefits provided in a group life insurance policy, that the alleged insured was not covered by policy because he was not an employee of the person who procured the policy.

2. In receiving alleged insured's application for group life insurance, determining whether applicant was an employee and as such insurable, and in remitting premiums to insurer, employer acted as agent of insurer and employer's knowledge of facts bearing upon whether applicant was or was not an employee are imputable to insurer.

3. Where representations of employer, as agent of insurer, and those of employee, that latter was an employee of former and as such insurable under a group life insurance policy, are not wholly unfounded in fact, employee's beneficiary is not precluded because of the provisions of 36 O.S.Supp., 1955, § 231, from asserting that insurer's acceptance of premiums estopped it from asserting absence of employer-employee relationship.

Appeal from Common Pleas Court of Tulsa County; Paul A. Walker, Jr., Judge.

Action by beneficiary under group life insurance policy to recover death benefits. From judgment of trial court to effect that alleged insured was not covered by policy because he was not an employee of alleged employer who procured policy, beneficiary appeals. Reversed and remanded with directions.

Ungerman, Grabel, Ungerman, Leiter & Unruh, Imogene H. Harris, Tulsa, for plaintiff in error.

Gable, Gotwals & Hays and G. Douglas Fox, Tulsa, for defendant in error.

BERRY, Justice.

On December 1, 1955, defendant in error, Massachusetts Mutual Life Insurance Company, hereafter referred to as 'insurer', issued a group life insurance policy to Production Manufacturing Co., hereafter referred to as 'employer'. On said date insurer also issued to Robert M. Baum, hereafter referred to as 'deceased', as an employee of employer an instrument that the parties refer to as a certificate. It was provided in substance in the certificate so issued that same was subject to the terms and conditions of the above-referred-to policy; that the certificate was effective as of December 1, 1955; that plaintiff in error, Fannye L. Baum, hereafter referred to as 'plaintiff', was the beneficiary. Plaintiff was insured's wife.

Deceased died December 8, 1958. Following his death, plaintiff demanded of insurer payment of insurance in the amount of $5,000 which she asserted was owing under the terms of the policy and certificate. Insurer declined to pay and returned to employer insurance premiums paid in behalf of insured from date of certificate to date of his death. This action resulted.

It is not disputed that employer considered that deceased was its employee within the terms of the policy and that the premiums paid by employer in behalf of deceased were sufficient to entitle plaintiff to recover $5,000 if deceased was in fact covered by the policy. As an alternative defense, insurer pleaded that assuming deceased was an employee, his compensation and the premiums measured thereby would in any event fix maximum recovery at $2,000. In view of the fact that the trial court found for insurer on the basic issue that deceased was not an employee of employer and was therefore not within the coverage provided by the policy, this issue is not before us.

The pleadings, facts and judgment of the lower court show that the issues presented by this appeal are these: First, is insurer precluded by the incontestable provisions of 36 O.S.1951 § 232, sub-paragraph (2) (the substance of said sub-paragraph was made a part of the policy), from defending on the grounds that deceased was not in fact an employee of employer and was hence not covered by the policy? Second, is insurer estopped from urging the defense that deceased was not an employee? We will discuss these issues in the order mentioned.

The pertinent provisions of the policy read as follows:

'Section 1--Eligibility of Employees

'1. The following classes of employees are eligible for insurance under this policy:

'(a) Employees who are actively at work on the effective date of this policy.

'4. The following classes of employees are excluded from insurance under this policy:

'Part-time employees.

'Section XXI--In Contestability.

'Except for non-payment of premiums by the Employer, this policy shall be incontestable after it has been in force for two years from its date of issue. No statement made by any employee insured under the policy relating to his insurability shall be used in contesting the validity of the insurance with respect to which such statement was made after such insurance has been in force prior to the contest for a period of two years during such employee's lifetime nor unless it is contained in a written instrument signed by him.'

The facts bearing upon the matter of whether deceased was an employee are these: Deceased was a tax accountant. His place of business was wholly disconnected from employer's place of business. He did, however, on occasions do work at employer's office. Deceased had several employees and his clients were some thirty in number. He apparently did all of employer's tax work and was available at all times to do any tax work requested by employer and often consulted with employer's president. He did not spend as much as half of his time working for employer.

While plaintiff does not concede that the evidence shows that deceased was not an employee, she does, primarily, base her right to recover herein on the incontestable provision of Sec. 232, supra, as well as the proposition that insurer is estopped to assert that deceased was not in fact an employee.

The parties agree that there is a sharp division of authority on the basic issue of whether the provisions of Sec. 232, supra are applicable under the facts of this case, and also agree that this is the first case which presents directly such issue to the Court.

In support of its contention on said issue, insurer cites as being directly in point Metropolitan Life Ins. Co. v. Conway, 252 N.Y. 449, 169 N.E. 642; Fisher v. United States Life Ins. Co. in New York City, 4 Cir., 249 F.2d 879; Carp v. California-Western States Life Ins. Co., 5 Cir., 252 F.2d 337; Elsey v. Prudential Ins. Co. of America, 10 Cir., 262 F.2d 432; Washington National Ins. Co. v. Burch, 5 Cir., 270 F.2d 300; and Rasmussen v. Equitable Life Assurance Soc., 293 Mich. 482, 292 N.W. 377. In her reply brief, plaintiff asserts in substance that the cited cases can be distinguished from the instant case either on the facts or the issues presented. While the cases may not be squarely in point, we are of the opinion that generally speaking, the cases tend to sustain insurer's contention. Insurer also cites Reed v. Home State Life Ins. Co., 186 Okl. 226, 97 P.2d 53; Bankers Life Co. of Des Moines, Iowa v. Horton, 189 Okl. 591, 118 P.2d 402; and Prudential Ins. Co. of America v. Elias, 188 Okl. 420, 109 P.2d 815 as tending to sustain its basic contention.

In support of her primary contention, plaintiff cites as being directly in point John Hancock Mut. Life Ins. Co. of Boston, Mass. v. Dorman, 9 Cir., 108 F.2d 220; Equitable Life Assurance Soc. v. Florence, 47 Ga.App. 711, 171 S.E. 317; Allison v. Aetna Life Ins. Co., La., 158 So. 389, and Eagon v. Union Labor Life Ins. Co., 3 N.Y.2d 785, 164 N.Y.S.2d 37, 143 N.E.2d 793. In its brief insurer asserts in substance that each of the cited cases tend to sustain plaintiff's contention. Plaintiff also...