Bellamy v. Pacific Mut. Life Ins. Co.

• Citation: 651 S.W.2d 490
• Decision Date: 31 May 1983
• Docket Number: No. 63428,63428
• Parties: Evelyn BELLAMY, Respondent, v. PACIFIC MUTUAL LIFE INSURANCE COMPANY, Appellant.
• Court: United States State Supreme Court of Missouri

Page 490

651 S.W.2d 490

Evelyn BELLAMY, Respondent, v. PACIFIC MUTUAL LIFE INSURANCE COMPANY, Appellant.

No. 63428.

Supreme Court of Missouri,

En Banc.

May 31, 1983.

Robert W. McKinley, Jr., Kansas City, for appellant.

Thomas A. Sweeney, Kansas City, for respondent.

RENDLEN, Chief Justice.

Plaintiff (beneficiary) sued for benefits under a group life and accident policy following the death of her daughter, Nancy Bellamy, in an automobile accident. After a verdict for plaintiff of $105,000 plus interest, insurer sought review in the Missouri Court of Appeals, Western District, where the judgment was affirmed. Transfer was granted to this Court and the cause, coming to the writer on reassignment, is decided as though on original appeal. We affirm.

Defendant raised multiple assignments of trial error, including failure to grant its motion for a directed verdict and several instructional errors. ¹ Denying defendant's contentions, plaintiff asserts the trial court erred in failing to sustain her motion for a directed verdict. Concluding that plaintiff was entitled to a directed verdict, we deny defendant's claim to a directed verdict and accordingly need not reach the alleged instructional errors.

At the time of her death and for some period prior thereto, Nancy Bellamy was a student and part-time employee of Frick's TV, Inc., a television repair business owned and operated by Mr. and Mrs. Timothy Frick. Until early 1975, the Fricks were covered under a group insurance policy issued by Prudential Insurance Company to a partnership of which Timothy Frick was the only remaining member. When Prudential announced a premium increase, the Fricks decided the rate was more than they cared to afford and asked their Prudential agent, John Russo, if he knew of anything less expensive. Russo spoke to his friend, Frank Agrusa, another Prudential agent who was also a broker. Agrusa supplied Russo with a sales kit describing a group insurance plan for small employers offered by Beneficial Employees Security Trust (B.E.S.T.) and underwritten by Pacific Mutual Insurance Company. Russo met with the Fricks, discussed the advertising brochures and explained the plan required participation of at least three employees. The Fricks told Russo their group would consist of Mr. and Mrs. Frick and Nancy Bellamy. Russo testified Mrs. Frick told him Nancy was a full-time employee, a statement Mrs. Frick denied. Russo filled out printed application forms for Nancy and the Fricks, writing in "$320" as Nancy's monthly wage, although she normally worked only eight hours a week for a wage of $2.20-2.25 per hour. Russo testified, and Mrs. Frick denied, that the information as to Nancy's salary was provided by the Fricks. In any event, immediately above the place for signature on the application form left for Nancy to sign appeared the following printed statement:

I certify that I am engaged in regular full-time employment for at least 30 hours per week. I authorize my employer to make deductions from my earnings necessary to provide my contribution for this coverage. I understand that coverage is not in force until the effective date shown on each certificate of insurance issued to me; however, if I am absent from full-time employment on such date(s) as the result of an accident or sickness I agree that coverage(s) is not effective.

Mrs. Frick testified that before leaving the form for Nancy to sign, she called Russo and asked him about the 30-hour provision. According to Mrs. Frick, Russo assured her the 30-hour requirement applied to employees hired after the program was initiated, not employees already working for the Fricks, but there was no evidence Nancy ever met Russo or discussed eligibility requirements with the Fricks. Ordinarily, Mrs. Frick did not see Nancy, who worked on Saturdays and during Mrs. Frick's vacations, so Mrs. Frick left the application for Nancy to sign with a note explaining what it was. After Nancy completed and signed the form, naming her mother as beneficiary, it was delivered to Russo and forwarded, along with the Fricks' application forms and proper payment, to B.E.S.T. Soon thereafter, a Pacific Mutual certificate of insurance validated by B.E.S.T. was issued and delivered to Nancy, showing that coverage was effective April 1, 1975. Nancy's stated basic life coverage was $5,000, with an additional $100,000 coverage in the event of travel accident. Monthly premiums for Nancy's coverage were paid by the Fricks until June 13, 1975, when Nancy was killed in an automobile accident. A claim was made by Nancy's mother as beneficiary, but Pacific Mutual declined payment on the ground that as a part-time employee, Nancy had no coverage. Defendant's denial of coverage precipitated this suit.

At the close of the evidence, both parties moved for a directed verdict and the motions were denied. On appeal, defendant contends the trial court erred in overruling its motion for a directed verdict, because Nancy failed to satisfy two conditions precedent plainly specified in the policy: full-time employment and contribution by the employee to the cost of the insurance. ² Plaintiff counters that the court erred in overruling her motion for a directed verdict, because the employment condition in Nancy's contract was ambiguous and the premiums paid by Nancy's employer were a substitute for salary which satisfied the contribution condition of the policy. ³ To resolve this controversy, we must first identify the parties to the contract.

In numerous Missouri cases, the statement is found that a contract of group insurance is one between the insurer and employer for the benefit of the latter's employees, e.g., Burckhardt v. General American Life Insurance Co., 534 S.W.2d 57, 64 (Mo.App.St.L.1975); Straub v. Crown Life Insurance Co., 496 S.W.2d 42, 43 (Mo.App.St.L.1973); Satz v. Prudential Insurance Co. of America, 225 S.W.2d 480, 482 (Mo.App.St.L.1949); Nick v. Travelers Insurance Co., 185 S.W.2d 326, 335-36 (Mo.App.K.C.1945), aff'd 189 S.W.2d 532 (Mo.1945); Crawford v. Metropolitan Life Insurance Co., 167 S.W.2d 915, 924 (Mo.App.St.L.1943); Longley v. Prudential Insurance Co. of America, 161 S.W.2d 27, 29 (Mo.App.St.L.1942); Brown v. Equitable Life Assurance Society of United States, 143 S.W.2d 343, 346 (Mo.App.St.L.1940); Williams v. Sun Life Assurance Co. of Canada, 235 Mo.App. 741, 148 S.W.2d 112, 114 (Mo.App.K.C.1940); White v. Prudential Insurance Co. of America, 235 Mo.App. 156, 127 S.W.2d 98, 102 (Mo.App.St.L.1939); Eisen v. John Hancock Mutual Life Insurance Co., 230 Mo.App. 312, 91 S.W.2d 81, 87 (Mo.App.K.C.1936); Kingsland v. Missouri State Life Insurance Co., 228 Mo.App. 198, 66 S.W.2d 959, 961 (Mo.App.K.C.1933). It may be inferred from these cases that as to policies of group insurance, no privity of contract exists between employee-insured and the insurer, and rights of the employee and his beneficiary are exclusively determined by the contract between insurer and employer.

There are suggestions in other cases, however, that employee-participants in group insurance plans have more than indirect rights conferred by the master policy. In Kingsland v. Missouri State Life Insurance Co., 228 Mo.App. 198, 66 S.W.2d 959, 961 (Mo.App.K.C.1933), the Court of Appeals, Kansas City District, indicated conditions in a certificate of group insurance issued to an employee might alter those in the master policy or that the certificate alone might constitute a contract of insurance. In Adair v. General American Life Insurance Co., 124 S.W.2d 657, 660 (Mo.App.K.C.1939), the same court indicated a beneficiary might recover in case of a real conflict between the employee's certificate of insurance and the master policy. In Butler v. Equitable Life Assurance Society of the United States, 233 Mo.App. 94, 93 S.W.2d 1019, 1023-25 (Mo.App.K.C.1936), Hays v. Equitable Life Assurance Society of the United States, 235 Mo.App. 1261, 150 S.W.2d 1113, 1115 (Mo.App.K.C.1941), and Nick v. Travelers Insurance Co., 238 Mo.App. 1181, 185 S.W.2d 326, 338-9 (Mo.App.K.C.1945), aff'd 354 Mo. 376, 189 S.W.2d 532 (Mo.1945), it was found that the relationship between insurer and contributing employee-participants in group insurance plans was sufficient to require notice of cancellation not specified in the master policy. On its way to affirming judgment for a group insurer in Carter v. General American Life Insurance Co., 452 S.W.2d 253, 256-57 (Mo.App.St.L.1970), the Court of Appeals, St. Louis District, felt obliged to determine there was no ambiguity in either the master policy or the employee's certificate of insurance. In Crawford v. Mid-America Insurance Co., 488 S.W.2d 255, 258-59 (Mo.App.K.C.1972), the Court of Appeals, Kansas City District, held a "Special Notice to Parents" summarizing master policy provisions constituted part of a student group insurance policy. In Morris v. Travelers Insurance Co., 546 S.W.2d 477, 482-86 (Mo.App.K.C.1976), the Kansas City Court of Appeals held a direct contractual relationship exists between employee and group insurer. Similarly that court in Cannon v. Katz Drug Co., 577 S.W.2d 82, 87 (Mo.App.K.C.1978), said that an employee-participant in a contributory group life policy was not simply a third party donee beneficiary but a party to the insurance contract who was entitled to notice as a condition of cancellation. Finally, in Mutual Bank and Trust Co. v. Shaffner, 248 S.W.2d 585, 588, 590-91 (Mo.1952), this Court found that under a group life insurance policy arranged by a bank for certain depositors, privity of contract existed between the insurer and the depositors-assured.

A review of these cases and of the record persuades us the conclusion reached in the latter class of cases is in closest accord with the commercial realities of the group insurance contract effected in this case.

The master policy was issued by Pacific Mutual Insurance Company to the Beneficial Employees Security Trust (B.E.S.T.), an...