Bimestefer v. Bimestefer

• Decision Date: 10 December 1954
• Docket Number: No. 26,26
• Citation: 109 A.2d 768,205 Md. 541
• Parties: Evelyn Ruth BIMESTEFER v. Lawrence William BIMESTEFER.
• Court: Maryland Court of Appeals

Page 541

205 Md. 541

109 A.2d 768

Evelyn Ruth BIMESTEFER v. Lawrence William BIMESTEFER.

No. 26.

Court of Appeals of Maryland.

Dec. 10, 1954.

Walter C. Mylander, Jr., and Charles C. W. Atwater, Baltimore (Elbridge B. Donaldson, Baltimore, on the brief), for appellant.

John W. Hessian, Jr., Towson, and Joseph S. Kaufman, Baltimore (Smalkin & Hessian, Towson, on the brief), for appellee.

Before BRUNE, C. J., and DELAPLAINE, COLLINS, HENDERSON and HAMMOND, JJ.

HAMMOND, Judge.

The issue presented in this appeal is whether the prohibition against assignment in a group insurance policy prevented the insured from giving beyond recall the right to receive the insurance proceeds at his death.

The Metropolitan Life Insurance Company issued its master group life, accident and health insurance policy to the Bethlehem Steel Company so as to insure the lives of certain of the latter's employees. John Bimestefer, Jr., a widower, became insured in the amount of $15,000, naming his son and only child, Lawrence William Bimestefer, the appellee, as sole beneficiary. He was given the customary certificate which the insurance company caused to be issued to each insured, in which was set forth the name of the insured employee and the beneficiary and a certification by the insurer that the insured was covered for the amount stated: '* * * under and subject to the terms and conditions of Group Policy No. 16000-G, the provisions of which are summarized on this and the following pages * * *.' The pertinent provisions of the policy, which are either repeated or accurately summarized in the certificate, are these: 1, the insurance is payable at death: '* * * to the Beneficiary of record or if the Beneficiary is not living when the Employee dies such amount shall be paid to the contingent Beneficiary.' 2, 'The Employee may change his Beneficiary or contingent Beneficiary at any time upon written request accompanied by this certificate for endorsement Consent of the Beneficiary or contingent Beneficiary shall not be requisite to any change of beneficiary.' 3, 'This certificate is non-assignable and the insurance and benefits are non-assignable prior to a loss. The insurance does not at any time provide paid-up insurance, or loan or cash values.' 4, 'If any prior certificate relating to the insurance referred to herein has been delivered to the employee referred to herein such certificate is void.'

Soon after he received the certificate, the father told his son of the insurance and handed him the certificate, stating: 'I want you to have it. It will be a nest egg for you and will help with David's education', adding: 'This is yours.' Later, the insured married again and sought to have his wife, Evelyn Ruth Bimestefer, the appellant, made a beneficiary of the policy. Upon his representation that the original certificate was lost, the insurer, without requiring the surrender of the certificate as required by the terms of the policy, issued and delivered to him a duplicate certificate, which named Evelyn Ruth Bimestefer as the beneficiary. He handed her the certificate, saying almost the same thing he had to his son. After the death of the insured, his and and his widow each demanded of the insurer the proceeds of the policy. The company refused to pay either and each filed a suit at law against it in the Circuit Court for Baltimore County for the payment of the proceeds. After the suits had been filed and consolidated, the insurer filed a bill of interpleader. The Chancellor decreed that the son was entitled to the insurance proceeds as the donee of a valid, irrevocable gift. The provision of the policy prohibiting assignment was intended, he said, solely for the benefit of the insurer and was waived by the payment of the money into court.

There is no real dispute that rights under insurance policies generally may be subject to transfer by parol. The conflict in the case is as to whether the prohibition against assignment, in the policy and the certificate, prevented the general rule being applicable here and if it did, whether there could be, and was, a waiver of the benefit. In resolving the conflict, we assume that the insured intended to, and unless the ban on assignment was effective, in fact, did make a valid gift of his rights under the policy to his son. Restatement, Contracts, Sec. 158(b). We do so in light of the principle that a gift is a form of assignment--a gratuitous assignment. Restatement, Contracts, Sec. 149. A gift has been said to be: '* * * an assignment perfected by delivery * * *.' Tompkins v. Tompkins, 132 N.J.L. 217, 38 A.2d 890, 892. See Restatement, Contracts, Sec. 158(b), supra; and Ratsch v. Rengel, 180 Md. 196, 23 A.2d 680.

The cases in Maryland are in line with the holdings elsewhere, that unless statute or contract provision forbids, the rights of an insured under a life policy may be assigned by parol if there is delivery of the policy to the assignee. Ratsch v. Rengel, 180 Md. 196, 201, 23 A.2d 680, supra; First National Bank v. Thomas, 151 Md. 241, 134 A. 210, 47 A.L.R. 730. Cf. Dale v. Brumbly, 96 Md. 674, 54 A. 655; and Michaelson v. Sokolove, 169 Md. 529, 182 A. 458. In other states, the general rule has been applied to transfers of rights under group insurance policies. Such transfers were upheld in the following cases, in which there was no statutory or contract provision forbidding assignment: Stepson v. Brand, 213 Miss. 826, 58 So.2d 18, 33 A.L.R.2d 267; Peel v. Reibel, 205 Minn. 474, 286 N.W. 345; Koch v. Aetna Life Ins. Co. of Hartford, Connecticut, 165 Wash. 329, 5 P.2d 313.

Nevertheless, the concept of freedom to contract has been recognized by the courts. In large measure, they agree that the parties may limit the alienation of rights and prohibit assignment of rights under contract where clear language and plain words have been chosen. Cases which have so held in life insurance contracts, including group insurance, include: Morkel v. Metropolitan Life Ins. Co., 163 Misc. 366, 297 N.Y.S. 962, approved in Allhusen v. Caristo Const. Corp., 303 N.Y. 446, 103 N.E.2d 891, 893, 37 A.L.R.2d 1245; Metropolitan Life Ins. Co. v. Brown's Adm'r, 222 Ky. 211, 300 S.W. 599; Hoffman v. Hoffman, 8 N.J. 157, 84 A.2d 441, 28 A.L.R.2d 1205; Carter v. Thornton, 8 Cir., 93 F.2d 529; Tyler v. National Life and Accident Ins. Co., 48 Ga.App. 338, 172 S.E. 747; Thomas v. Metropolitan Life Ins. Co., 144 Ga. 367, 87 S.E. 303. Restatement, Contracts, Sec. 151, states that: 'A right may be the subject of effective assignment unless * * * (b) the assignment is forbidden by statute * * * or (c) the assignment is prohibited by the contract creating the right.' The Maryland cases on the subject have upheld contractual or statutory provisions against assignment. Michaelson v. Sokolove, 169 Md. 529, 182 A. 458, supra; Yake v. Yake, 170 Md. 75, 183 A. 555; Dale v. Brumbly, 96 Md. 674, 54 A. 655, supra; The Maccabees v. Lipps, 182 Md. 190, 34 A.2d 424.

There has been enlightening and helpful discussion in the opinions as to the fundamental basis for upholding clear prohibitions against assignment in insurance contracts. In Government insurance for servicemen, the Federal statutes and the regulations constitute the contract. They prohibit assignment. In Tompkins v. Tompkins, 132 N.J.L. 217, 38 A.2d 890, supra, the Court said the policy of the statutes was to offer a measure of economic security for servicemen and their dependents and concluded: 'The statutory reservation to the insured serviceman of the right, 'at all times,' to change the beneficiary, considered in the light of the general legislative object, disabled the insured from making the irrevocable gift of the insurance asserted by defendant. Allowance of this claim of an unalterable transfer of title to the instrument itself, by its delivery with a donative purpose, would nullify the absolute right of the insured, thus legislatively conferred, to change the beneficiary while the insurance policy subsisted--a power designed to advance the essential statutory policy.' To the same effect are Yake v. Yake, 170 Md. 75, 183 A. 555, supra; Kauffman v. Kauffman, 93 Cal.App.2d 808, 210 P.2d 29. In Metropolitan Life Ins. Co. v. Brown's Adm'r, supra [222 Ky. 211, 300 S.W. 600], the Court of Appeals of Kentucky said the forbidding of assignment of an interest in a group policy was for the benefit not only of the insurer, but of the employer and the employees, and found that: 'The chief reason the coal company had for effecting and keeping paid the cost of this insurance for its employees was that they might thereby be induced to continue in its service. Such tendency as the insurance had to that end would be destroyed completely by the assignment of the policy and its benefits. Hence the stipulation against assignment of the insurance was wholly reasonable and must be upheld.'

We think the reasoning of these decisions is sound and persuasive. Undoubtedly, as part of the collective bargaining process and to further good employer-employee relations, the Bethlehem Steel Company furnished the group insurance coverage, paying a major portion of the cost, to afford greater economic security to employees and their families. The insurance continued in force only as long as those insured were employees. The purposes of the insurance coverage would be very largely enhanced if the right to the proceeds of the policy could not be assigned and the insured was always free to protect the individual or individuals he felt then most needed it, by changing the beneficiary from time to time. The bundle of rights the insured acquired included only those specified in the contract of insurance, which bound him fully, and he could not give his son something the contract, in plain and clear terms, said was not his to give.

While we do not rest the decision on the law governing the exercise of a power of appointment, an illuminating parallel between that situation and the case at...