Carp v. California-Western States Life Insurance Co.

• Decision Date: 19 February 1958
• Docket Number: No. 16464.,16464.
• Citation: 252 F.2d 337
• Parties: Ellis CARP, Appellant, v. CALIFORNIA-WESTERN STATES LIFE INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

252 F.2d 337 (1958)

Ellis CARP, Appellant, v. CALIFORNIA-WESTERN STATES LIFE INSURANCE COMPANY, Appellee.

No. 16464.

United States Court of Appeals Fifth Circuit.

February 19, 1958.

Henry Klepak, Dallas, Tex., for appellant.

George E. Seay, Dallas, Tex., for appellee.

Before TUTTLE, JONES and BROWN, Circuit Judges.

TUTTLE, Circuit Judge.

The appellant, Dr. Ellis Carp, named as the beneficiary in a certificate of coverage under a group life insurance policy issued by the defendant-appellee, California-Western States Life Insurance Co., sued to obtain payment from the latter of the insurance proceeds of $10,000. This appeal is from a judgment entered upon a jury verdict finding the defendant company free from liability under the policy. The principal question is whether the person in whose name the certificate was issued was an employee of the company that obtained the master policy of insurance within the meaning of the insuring clauses of the policy.

On August 1, 1952, the defendant, California-Western, issued its master policy of group life insurance to cover the employees of the Dal-Tex Optical Company of Dallas, Texas. Pursuant to an application submitted by the employer in February, 1955, California-Western issued a certificate of coverage under the policy, effective March 1, 1955, to Mrs. Mary F. Carp, evidencing insurance upon her life in the amount of $10,000, and naming the appellant, Dr. Ellis Carp, her son, as beneficiary. A few weeks later, on March 16, 1955, Mrs. Carp died. Dr. Carp submitted a timely proof of death to the defendant and made claim for the insurance proceeds. The company rejected the claim upon the ground that Mrs. Carp never became eligible for coverage under the terms of the policy.

The insuring clauses of the policy are quoted in the margin.¹ Generally, the policy provides life insurance for full-time employees, directly employed and compensated for services by the Dal-Tex Company. All employees actively at work on full time and for full pay on the effective date of the policy are eligible. Employees then absent become eligible upon their return to work. Future new employees, the only classification under which Mrs. Carp could qualify, become eligible upon the completion of one month of continuous service providing they are then actively at work on full-time and for full pay.

Coverage is provided in amounts of $10,000, $5,000, and $1,000, depending upon the classification of the employee, within one of three listed categories: "Owners & Supervisors," "Doctors," "All Other Employees including Out of State Employees."

The application submitted by the employer to California-Western on behalf of Mrs. Carp listed her occupation as "supervisor Purch." and placed her in the Owner & Supervisor classification for insurance purposes. The application was dated February 9, 1955, and stated that Mrs. Carp had become permanently employed on February 1, 1955. The certificate of coverage accordingly issued by the defendant to Mrs. Carp provided life insurance benefits in the amount of $10,000, under the "A" classification.

The company has relied upon two specific grounds in resisting the appellant's claim for the proceeds: (1) that Mrs. Carp never was a full-time, full-pay employee of Dal-Tex Optical Co. as defined by the terms of the policy; (2) that if she was such an employee, she was not a supervisor and not entitled to $10,000, of insurance, but at most only $1,000, under the "C" classification, which covers ordinary employees. The jury returned a verdict reading: "We, the jury, find for the defendant not a full time employee or a supervisor."

It is our view that the record amply sustains a finding that Mrs. Carp never became eligible for insurance under the master policy issued by the defendant because of her failure to attain the status of an employee as defined by the policy. Our decision upon this matter will completely dispose of the controversy presented by the appeal and it is therefore unnecessary to comment upon the defendant's contest of Mrs. Carp's designation as a supervisor by Dal-Tex. However, in addition to the primary question of factual sufficiency, the parties have joined issue upon a number of rulings of the court on pre-trial motions and matters arising during the trial. A discussion of each of these points individually likewise becomes unnecessary in view of our disposition of the appeal. The parties' contentions upon these issues, however, derive primarily from their respective theories of the case and combine to raise a question concerning the burden of proof in a case of this nature, a matter deserving of comment.

The appellant's basic position is that the defendant, California-Western, can free itself from liability under the policy only on the showing of false representations concerning the employment of Mrs. Carp and that it must proceed upon a theory of avoiding the contract and therefore must bear the burden of proof. The defendant on the other hand argues that the appellant has simply failed to prove compliance with the terms of the policy upon which he must rely to secure its benefits. It argues that the burden is upon the appellant to prove that the conditions giving rise to coverage have been fulfilled.

With respect to the issue of whether the person in whose name a certificate of coverage has been issued is an employee as defined by the foregoing provisions of the policy, which is the ground upon which we dispose of this appeal, the defendant has correctly perceived the nature of the controversy.

It is clear, generally speaking, that the burden is upon the plaintiff to prove the existence of a contract (Sutton County v. Security Trust Co., Tex.Civ.App., 61 S.W.2d 862). The rule is no different where recovery is sought under a policy of group life insurance:

"Plaintiff, the beneficiary of any insurance carried by the deceased, can recover, if at all, only under the provisions of the group policy contract, and the burden of proof was upon her to establish that right." Minnesota Mut. Life Ins. Co. v. Newman, Tex.Civ.App., 157 S.W.2d 667, 670.

Similarly in Wann v. Metropolitan Life Ins. Co., Tex.Com.App., 41 S.W.2d 50, 52, it was stated:

"In order for plaintiff in error to set up a cause of action under the terms of the certificate, it was incumbent upon him to allege and prove that the provisions of the group policy, when construed in connection with the certificate and rider, entitled him to recover for the disability resulting from the injuries sustained in the service of the employer."

Although the problem of allocating the burden of proof was not directly involved in the foregoing cases, any doubt concerning the law of Texas on the specific question as it is presented in this case, would appear to be resolved in Schooley v. Metropolitan Life Ins. Co., Tex.Civ. App., 77 S.W.2d 886, 888, where the issue of the sufficiency of the evidence to support recovery under the policy was directly raised. There the court stated, citing Wann v. Metropolitan Life Ins. Co., supra:

"It was incumbent upon the appellant to allege and prove that Schooley was an employee within the meaning of the policy, construed in connection with the certificate and rider issued to him, at the time of his death * * *"

The company therefore in contesting the employee's eligibility for insurance under the group policy is not raising an issue of invalidity upon which it might bear the burden of proving a specific defense, but simply the failure of the employee to satisfy the policy provisions. That questions of coverage do not relate to the invalidity of the policy is also demonstrated in those decisions allowing the insurance company to raise that defense after the expiration of the incontestable period where it is held that the company is seeking to enforce the contract and not avoid it (see Fisher v. United States Life Insurance Co., 4 Cir., 249 F.2d 879). It is our holding, in the light of the foregoing authorities, that the burden of proof on the issue of employment, is clearly upon the plaintiff.

Turning to the primary issue of factual sufficiency, the evidence controlling that question, briefly summarized, is this:

Dr. Ellis Carp, the beneficiary named in the certificate, is a licensed optometrist and member of a partnership doing business in Texas and several other states as the Lee Optical Company. He is also secretary and a holder of one-third of the stock of Dal-Tex, which is a manufacturer and distributor of optical supplies — spectacle frames, lenses, and accessories — and one of Lee Optical's major suppliers. Among the accessories handled by Dal-Tex and supplied to Lee Optical are optical trims — the ornamentation applied to glasses frames, particularly women's frames, to make them more attractive.

Mrs. Carp, as noted before, was Dr. Carp's mother. She was 68 years old and lived in Mount Vernon, New York, with her daughter and son-in-law. She had for many years done needlework and crocheting as a hobby and in this work had undertaken to make her own designs. On a visit to his mother in the fall of 1954, Dr. Carp saw some of her designs and it occurred to him that they could be used as patterns for optical trims. He took some of the needlework with him and upon his return to Texas showed it to Dal-Tex's president, Mr. Irving Greenberg.

Greenberg agreed that there might be commercial possibilities in Mrs. Carp's designs as patterns for trims and he asked Dr. Carp to have his mother submit some drawings of needlework designs. Arrangements were accordingly worked out for the submission and evaluation of Mrs. Carp's designs. Dr. Carp called his mother and told her to go ahead with her work and to send some drawings to Dal-Tex. He continued as he testified to keep in touch with her every few days to transmit instructions concerning the designs and drawings. Greenberg called the manufacturer of the trims, the Blue Ribbon Optical Company in New York, and...