Dyer v. Occidental Life Ins. Co. of California

• Decision Date: 05 May 1950
• Docket Number: No. 12274.,12274.
• Citation: 182 F.2d 127
• Parties: DYER v. OCCIDENTAL LIFE INS. CO. OF CALIFORNIA et al.
• Court: U.S. Court of Appeals — Ninth Circuit

182 F.2d 127 (1950)

DYER v. OCCIDENTAL LIFE INS. CO. OF CALIFORNIA et al.

No. 12274.

United States Court of Appeals Ninth Circuit.

May 5, 1950.

D. P. Price and Joe P. Price, Portland, Or., for appellant.

Leedy & Keane, Gordon H. Keane and Robert A. Leedy, Portland, Or., for appellee.

Before HEALY, BONE and POPE, Circuit Judges.

BONE, Circuit Judge.

This action arose under the interpleader statute, 28 U.S.C.A. § 1335. Appellee, Occidental Life Insurance Co. (plaintiff below), deposited the sum of $1200 (this sum representing the proceeds of a life insurance policy) into the registry of the court and disclaimed further interest in this fund. Adverse claimants to the fund are appellant, T. Ona Dyer, an Oregon citizen, and appellees, Mary Ann and Patricia Katherine Zimmer, citizens of Montana. Occidental is merely a nominal appellee.

The insured, Raymond Zimmer, who was a member of the Teamsters Union, died on November 21, 1947. Pursuant to the vote of its members the union had, on July 1, 1947, entered into a group life insurance contract with Occidental whereby the life of each member of the union was insured in the amount of $1,200. A group or master policy was issued to the union by Occidental and an individual certificate (which was stated to be evidence of the insurance and subject to the terms of the group policy) was issued to each member of the union. Participation of the insurance plan was compulsory on all members of the union, and each member was assessed an additional $1 per month dues to pay the insurance premium, but this amount did not represent the exact cost to the union of the group premium.¹

Appellant is not related to Zimmer but claims the proceeds payable under the policy because she had been designated by Zimmer as his beneficiary. This "designation" was effective as of July 1, 1947. The provisions of the group or master policy contain no restrictions on who may be named as a beneficiary, but merely permit changes in the designated beneficiary, and provide classes of successive preference beneficiaries in the event that no beneficiary is designated.

Appellees are two minor children of Zimmer.² They are entitled, under the provisions of the successive preference beneficiary clause, to the proceeds of the policy in the event that the designation of appellant as beneficiary was ineffective. Appellees' claims are based upon an amendment of the union by-laws which limited and restricted permissible beneficiaries to members of a designated class (wife, child or children, father, mother, brother or sister).³ These amendments to the by-laws were duly adopted by vote of the members of the union and became effective as of November 4, 1947 (subsequent to the time of Zimmer's designation of appellant as his beneficiary, but prior to the date of his death, which occurred on November 21, 1947).

The trial court held that "the spirit" of the transaction required the by-laws and the master policy to be tied together and therefore the previous designation of appellant as beneficiary became ineffective after the noted amendment to the by-laws was adopted.

Oregon law governs but neither party has found any decision in Oregon or elsewhere which dealt directly with the precise question before us.⁴ Appellant relies upon general contract law and the wording of the policy and contends that the written contract of insurance is controlling. She insists that because the policy makes no reference to the union's by-laws, the latter cannot limit or modify the terms of the former.⁵

Appellees cite the Oregon statutes concerning fraternal benefit associations, O.C.L.A. §§ 101-701 et seq., which restrict payment of death benefits to members of a designated class. While we do not agree with appellees that the union is a fraternal benefit society within the meaning of the statute,⁶ we think it clear that the Oregon statute establishes beyond doubt that the union's by-law limiting beneficiaries to members of a restricted class is not contrary to public policy in Oregon.

Group insurance policies entered into between insurance companies and labor unions for the benefit of the members are relatively new in our economic history. Although familiar landmarks in established contract and insurance law give some aid in resolving new issues like this one which inevitably arise from time to time, we prefer to guard against a too-strict application of old rules and concepts which were evolved to resolve yesterday's controversies — rules which may fail to consider and allow for new elements and circumstances. The law still retains its fluid and viable character.

When a man joins a labor union (or almost any other democratically controlled group), necessarily a portion of his individual freedom is surrendered for the benefit of all members. He accepts the will of the majority of the members in order that he may derive the advantages to be gained from the concerted action of all. Just as the enactments of the...