Fisher v. United States Life Ins. Co. in City of NY

• Decision Date: 08 November 1957
• Docket Number: No. 7400.,7400.
• Citation: 249 F.2d 879
• Parties: Lelia Grace FISHER, Appellant, v. The UNITED STATES LIFE INSURANCE COMPANY IN CITY OF NEW YORK, a body corporate, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

249 F.2d 879 (1957)

Lelia Grace FISHER, Appellant, v. The UNITED STATES LIFE INSURANCE COMPANY IN CITY OF NEW YORK, a body corporate, Appellee.

No. 7400.

United States Court of Appeals Fourth Circuit.

Argued October 9, 1957.

Decided November 8, 1957.

W. Giles Parker and Wylie L. Ritchey, Baltimore, Md., for appellant.

William B. Kempton, Baltimore, Md. (Robert E. Coughlan, Jr., Baltimore, Md., and Saul Lesser, New York City, on brief), for appellee.

Before PARKER, Chief Judge, and SOBELOFF and HAYNSWORTH, Circuit Judges.

HAYNSWORTH, Circuit Judge.

This is a suit upon a group life insurance policy. In accordance with the well considered views expressed in a written opinion, judgment was entered for the defendant upon a verdict of a jury which found that the plaintiff's decedent was not an employee of a named employer within the meaning of the insuring clauses of the policy. Fisher v. United States Life Insurance Company in the City of New York, D.C., 145 F.Supp. 646. The beneficiary, by this appeal, asserts that the defense is unavailable under the terms of the incontestable clause and that her motion for judgment non obstante veredicto should have been granted.

The defendant insurance company issued its group life insurance policy in New York to the Trustees of the Oil Heat Institute of America, Distribution Division, Insurance Trust Fund, as the assured, for the benefit of employees of those heating oil dealers and distributors who chose to participate. One of the participating employers was Herman H. Fisher, Inc., of Baltimore, Maryland. The plaintiff's decedent was the founder and the president of that company.

The policy provided life insurance for certain executive, administrative and supervisory employees, individual proprietors or partners, and provided that each employee within the defined classes, actively at work with a contributing employer on the effective date of the policy, should become insured as of that date, while each employee subsequently becoming eligible should become insured as of the date of his subsequent eligibility. The policy then specifically provided that if any employee is not regularly performing the duties of his occupation on the date he would otherwise become insured under the policy, the effective date of the insurance of such employee shall be deferred until his return to active duty. The insurance as to any employee was to terminate automatically thirty-one days after termination of his employment, and cessation of active work in a class of eligible employees was, by definition, a termination of employment, except that an employee temporarily on part-time employment, or absent because of sickness or injury, was considered to be continuously employed so long as premiums were paid.

The policy provided that all premiums should be paid by the assured trustees and they should be non-contributory in the sense that no employee should make a contribution to the premium cost.

No individual applications or medical examinations were required. Each contributing employer sent to the trustees a list of his eligible employees together with funds to cover the premium cost of such insurance. These lists of eligible employees, together with the premium payments, were then delivered by the trustees to the insurance company. Under the terms of the insurance policy, the effectuation of the insurance was then automatic as to all eligible employees for whom the premium payment had been made. Indeed, the policy specifically provided that "The insurance shall not be invalidated by the Assured's failure due to clerical error, to give proper notice to the Company that an employee has become insured under this policy." However, the policy provided that the insurance company would issue to the assured for delivery to each insured employee a certificate setting forth a summary of the provisions of the insurance policy, specifying the face amount of the insurance and recording the designated beneficiary.

The pertinent provisions of the policy, summarized above, are set forth in full in the margin.¹

Prior to the effective date of the insurance policy, Herman H. Fisher, the President of Herman H. Fisher, Inc., had suffered a cerebral embolism resulting in paralysis, and he had other mental and physical ailments. Until his death, some two and a half years after the issuance of the insurance policy, he was receiving total and permanent disability payments under other insurance, and the jury has found that neither on the effective date of this insurance policy nor thereafter was he "regularly performing the duties of his occupation," within the meaning of that provision of the policy which fixes the effective date of an employee's insurance. Nonetheless, his name was included on the list of eligible employees of Herman H. Fisher, Inc., and the insurance company issued its certificate in his name, upon which some of the provisions of the policy were summarized while others were quoted in full, the amount of the insurance was specified and the plaintiff was named as beneficiary. In the certificate, the company's certification that Mr. Fisher, an employee, is insured under the terms of the master policy, that it would pay the face amount to the plaintiff upon his death, and that the insurance was effective as of October 1, 1952, is qualified by the words "(Provided employee is then regularly performing the duties of his occupation)."

Our consideration of this case is not complicated by any fact or circumstance which would warrant any claim of waiver or of estoppel. The single question presented is whether or not the incontestable clause bars the defense that the plaintiff's decedent, under the applicable terms of the insurance policy, had never become insured.

As the District Judge clearly pointed out in his opinion, it is well settled in general, and in New York whose laws govern our decision in this case, in particular, that the incontestable clause, after the passage of the stipulated period, proscribes defenses which go to the validity of the policy whether because of noncompliance with conditions or the falsity of representations or warranties. It was never intended to enlarge the coverage of the policy, to compel an insurance company to insure lives it never intended to cover or to accept risks or hazards clearly excluded by the terms of the policy. As then Chief Judge Cardozo, speaking for the New York Court of Appeals in Metropolitan Life Insurance Co. v. Conway, 252 N.Y. 449, 169 N.E. 642, said:

"The provision that a policy shall be incontestable after it has been in force during the lifetime of the insured for a period of two years is not a mandate as to coverage, a definition of the hazards to be borne by the insurer. It means only this, that within the limits of the coverage the policy shall stand, unaffected by any defense that it was invalid in its inception, or thereafter became invalid by reason of a condition broken. * * * With such a clause the death of the insured, coupled with the payment of the premiums, will sustain a recovery in the face of a forfeiting condition. It is quite another thing to say that the same facts will prevail against a refusal to assume the risk."

See also the opinion of Judge Chesnut, speaking for this Court, in Equitable Life Assurance Society of the U. S. v. Deem, 4 Cir., 91 F.2d 569.

The defense here is not that Mr. Fisher was not in good health on the date the group policy was issued or, indeed, that any condition or representation has been violated. The defense is simply that it is the clear intendment of the policy that all employees, within the definition of the policy, of each participating employer, were to be insured provided only the requisite premium payments were made, while persons not so employed are not within the coverage of the policy. Clearly it was the intention of the parties to the master policy to provide insurance for the benefit of people actively employed by participating employers, but, as clearly, the limitations they provided foreclose any assumption that it was intended that other persons might be covered by the insurance or that a particular employer, on a selected basis, might extend the insurance to a stranger to the defined class merely by reporting his name to the trustees and remitting the requisite premium.

The provision of the policy, expressly extending the insurance for the protection of an employee even though his name by clerical error had never been reported to the insurance company, emphasizes the fact that, subject only to the payment of the requisite premiums, the insurance was intended to extend to all members of a defined class, but to no one who was not a member of the insured class.

The individual certificates issued by the insurance company are not a part of the contract, which is contained entirely in the application of the trustees and in the group insurance policy issued to them. The certificates...