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

• Decision Date: 02 November 1956
• Docket Number: No. 8462.,8462.
• Citation: 145 F. Supp. 646
• Parties: Lelia Grace FISHER v. The UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, a body corporate.
• Court: U.S. District Court — District of Maryland

145 F. Supp. 646

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

No. 8462.

United States District Court D. Maryland, Civil Division.

November 2, 1956.

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

William B. Kempton, Barton, Wilmer, Bramble & Addison, and Robert E. Coughlan, Jr., Baltimore, Md., for defendant.

THOMSEN, Chief Judge.

Plaintiff's motion for judgment n. o. v. raises the question whether the incontestable clause in a group life insurance policy prevents the insurer from successfully defending a death claim on the ground that plaintiff's decedent, Herman H. Fisher, President of Herman H. Fisher, Inc., a contributing employer, was not an employee eligible to be insured under the terms of the policy.

A jury has found that Herman H. Fisher was not an eligible employee, as defined in the policy, because he was not actively employed by the corporation on the effective date of the group policy and did not return to active duty or regularly perform the duties of his occupation at any time between the effective date of the policy and the date of his death. The parties had previously agreed that the effect of the incontestable clause should be decided by the court without a jury.

Facts.

On or about October 1, 1952, the defendant issued its group policy, No. G-3562-L, to the Trustees of the Oil Heat Institute of America, Distribution Division, Insurance Trust Fund, as the assured. Herman H. Fisher, Inc. was named in the policy as a contributing employer, and thereupon became entitled to insure its eligible employees in accordance with terms and schedules of the policy.

The policy was issued under sec. 204 (d) of the Insurance Law of New York, McKinney's Consolidated Laws of New York Annotated, c. 28, Book 27, Insurance Law, Article 9-A, sec. 204(d). It required no physical examination; but the defendant agreed to insure all eligible employees of the contributing employers. Under the heading "Employees Eligible" the policy provided:

"Definition: The term `employee' as used in this policy shall mean all actively employed officers, executives, division and department heads including individual proprietors and partners actively employed in their occupation provided that such employee's annual earnings from the contributing employer or as proprietor or partner are not less than $5,000.00.

"Each employee as defined above actively at work with a contributing employer on the effective date of the policy shall be eligible for insurance hereunder on such effective date; each employee not eligible on the effective date of the policy shall become eligible hereunder on the date he becomes actively employed with a contributing employer; * *"

Each employer submitted to the trustees a list of its eligible employees, giving the necessary information with respect to name, age, address, salary and beneficiary. The trustees forwarded this information to the defendant. As additional employees became eligible, the employer would submit their names and other relevant information to the trustees for transmission to the defendant.

The policy required that the employers should pay all premiums to the trustees, who remitted them to the defendant. No premiums were collected from the employees, and no individual applications were signed by the employees or submitted to the trustees or to the defendant.

The policy also contained the following provisions, among others:

"Effective Date of an Employee's Insurance

"Each employee becoming eligible as of the effective date of this policy shall become insured as of that date. Each employee becoming eligible after the effective date of this policy shall become insured as of the date of his eligibility; provided, however, that in any instance when an employee is not regularly performing the duties of his occupation on the date he would become insured in accordance with the terms of this paragraph, the effective date of such employees insurance shall be deferred until his return to active duty. * * *"

"Termination of Employee's Insurance

"The insurance of an employee shall automatically terminate at the earliest time indicated below except as may be hereinafter provided:

"(a) Thirty-one days after termination of employment. Cessation of active work in the classes of employees eligible for insurance shall be deemed termination of employment, except that while an employee is temporarily on part-time employment or is absent on account of sickness or injury, employment shall be deemed to continue until premium payments for such employee's insurance are discontinued. * * *

"(b) For non-payment of premiums by the Assured on behalf of an employee in which event such insurance shall automatically terminate at the end of the period for which premium has been paid.

"(c) Upon termination of this policy except as may be provided under `Conversion Privilege' hereof."

"Certificates

"The Company will issue to the Assured, for delivery to each insured employee, a certificate setting forth a summary of the essential features of the insurance coverage to which the employee is entitled and to whom the benefits are payable."

"The Contract

"This policy, the application of the Assured attached hereto, and the individual applications, if any, of the employees, constitute the entire contract between the parties hereto.¹

All statements made by the Assured, or by the individuals insured, shall, in the absence of fraud, be deemed representations and not warranties, and no statement shall avoid the insurance, or be used in defense of a claim under it, unless it is contained in a written application.

"The rights of the Assured or of any insured employee or of any beneficiary under this policy shall not be affected by any provision other than one contained in this policy or in the copy of the Assured's application attached hereto or in the individual application of an insured employee."

"Incontestability

"This policy shall be incontestable after one year from the date of issue except for non-payment of premiums."

Shortly after October 1, 1952, Herman H. Fisher, Inc. reported to the defendant through the trustees that Herman H. Fisher, its president, was an employee of Herman H. Fisher, Inc., eligible to be insured under the provisions of the group policy. Thereafter, the defendant issued to the trustees for delivery to Herman H. Fisher a certificate in which the defendant certified that "it has insured certain employees of Contributing Employers to the Trustees of the Oil-Heat Institute of America, Inc. Distribution Division, Insurance Trust Fund (Herein called the Assured) for Group Life Insurance under Group Life Policy Number G-3562-L, and that Herman H. Fisher, an employee, is insured for the sum of (see rider attached²) payable in event of death of such employee to Lelia Grace Fisher, Wife, beneficiary designated by the employee to receive such benefits as are payable in the event of the death of the employee. Effective Date 10-1-52. (Provided Employee is then regularly performing the duties of his occupation)." In accordance with the provisions of the policy and of sec. 161, subd. 1(a) of the New York Insurance Law, the certificate contained statements with regard to Payment of Insurance, Termination of Employee's Insurance, Conversion Privilege, Designation of Beneficiary, Misstatement of Age, and Extended Insurance — Premium Waiver, taken directly from the policy issued to the trustees. Herman H. Fisher, Inc. paid to the trustees the required premiums for the insurance on the life of Herman H. Fisher as well as its other employees, and the trustees transmitted those premiums to the defendant.

After the death of Herman H. Fisher, in March, 1955, the defendant discovered for the first time that Herman H. Fisher had not been actively employed by Herman H. Fisher, Inc. at the time the policy became effective on or about October 1, 1952, nor at any time thereafter, but that he had been paralyzed as the result of a cerebral embolism, and otherwise mentally and physically ill, and had been receiving total disability benefits during the entire period. The defendant refunded to the Trustees all premiums theretofore paid to it on account of the said Herman H. Fisher, and denied liability to the plaintiff as his designated beneficiary.

At the trial of her case against the insurer I reserved ruling on plaintiff's motion for directed verdict, based on the incontestable clause, and submitted to the jury the question whether Herman H. Fisher was ever an eligible employee under the terms of the policy. The jury found in favor of the defendant on that issue.

Plaintiff's motion for judgment n. o. v. raises the question whether the incontestable clause in the group policy bars a defense on that ground.

Discussion.

Plaintiff contends that the case is essentially the same as one involving an individual life insurance policy; that the question involved is the validity of the certificate issued to Herman H. Fisher; and that the incontestable clause in the group policy prevents the insurer from questioning the validity of that certificate after one year from the date of its issuance.

Defendant contends, on the other hand, that the incontestable clause in the group policy deals with the validity of the group policy itself, which is not questioned; that the issue here is one of coverage; and that the policy limits its coverage to active employees, and excludes from its coverage any employee who was not an active employee at the time the policy was issued or at some time thereafter before his death.

The undisputed evidence shows that the group policy was applied for, issued and delivered in New York, and that the trustees paid the first premium in that State. The law of New York, therefore, controls the case. Boseman v. Connecticut General Life Ins. Co., 301 U.S. 196, 57 S.Ct. 686, 81 L.Ed. 1036.

The general principles applicable to...