Geist v. National Bellas Hess, Inc., 64-C-712.

• Decision Date: 24 May 1965
• Docket Number: No. 64-C-712.,64-C-712.
• Citation: 241 F. Supp. 209
• Parties: Cecile A. GEIST, Plaintiff, v. NATIONAL BELLAS HESS, INC. and the National Bellas Hess Life Insurance Company, Defendants.
• Court: U.S. District Court — Eastern District of New York

241 F. Supp. 209

Cecile A. GEIST, Plaintiff, v.NATIONAL BELLAS HESS, INC. and the National Bellas Hess Life Insurance Company, Defendants.

No. 64-C-712.

United States District Court E. D. New York.

May 24, 1965.

Benjamin, Galton, Robbins & Flato, New York City, for defendants, by Louis Flato, New York City, of counsel for the motion and in opposition to the cross-motion.

Geist, Netter & Marks, New York City, for plaintiff, by George E. Netter, New York City, of counsel in opposition to the motion and for the cross-motion.

RAYFIEL, District Judge.

This is an action by Cecile A. Geist, the widow of A. Joseph Geist, and the named beneficiary of a certificate of group life insurance issued to him by the defendantNational Bellas Hess Life Insurance Company(the Insurance Company) as an "employee" of the defendantNational Bellas Hess, Inc., (National) to recover the sum of $25,000, the face amount thereof.The action was commenced in the Supreme Court of the State of New York, County of Queens, and was removed to this Court pursuant to Section 1441 of Title 28, U.S. Code, since both defendants are corporations foreign to New York and have their principal offices in Missouri.The defendants have moved under Rule 56 of the Federal Rules of Civil Procedure for summary judgment dismissing the complaint and the plaintiff, by cross-motion, has moved for summary judgment in the amount demanded in the complaint.

The papers submitted herein reveal the following facts:

A. Joseph Geist, a prominent attorney in the City of New York, was for many years prior to November, 1962, a director of National.He had regularly been elected a member of its Board of Directors at its annual meetings.National conducts a large mail order business and is a publicly owned corporation whose shares are listed and traded on the American Stock Exchange.It is a Delaware Corporation and maintains its principal place of business in North Kansas City, Missouri.It owns all of the shares of stock of the Insurance Company, a Missouri Corporation, licensed therein to conduct a general life insurance business.

In 1954 National obtained from the Insurance Company a group life insurance policy for the benefit of its employees under the terms of which all of its full-time ledger employees and those of its affiliates were eligible to apply for and receive life insurance in accordance with the schedule set forth in the policy, the premiums for which were to be paid by National, for which it was to be partially reimbursed by the covered employees.In 1960 the said group policy was amended to provide that any member of the Board of Directors of National was eligible, as an "employee", to apply for and receive life insurance in the sum of $25,000.

In 1960 Mr. Geist, being eligible as a Director, applied for and received insurance on his life in the sum of $25,000, effective May 1, 1960, under the aforementioned group policy, which was evidenced by a certificate issued to him.His wife, the plaintiff herein, was named as beneficiary.At that time Mr. Geist was seventy-four years of age.The first annual premium for his insurance, $2,217.75, was paid by National, to which he contributed $150.National paid his premium of $2,401.75 for the next year and $2,601.75 for the following year, Geist in each case reimbursing National to the extent of $150, as he was required to do under the terms of the policy.In each of these years National billed Mr. Geist for his contribution when due.

For some time prior to the annual meeting of stockholders held on November 21, 1961 Mr. Geist had been ill.Nevertheless he was then re-elected as a member of an eleven member Board of Directors.His illness continued and as a result thereof he was unable to attend any of the meetings of the Board of Directors during the ensuing year.By reason of such illness and his resultant failure to attend any of the meetings of the Board, the management of National decided that it would not recommend Mr. Geist's re-election as a Director at the expiration of his term in November, 1962.However, because of his many years of valuable service as a Director, the Board decided to designate him as an "Honorary Member Emeritus of the Board of Directors" and "Consultant to the Board of Directors" for the following year, and to designate his law firm as "Consultant to General Counsel of the Company".Mr. Geist was informed of the Board's decision by a letter from the General Counsel dated August 22, 1962, to which he replied on August 30, 1962.A resolution embodying these proposals was passed by the Board of Directors on September 21, 1962 and a certified copy thereof was sent to Mr. Geist by General Counsel with a letter dated September 25, 1962.He acknowledged receipt thereof by letter to General Counsel on October 11, 1962.

The annual meeting of the stockholders of National was held on November 20, 1962.Prior to the meeting the Board of Directors, acting pursuant to authority vested in it by National's certificate of incorporation and by-laws, reduced its membership to nine.Gilbert H. Perkins, then a member of the Board, resigned, and Mr. Geist was not re-elected.Thereafter National notified the Insurance Company that he was no longer a Director, and, hence, was no longer eligible for insurance coverage.This action was taken because the group policy contained a provision to the effect that insurance thereunder was to terminate thirty-one days after the date of termination of the employment of the insured, except in the case of absence from work due to illness, injury or retirement on pension, and Mr. Geist had not exercised the right of conversion contained in the said group policy, which provided that an employee, within 31 days after the termination of his employment, and without evidence of insurability, could convert his certificate of insurance into an individual policy upon the payment of the premium applicable thereto.On January 17, 1963 the Insurance Company terminated his coverage and, accordingly, National did not pay the premium which would have become due on May 1, 1963, and did not bill him for the sum of $150.00, the amount of his contribution thereto.

On August 11, 1963 Mr. Geist died and the plaintiff claimed payment of the sum of $25,000 under the policy.When the Insurance Company rejected the claim this action was commenced.

The plaintiff bases her claim on the following grounds:

1.That at the time of his death Mr. Geist was a member of the Board of Directors of National within the meaning of the group life insurance policy by reason of the resolution adopted by the Board designating him "as Honorary Member Emeritus of the Board of Directors" and that the purported cancellation of his life insurance was improper and invalid.

2.That his designation as an "Honorary Member Emeritus" was not a final and definitive termination of his "employment" as a Director, but was merely a temporary change in a continuing relationship whereby National would be assured of his services, and, consequently, he was entitled to notice of the claimed cancellation of his certificate of insurance and an opportunity to convert the...