John Hancock Mut. Life Ins. Co. v. Dorman, 9144.

• Decision Date: 04 January 1940
• Docket Number: No. 9144.,9144.
• Citation: 108 F.2d 220
• Parties: JOHN HANCOCK MUT. LIFE INS. CO. OF BOSTON, MASS., v. DORMAN.
• Court: U.S. Court of Appeals — Ninth Circuit

108 F.2d 220 (1939)

JOHN HANCOCK MUT. LIFE INS. CO. OF BOSTON, MASS., v. DORMAN.

No. 9144.

Circuit Court of Appeals, Ninth Circuit.

November 28, 1939.

Rehearing Denied January 4, 1940.

Meserve, Mumper & Hughes, of Los Angeles, Cal. (E. Avery Crary, of Los Angeles, Cal., of counsel), for appellant.

George H. Moore and Hugh B. Rotchford, both of Los Angeles, Cal., for appellee.

Before WILBUR, DENMAN, and STEPHENS, Circuit Judges.

DENMAN, Circuit Judge.

This is an appeal from a judgment adjudging appellant indebted to appellee beneficiary under a term contract of employee group insurance. The coverage was against death and disability. The deceased insured was a member of the board of directors of a company, all of whose employees, who applied for such protection and paid a required premium, were insured.

The contract is embodied in several documents. One, hereafter called the master policy, is issued to the employer. Another is a certificate, issued to the employee whose life and disability are covered. The employer procuring the master policy for his employees had no coverage of any risk. The master policy provided for the insurance of employees of several different companies.

The particular company whose employees were insured was the Western Bakeries Corporation, Ltd., a corporation having an office in the City of Los Angeles, California, at which met its board of directors for the conduct of the business of the employer, including that pertinent to the contract of insurance. The insured was a member of the board of directors of the Bakeries Corporation and attended the meetings of the board in Los Angeles and there contributed his services as one experienced in the baking trade to the deliberations of the board of directors. He received no pay from the company for any services rendered to it.

It is contended that the certificate is not a part of the contract insuring the employee. There is no merit in this contention. The master policy provides for its issuance to the insured and states that the certificate shall contain "a statement as to the insurance protection to which he is entitled". Many provisions as to this "insurance protection" appear in the certificate and not in the master policy, among others, that the insurance of the employee "will cease upon failure on the part of the Employee to pay the required premium contribution to the Employer," and the principal amount of his insurance.¹

In these respects the certificate differs from that in Boseman v. Insurance Co., 301 U.S. 196, 203, 57 S.Ct. 686, 690, 81 L.Ed. 1036, 110 A.L.R. 732, where the certificate was held merely evidence of the policy itself because it "did not affect any of the terms of the policy" and because "It served merely as evidence of the insurance of the employee. Petitioner's rights and respondent's liability would have been the same if the policy had not provided for issue of the certificate." In the case at bar not only would many of the insured's rights and insurer's liabilities not be the same if the certificate had not been issued, but, without the certificate, the amount of his insurance and his obligation to pay a premium to keep it effective would not have been a part of the written agreement which created the liability of the insurer. A certificate required to be issued by the master policy to determine the terms and conditions of the insurer's liability is a part of the policy.

By its terms the master policy provided that such certificates should be issued directly by appellant but, prior to the beginning of the term of the alleged insurance of the director, a change was made by agreement between the insurer and the employer whereby the certificates to be issued to those insured were to be issued by the employer, Western Bakeries Corporation, Ltd., a subsidiary of Interstate Bakeries Corporation. The amendment to the master policy is stated in the insurer's own language in answer to an interrogatory of the complaint. The insurer's statement of the amendment is:

"Ans. to Int. No. 4. The insurance provided under the master policy is handled, for the sake of economy and promptness, under what is known as a simplified accounting system, by virtue of which the Interstate Bakeries Corporation and its subsidiary or affiliated companies issue the certificates and from time to time make reports in gross to the Home Office of outstanding insurance and premiums collected thereon." (Emphasis supplied)

The "handling" of the insurance included the receipt of the employee's application, the determination of his insurability as an employee, and of the amount of the consideration to be paid by the insured employee.

The insured filed his application with the Bakeries Corporation on December 6, 1934, several years after the issuance of the master policy. The insured's application, addressed to appellant insurance company, was received by Bakeries Corporation in Los Angeles, California, and the latter, acting under the amended agreement of insurance, accepted it, determined the insured's "premium contribution", and there issued the certificate signed by the insurance company. It thereafter collected the premium payments of the insured up to the time of his death. Nothing was done in this connection by the insurer save through the Western Bakeries Corporation which, under the amended master policy, was handling the insurance. We find no error in the district court's finding that in this handling process the Western Bakeries Corporation was the agent of appellant.

Since all these handling acts occurred in California and, so far as the insured is concerned, he had no contract with the insurance company until his policy certificate was issued to him in California, and since no place of performance of acts by the insured or the payment of the insurance proceeds to his beneficiary is stated in the policy, the legal effect of insured's insurance contract is determined by the law of California. California Civil Code, sec. 1646.

The certificate part of the policy and the application made a part of the insurance contract, described the insured as an employee of the Bakeries Corporation. The policy contained an incontestability clause providing "This policy shall be incontestable one year from the date of issue, except for the non-payment of premiums." It is admitted that a year has passed since the date of issue of the certificate which, so far as the insured is concerned, is the date of issue of the policy.

The insurance company claims that it may contest the validity of the policy on the ground that the insured is not an employee of the Bakeries Corporation because, although a director rendering service which from the testimony we may infer was of a higher character to his corporation than any of its manual and other employees, he...