Kirkpatrick v. Boston Mut. Life Ins. Co.

Citation393 Mass. 640,473 N.E.2d 173
CourtUnited States State Supreme Judicial Court of Massachusetts
Decision Date14 January 1985

Richard L. Neumeier, Boston (Cheri L. Crow, Boston, with him), for plaintiff.

Charles J. Bowser, Jr., Boston, for defendants.


HENNESSEY, Chief Justice.

The plaintiff, Oscar Kirkpatrick, was party to a group insurance contract with the defendant, Boston Mutual Life Insurance Company (Boston Mutual), through his employment with Systems Engineering And Manufacturing Corp. (Systems Corp.). He brought this action in the Superior Court alleging, in "Count One," that Boston Mutual violated the contract by refusing to pay him long-term disability benefits and alleging, in "Count Two," that such violations constituted an unfair and deceptive act under G.L. c. 93A. The plaintiff filed a motion for partial summary judgment on his contract claim, together with supporting affidavits. Boston Mutual opposed the motion and submitted its own affidavits. Based upon this record, a judge of the Superior Court denied the plaintiff's motion and granted summary judgment to Boston Mutual on both counts of the complaint. Subsequently the plaintiff filed an application for direct appellate review which we allowed. We now reverse the entry of summary judgment and remand the case for trial.

We summarize the facts as presented in the judge's findings and affidavits and exhibits of both parties. In June, 1978, Boston Mutual issued a group insurance policy to Systems Corp., the plaintiff's employer. The group policy provided for payment of long-term disability benefits, as well as for life, accidental death and dismemberment, and accident and sickness insurance to eligible employees. In 1979, the group policy was amended to provide that the effective date of coverage for employees hired after June 25, 1978, with respect to long-term disability and accident and sickness benefits, was "the 1st day of the insurance month following one year of employment." The policy's long-term disability coverage was subject to a 180 day elimination period as well as a "pre-existing condition" exclusion. 2 Excluded from the policy's long-term disability coverage was "any disability commencing during the first twelve months that the insurance is in force with respect to the Employee if the disability is caused or contributed to by, or is a consequence of, a disease or injury for which the Employee received medical treatment, or services, or took prescribed drugs or medicines during the three month period immediately prior to the Effective Date of such insurance."

As self-administrator of the group policy, Systems Corp. assumed such functions as enrolling members, providing claims information, providing premium reports, and filling out and distributing to eligible employees insurance certificates supplied by Boston Mutual. Systems Corp. also submitted a monthly group transaction report to Boston Mutual informing the insurer of additions to, deletions from, and changes in the coverage of eligible employees.

The plaintiff began his employment with Systems Corp. on August 11, 1980. He was hospitalized for hepatitis from July 8 to July 24, 1981, and then from July 31 to August 8, 1981. He returned to work on a full-time basis on October 5, 1981, and was terminated due to his continued disability from hepatitis on October 13, 1981.

The plaintiff testified in his deposition that he received a group insurance certificate through his employer sometime between July 8 and July 31, 1981. The certificate, issued by Boston Mutual, showed the benefits to which he was entitled under the group policy. At the top of the first page of this certificate, Systems Corp. filled in an erroneous effective date of June 25, 1981, for the plaintiff's long-term disability and accident and sickness coverage. The subsequent provisions of the certificate contained no further references to the effective date of coverage. However, according to the terms of the group policy, which the plaintiff never received, his effective date was September 1, 1981. 3 The significance of this conflict of dates is the applicability of the policy's pre-existing condition exclusion. If the plaintiff's effective date was June 25, 1981, he was entitled to benefits for his July disability; if his coverage was not effective until September 1, 1981, his disability falls within his three-month exclusion.

Systems Corp. paid premiums to Boston Mutual on the plaintiff's behalf for a period beginning June 25, 1981, and added the plaintiff's name to its monthly transaction report as eligible for benefits as of that date. On July 31, 1981, the plaintiff filed a claim with Boston Mutual for accident and sickness benefits. On his claim form Systems Corp. again supplied the erroneous June 25 effective date. Based upon this date Boston Mutual paid the plaintiff accident and sickness benefits for the twenty-six week period between August 8, 1981, and January 7, 1982.

On March 1, 1982, the plaintiff applied to Boston Mutual for long-term disability benefits. On June 4, 1982, Boston Mutual denied his claim, alleging that the plaintiff's disability arose within three months of his September 1, 1981, effective date and therefore was excluded from coverage. The plaintiff contends he was due benefits based upon an effective date of June 25, 1981.

On appeal the plaintiff argues: (1) That Systems Corp. acted as an agent of Boston Mutual in filling out his certificate and therefore Boston Mutual is bound by the erroneous effective date appearing on his certificate, and (2) where there is a conflict in the terms of an individual certificate and group policy, that conflict should be resolved in favor of the insured. We are presented with issues of first impression 4 over which courts elsewhere are divided.

On a motion for summary judgment "the inferences to be drawn from the underlying facts ... must be viewed in the light most favorable to the party opposing the motion." Hub Assocs. v. Goode, 357 Mass. 449, 451, 258 N.E.2d 733 (1970), quoting United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). The motion judge should enter summary judgment only if the pleadings and affidavits of the parties demonstrate "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Mass.R.Civ.P. 56(c), 365 Mass. 824 (1974). We will uphold an order for summary judgment on review only if "certain factors converge to convince us that the trial judge was ruling in this case on undisputed facts and, of course, that his ruling was correct as matter of law." Community Nat'l Bank v. Dawes, 369 Mass. 550, 556, 340 N.E.2d 877 (1976).

Here, the underlying facts are virtually undisputed. The issue instead is what inferences can be drawn from these facts and whether in light of such inferences a jury "could find with reason what is required for liability in cases of this type." Richey v. American Auto Ass'n, 380 Mass. 835, 838, 406 N.E.2d 675 (1980).

Applying these principles, we conclude that the motion judge erred in granting summary judgment to Boston Mutual. The judge ruled that Systems Corp. was not acting as Boston Mutual's agent in filling out the plaintiff's certificate; that Boston Mutual therefore could not be held responsible for System Corp.'s error; and that the terms of the plaintiff's group policy regarding his effective date must prevail over the conflicting provision in his certificate. We conclude that the crucial issue of agency presents a triable question for the jury, and if the jury were to find such agency, the applicable law is such that a verdict for the plaintiff would be warranted on count one, sounding in contract. 5

1. Agency.

A conflict of authority exists over whether an employer acts as agent for the insured or the insurer in administering group policies. 1 J.A. Appleman & J. Appleman, Insurance Law and Practice § 43 (Rev.1981). In arguing that Systems Corp. acted solely on behalf of its employees, Boston Mutual relies upon cases following the older "conventional" rule. Id. at 89 n. 2, and cases cited. These authorities reason that an employer serves its own interests and those of its employees--rather than the adverse interests of the insurer--when it assumes administrative responsibilities. See Norby v. Bankers Life Co., 304 Minn. 464, 468-470, 231 N.W.2d 665 (1975) (discussing and rejecting characterization of employer as agent of the insured). With the tremendous expansion of the group insurance market, a growing minority of courts have come to realize that the insurer is equally benefitted by employer-administered plans. "It cannot be said that the employer acts entirely for its own benefit or for the benefit of its employees in undertaking administrative functions. While a reduced premium may result if the employer relieves the insurer of these tasks, and this, of course, is advantageous to both the employer and the employees, the insurer also enjoys significant advantages from the arrangement. The reduction in the premium which results from employer-administration permits the insurer to realize a larger volume of sales, and at the same time the insurer's own administrative costs are markedly reduced." Elfstrom v. New York Life Ins. Co., 67 Cal.2d 503, 512-513, 63 Cal.Rptr. 35, 432 P.2d 731 (1967).

An agency "results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control." Restatement (Second) of Agency § 1 (1958).

Inferring the existence of an agency, a number of courts have held insurers responsible for administrative errors committed by employers (or other group policyholders) who act on their behalf. See, e.g., John Hancock Mut. Life Ins. Co. v. Dorman, 108...

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