Lineberger v. Security Life & Trust Co.

• Decision Date: 12 December 1956
• Docket Number: No. 393,393
• Citation: 95 S.E.2d 501,245 N.C. 166,68 A.L.R.2d 1
• Court: North Carolina Supreme Court
• Parties: , 68 A.L.R.2d 1 Mamie P. LINEBERGER v. SECURITY LIFE & TRUST COMPANY and Pilot Freight Carriers, Inc.

Page 501

95 S.E.2d 501

245 N.C. 166, 68 A.L.R.2d 1

Mamie P. LINEBERGER v. SECURITY LIFE & TRUST COMPANY and Pilot Freight Carriers, Inc.

No. 393

Supreme Court of North Carolina.

Dec. 12, 1956

Weston P. Hatfield, Winston-Salem, for plaintiff, appellant.

Womble, Carlyle, Sandridge & Rice, Winston-Salem, for Security Life & Trust Co., defendant, appellee.

PARKER, Justice.

On 8 March 1953 Security Life & Trust Company issued to Pilot Freight Carriers, Inc., a motor vehicle public carrier, its Group Policy No. G--198, which was a Non-Contributory Policy with all premiums thereon paid monthly by Pilot Freight Carriers, Inc., and no part thereof paid by any of its employees covered by said policy. Under the arrangement between them the Pilot Freight Carriers, Inc. was a self-ad-ministrative unit, and it kept and maintained in its office a record showing the names of its employees covered by the policy at any given time. Security Life & Trust Company had the right at will to inspect this record, or any other records in the office of Pilot Freight Carriers, Inc. pertaining to the policy of Group Insurance and to the employees covered by it. Pilot Freight Carriers, Inc. was required, and did make a monthly report to Security Life & Trust Company on forms furnished by it, entitled 'Premium Statement for Group Life Insurance,' which report contained the number of its employees covered by the policy, the amount of insurance in force on the lives of its employees under the policy as of the given insured date, the number of new employees insured since the last duedate, employees terminating insurance since last due-date, and other pertinent information.

At the times mentioned in the pleadings Pilot Freight Carriers, Inc. maintained a freight terminal in Forsyth and Mecklenburg Counties. On 30 June 1952 Jasper C. Lineberger entered the employment of Pilot Freight Carriers, Inc. as a freight checker at its terminal in Forsyth County, and was discharged on 31 January 1953. He was rehired on 26 May 1953, and worked as a full-time employee as a freight checker until 31 July 1954. On 31 July 1954 his employment was terminated by Pilot Freight Carriers, Inc., and he, together with several other employees, were discharged, on account of a lack of work for them at the Forsyth County Terminal. The effective date of his discharge was 1 August 1954. He was offered a job at its terminal in Charlotte, which he declined to accept. When he was discharged on 31 July 1954, he received his final pay cheque, and was notified there was no further work for him at the Forsyth County Terminal.

When he was discharged on 31 July 1954, Pilot Freight Carriers, Inc., removed his name from its insurance record showing the names of all its employees covered by the Group Policy, and at no time thereafter did his name appear on its insurance records showing the names of its employees covered by the Group Policy. Pilot Freight Carriers, Inc. paid no premium for coverage under said policy of group insurance on his life for either the months of August or September 1954. The last premium paid by it for coverage under the policy of group insurance on his life was for the month of July 1954, the due-date of which was 1 July 1954.

For the due-date of 1 August 1954 Pilot Freight Carriers, Inc. submitted to Security Life & Trust Company on 6 August 1954 the 'Premium Statement for Group Life Insurance,' which showed Jasper C. Lineberger as one of its 48 employees, and it delivered to Security Life & Trust Company its cheque for $1,153.22 in payment of the premium due for August 1954.

When Jasper C. Lineberger was rehired on 26 May 1953, there was issued to him a certificate in accord with the terms of the Group Policy showing that he was insured under the Group Policy. The certificate named plaintiff as beneficiary. Pursuant to a rider attached to the Group Policy on 1 September 1953 the amount of insurance under the certificate was increased to $3,000.

When he was discharged on 31 July 1954, he was not notified by his employer or by Security Life & Trust Company that the insurance on his life under the Group Policy was being terminated, or that the same could be converted as provided by the certificate. Neither he, nor Pilot Freight Carriers, Inc., nor anyone, paid any sum whatsoever to Security Life & Trust Company on the premium on the policy of Group Insurance for coverage thereunder on his life for the month of August 1954, or for any month thereafter.

For the work done by him for Pilot Freight Carriers, Inc., prior to 1 August 1954, he was paid weekly by cheque, and was carried on the regular payroll of the company as a full-time employee. After his discharge on 31 July 1954, he worked at irregular intervals during August and September 1954 for Pilot Freight Carriers, Inc. for a total number of 16 days prior to his death on 20 September 1954. During this period of irregular work his name was not carried on the insurance records or on the employment records kept by Pilot Freight Carriers, Inc., showing the names of its regular and full-time employees, who were covered by the Policy of Group Insurance during the months of August and September 1954, and he was paid in cash from the petty cash fund.

A copy of Group Policy No. G-198 was attached to the agreed statement of facts, and made a part thereof. This policy provides: 'Termination of Insurance. The insurance of any employee insured hereunder shall automatically cease: * * * (2) On the date of the termination of his employment. Termination of employment for the purposes of insurance hereunder, shall mean cessation of active work as an employee, except * * *. ' There are two exceptions: one, if an employee's cessation of active work is caused by sickness, injury or retirement, and two, if an employee is on leave of absence or temporary lay-off. The two exceptions are not relevant here.

It seems evident that the words 'termination of his employment' within the terms of the policy refer to the status of the employee rather than to a contractual relationship, and must mean a complete severance of the relationship of employer and employee, of which the employee has knowledge, by positive act on the part of either or both. It is such a termination of employment as will make effective all parts of the insurance contract. This is apparent from the exception that 'if an employee's cessation of active work is caused by sickness, injury or retirement, his employment may be deemed to continue until premium payments for such employee's insurance are discontinued by the employer. ' Pearson v. Equitable Life Assurance Society, 212 N.C. 731, 194 S.E. 661; Emerick v. Connecticut Gen. Life Ins. Co., 120 Conn. 60, 179 A. 335, 105 A.L.R. 413; Beecey v. Travelers' Ins. Co., 267 Mass. 135, 166 N.E. 571; Colter v. Travelers' Ins. Co., 270 Mass. 424, 170 N.E. 407; Peters v. Aetna Life Ins. Co., 279 Mich. 663, 273 N.W. 307; 44 C.J.S., Insurance, § 329, p. 1265; Appleman's Insurance Law and Practice, Vol. 1, sec. 122.

The agreed statement of facts sets forth that there was a complete severance of the relationship of employer and employee between Pilot Freight Carriers, Inc. and Jasper C. Lineberger by his discharge from employment on 31 July 1954, effective 1 August 1954, at which time he received his final pay cheque. He knew he was discharged from employment because of lack of business at its Forsyth County Terminal, and when he was offered employment at its Mecklenburg County Terminal, he refused to accept it. When he was discharged on this date, Pilot Freight Carriers, Inc. removed his name from its insurance records showing that he was an employee covered by the Group Policy, and at no time thereafter did his name appear on such records. From then until his death on 20 September 1954 no premium was paid by anyone to Security Life & Trust Company for coverage on his life under the Group Policy. From the agreed statement of facts it is clear that the report made to Security Life & Trust Company by Pilot Freight Carriers, Inc. on 6 August 1954 that he was an employee on 1 August 1954 was made in error. His termination of employment on 31 July 1954 was such a termination as to make effective all parts of the insurance contract. Plaintiff's contention that Jasper C. Lineberger's discharge on 31 ...