Morris v. Travelers Ins. Co.

• Decision Date: 27 December 1976
• Docket Number: No. KCD,KCD
• Citation: 546 S.W.2d 477
• Parties: Stanley L. MORRIS, Administrator in the Estate of Jacqueline M. Smith, Deceased, Plaintiff-Respondent, v. The TRAVELERS INSURANCE COMPANY, Defendant-Appellant. 27483.
• Court: Missouri Court of Appeals

Page 477

546 S.W.2d 477

Stanley L. MORRIS, Administrator in the Estate of Jacqueline

M. Smith, Deceased, Plaintiff-Respondent, v. The TRAVELERS INSURANCE COMPANY, Defendant-Appellant.

No. KCD 27483.

Missouri Court of Appeals, Kansas City District.

Dec. 27, 1976.

Motion for Rehearing and/or Transfer Denied Jan. 31, 1977.

Gene C. Morris, Robert P. Numrich, Kansas City, for defendant-appellant.

Rufus Burrus, Independence, for plaintiff-respondent.

Before DIXON, P.J., PRITCHARD, C.J., and WASSERSTROM, J.

DIXON, Presiding Judge.

Plaintiff recovered a judgment against defendant insurance company on a group life insurance policy issued to the employer of plaintiff's decedent. Jury was waived. Defendant insurance company has appealed. The single issue presented is that the trial court erred in entering the judgment by creating the coverage under the doctrine of estoppel, contrary to the general rule that coverage cannot be created by estoppel. The judgment is reversed with directions.

This court is indebted to the trial judge for his detailed findings of fact which permit the preparation of a short statement of the relevant facts.

Plaintiff Stanley L. Morris is the Administrator of the Estate of Jacqueline M. Smith, deceased. Jacqueline M. Smith was the widow of Robert C. Smith and the named beneficiary of any life insurance benefits due from defendant. Robert C. Smith died on January 2, 1964. Smith was in the employment of the Bendix Corporation, being paid on an hourly basis. The last day he actually worked was December 20, 1963. Smith was granted a written leave of absence for personal illness begining December 26, 1963 and ending December 31, 1963, later extended to January 13, 1964. This was approved in writing by different officials of the company on December 27, 1963, December 30, 1963, and January 2, 1964. December 31, 1963 was the last regular working day for hourly employees of Bendix before January 1, 1964. January 1, 1964 would not have been a work day for Smith. Smith's hourly rate of pay at the time he last actually worked at Bendix was $3.49 per hour. Although some payroll deductions were made with reference to the last checks received by Smith, there were no deductions shown for insurance. Defendant Travelers Insurance Company had issued a group insurance policy to the Bendix Corporation effective February 7, 1931. The provisions of the policy have been changed, and the coverage provided has been changed at various times since the inception of the coverage. Since 1961 changes in the group coverage for hourly employees of Bendix have been the result of agreements made by Bendix with the unions which represent its employees. Plaintiff introduced into evidence a 'Plan of Insurance,' furnished by defendant, setting out the provisions of the revised group insurance policy relating to life insurance benefits for employees of Bendix, effective as of January 1, 1964. This 'Plan of Insurance' provided for basic life insurance for those employed on an hourly basis in the amount of $3,000, and for optional additional insurance, based upon hourly rate of pay. The additional optional insurance provided for these employees making $3.40 or over per hour is $7,000.

The 'Plan of Insurance' with respect to the effective date of the basic $3,000 insurance contained the following:

'(2) Any Employee who is not actually at work on the date his insurance is to become effective shall not be insured until he actually returns to work.'

With respect to the effective date of the optional additional insurance, an identical provision is stated, as above quoted. Under both the basic and the additional insurance, monthly contributions by the employee are required. The agreement between Bendix and the labor union, which formed the basis for the revised group insurance plan effective January 1, 1964, provided:

'Section 10.

All insurance of employees insured under any existing Group Insurance Plan of the Company prior to the effective date of this Plan, will be terminated on the effective date of this Plan as to employees working on such date, and on the date of return to work for employees not at work on such date . . .'

Under date of January 1, 1964, defendant Travelers Insurance Company issued a 'Certificate of Insurance' in the name of Robert C. Smith, employee of Bendix, with Jacqueline M. Smith, wife, as beneficiary. This exhibit was introduced by plaintiff. Plaintiff also introduced certificates issued to Smith under earlier dates, the next most recent one being dated December 1, 1960.

The Certificate of Insurance provides, inter alia:

'The Optional Supplemental Insurance described herein is to be effective only if the Employee makes the required payments to apply toward the premium for such insurance.

'This individual Certificate is furnished in accordance with and subject to the terms of said group policies and is merely evidence of insurance provided under said group policies which insurance is effective only if the Employee is eligible for insurance and becomes and continues insured in accordance with the terms, provisions and conditions of said policies.'

On the back side of the Certificate, the basic life insurance is listed at $3,000 and the schedule of additional insurance, based upon rate of pay, up to $7,000, is given.

As to the optional insurance, it is stated:

'Each Employee is to be classified and the amounts of insurance applicable to him determined on the date such insurance becomes effective and thereafter on the first day of the second calendar month next following the date of each change in rate of pay in accordance with the table below upon the basis of the Employee's Hourly Rate of Pay, as determined and recorded by the Employer; provided, however, that no change to a class which would provide an increase in amount of insurance shall become effective while the Employee is absent from work. . . .'

No evidence was offered as to the actual delivery date of the Certificate of Insurance dated January 1, 1964. The effective date of the revised group insurance policy of defendant was January 1, 1964, and employees who were actively at work on December 31, 1963 were considered to be actively at work on January 1, 1964. Smith was not actively at work on December 31, 1963, nor at any time thereafter. Defendant has always acknowledged its obligation to pay the sum of $3,000. Plaintiff, although being offered the sum of $3,000, has always contended and claimed the amount due was $10,000.

The fact statement above recited is without attribution be quotation mark almost verbatim excerpted from the trial judge's findings of fact.

The trial judge also made conclusions of law. The court found that the certificate of insurance was presumed to have been delivered to Smith January 1 and the insurance company defendant does not dispute that finding. The court further found as follows:

'Defendant, by its issuance of Certificate of Insurance to Smith under date of January 1, 1964 is estopped from denying that said Certificate was in force and effect t the time of the death of Smith on January 2, 1964 and that the new insurance program (providing coverage up to $10,000 was in effect as to Smith; and is estopped from using as a defense that the new insurance was not effective because Smith was not actually at work on December 31, 1963.'

In a short memorandum, the trial judge explicated his conclusion of law. A short quotation from the memorandum will serve to focus upon the narrow issue upon which this appeal turns:

'The only real issue raised in the case is whether the beneficiary is to be denied the $7,000 additional coverage on the grounds that Smith was not actually at work on December 31, 1963, the last work day before the new insurance became effective. By the terms of the master policy Smith was not entitled to the new insurance until he returned to work.

However, defendant company did in fact issue to Smith a certificate, in effect placing Smith under the provisions of the new insurance. Prior to January 1, 1964 Smith presumably had in his possession a certificate on which he and his beneficiaries had the right to rely. The new certificate expressly 'replaces any and all Certificates previously issued for delivery to the Employee.' On the basis of this new certificate Smith and his beneficiaries had the right to rely on the new coverage provided, and defendant is estopped from denying the coverage as provided under the new group plan. It is to be noted that on the new certificate there is no specific provision indicating it is not effective until Smith should return to work. The provisions that no increase in insurance is to become effective while the Employee is absent from work applies only where there has been a change in the Employee's class. That is not our situation here.'

The initial argument of defendant is that coverage cannot be created by estoppel. Defendant points to the trial court's conclusions of law and asserts that the court has created coverage by estoppel. Cited is Blew v. Conner, 310 S.W.2d 294 (Mo.Ap.1958), modified, Blew v. Conner, 328 S.W.2d 626 (Mo. banc 1959), which in turn cites 43 Am.Jur.2d Insurance Section 1184, p. 1103 (then 29 Am.Jur. Insurance Section 903) and 45 C.J.S. Insurance § 674a. The court in Blew enunciated the general rule in the following language l.c. 303:

'While waiver and estoppel may prevent an insurer from asserting a defense a coverage otherwise provided by an insurance policy our Missouri appellate courts so far as we have been able to ascertain have not yet permitted the use of either waiver or estoppel to establish coverage in the first instance where none existed before.'

Defendant, in support of its position that the rule should be applied to group insurance contracts such as the present one, cites two Texas cases applying the rule to situations where the claimed estoppel arises from a difference between the certificate of insurance furnished and...