Oakley v. National Western Life Insurance Company

• Decision Date: 21 August 1968
• Docket Number: No. 66 Civ. 2337.,66 Civ. 2337.
• Citation: 294 F. Supp. 504
• Parties: Anna Pandick OAKLEY, Individually and as Executrix of the Goods, Chattels and Credits which were of the Estate of H. Wayne Oakley (Deceased), Plaintiffs, v. NATIONAL WESTERN LIFE INSURANCE COMPANY, Successor in interest to the National Bellas Hess Life Insurance Company, Defendant.
• Court: U.S. District Court — Southern District of New York

294 F. Supp. 504

Anna Pandick OAKLEY, Individually and as Executrix of the Goods, Chattels and Credits which were of the Estate of H. Wayne Oakley (Deceased), Plaintiffs, v. NATIONAL WESTERN LIFE INSURANCE COMPANY, Successor in interest to the National Bellas Hess Life Insurance Company, Defendant.

No. 66 Civ. 2337.

United States District Court S. D. New York.

August 21, 1968.

Leaf, Kurzman & Deull, New York City, for plaintiffs.

Herman A. Benjamin, New York City, for defendant.

MOTLEY, District Judge.

This is an action to recover on a group insurance policy which the defendant insurer admits "was written with * * * it by the Employer of the Insured, for the benefit of its employees." Both sides moved for summary judgment. Fed.R. Civ.P. 56. Plaintiff's motion is granted and defendant's motion is denied.

Plaintiff was the wife of H. Wayne Oakley, deceased. At all times relevant to this action, both Mr. and Mrs. Oakley were New York domiciliaries. Oakley was a director of National Bellas Hess, Inc., ("Hess") a Delaware corporation with its principal place of business in Missouri.

At all times relevant to this action, the defendant insurer was a Missouri corporation with its principal place of business in Missouri.

Effective December 1, 1954, the insurer, then a wholly owned subsidiary of Hess, issued to Hess a group life insurance policy. In 1960, directors of Hess became eligible for coverage and, effective May 1, 1960, Oakley was covered, to the extent of $25,000. Plaintiff was the beneficiary of that coverage.

Oakley paid premiums of $150 per annum for this coverage; Hess paid an additional sum of approximately ten times this amount. Oakley paid the premiums to Hess which, in turn, paid the full premium to the insurer.

Oakley resigned as a director of Hess, effective May 26, 1965. He died on September 9, 1965, more than 31 days but less than 90 days after the termination of his employment with Hess. Oakley was not notified of his right to convert his insurance policy within 90 days after the termination of his employment.

The contract of insurance provided as follows:

"Section 10. CONVERSION PRIVILEGE—Upon termination of employment of any Employee, all his insurance hereunder shall cease, in accordance with the Formula, and the said Employee shall be entitled to have issued to him by the Company, without evidence of insurability, and upon application made to the Company within thirty-one (31) days after such termination of employment, and upon payment of the premium applicable to the class of risk to which he belongs and to the form and amount of the policy at his then-attained age (nearest birthday), a policy of Life Insurance in any one of the forms customarily issued by the Company, except Term Insurance, in an amount equal to or, at the option of the Employee, less than the amount of his insurance under this Policy at the time of such termination.

"An individual policy so applied for shall become effective only upon the cessation of the insurance hereunder of the Employee so applying. The Company shall, upon the cessation of the insurance hereunder on any Employee because of termination of employment, be released from any liability on account of such Employee unless and until such individual policy is issued in accordance with the provisions of this Section, except as provided in Section 2 hereof."

Oakley made no attempt to convert.

The issues involved in this case were narrowed by the pretrial order of February 15, 1968. The parties agreed, and it was so ordered, that if New York law governs the contract, plaintiff is entitled to recover, and, if Missouri law governs, plaintiff is entitled to recover only if defendant waived its rights under the "Extended Death Benefit" provision.¹

Under New York law, if applicable, the absence of affirmative notification subsequent to the termination of employment conferred upon deceased the right to convert for 90 days after the termination of coverage, and death before the expiration of the 90 day period is deemed the exercise of the right of conversion. New York Insurance Law, McKinney's Consol.Laws, c. 28, § 204 (3); see Payne v. Equitable Life Assurance Society of the United States, 11 N.Y.2d 1006, 229 N.Y.S.2d 752, 183 N.E. 2d 763 (1962) affirming 14 A.D.2d 266, 220 N.Y.S.2d 493 (First Dept. 1961); De Ville v. Continental Assurance Co., 10 A.D.2d 386, 199 N.Y.S.2d 876 (4th Dept.) aff'd 8 N.Y.2d 1080, 207 N.Y.S. 2d 453, 170 N.E.2d 457 (1960).

As jurisdiction of this court is grounded on diversity of citizenship, this court is bound to apply the law of the State of New York; Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487 (1938) including its conflicts of law rules; Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Zogg v. Penn Mutual Life Insurance Co., 276 F.2d 861 (2d Cir. 1960). The question, therefore, is whether New York, under its conflicts of law rules, would apply, in this case, New York law or Missouri law to the issue of whether a certificate holder of a group insurance policy is entitled to affirmative notice of his right to convert.

At least since Auten v. Auten, 308 N.Y. 155, 124 N.E.2d 99, 50 A.L.R.2d 246 (1954), New York has followed the "center of gravity" or "grouping of contacts" theory of conflicts of law. "It gives to the place `having the most interest in the problem' paramount control over the legal issues arising out of a particular factual context, thus allowing the forum to apply the policy of the jurisdiction `most intimately concerned with the outcome of the particular litigation'". Id. at 161, 124 N.E.2d at 102. New York, it is clear, would apply the law of the state "which has the most significant contacts with the matter in dispute." Id. at 160, 124 N.E.2d at 102. It is less clear, however, how this is done.

There is no reason why all of the issues arising out of a given claim or set of facts must be decided by the same state's law. Reese, Comments on Babcock v. Jackson, 63 Col.L.Rev. 1212, 1253 (1963); see, Babcock v. Jackson, 12 N.Y. 2d 473, 484, 240 N.Y.S.2d 743, 752, 191 N.E.2d 279, 95 A.L.R.2d 1 (1963). One must examine and evaluate the contacts relevant to the particular issue to determine which law should be applied. Reese, op cit. supra. See, Restatement, 2nd, Conflicts of Law, Proposed Official Draft, May 1, 1968 § 188:

(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, as to that issue, has the most significant relationship to the transaction and the parties. * * *

(2) * * *

These contacts are to be evaluated according to their relative importance with respect to the particular issue. (Emphasis added.)

New York courts have delineated the methodology to be employed in this procedure. "First * * * isolate the issue, next * * * identify the policies embraced in the laws in conflict, and finally * * * determine the contacts of the respective jurisdictions to ascertain which has a superior connection with the occurrence and thus would have a superior interest in having its policy or law applied." Dym v. Gordon, 16 N.Y.2d 120, 124, 262 N.Y.S.2d 463, 466, 209 N.E.2d 792, 794 (1965). It appears that in New York the most significant "contacts" to be evaluated are the relative interests of the states involved. See, for example, In Re Crichton, 20 N.Y.2d 124, 281 N.Y.S.2d 811, 228 N.E.2d 799 (1967); Miller v. Miller, 22 N.Y.2d 12, 290 N.Y.S.2d 734, 237 N.E.2d 877 (1968). Cf. Restatement, 2nd, Conflicts of Law, Proposed Official Draft, May 2, 1967, § 6.

In In re Crichton, supra, a case involving the applicability of Louisiana's community property law to intangible personal property of a New York decedent located in Louisiana, the New York Court of Appeals phrased the test this way:

The choice of law problem here should be resolved by an examination of the contacts which Louisiana and New York have with this controversy for the purpose of determining which of those jurisdictions has the paramount interest in the application of its law. 20 N.Y.2d at 133, 281 N.Y.S. 2d at 819, 228 N.E.2d at 805.

Most recently, Judge Keating, after acknowledging the inadequacy and inconsistency of past New York conflicts decisions, reiterated this test. He stated:

"* * * the rule which has evolved clearly in our most recent decisions is that the law of the jurisdiction having the greatest interest in the litigation will be applied and that the facts or contacts which obtain significance in defining State interests are those which relate to the purpose of the particular law in conflict." Miller v. Miller, supra, 22 N.Y.2d at 15, 290 N.Y.S.2d at 737, 237 N.E.2d at 879.

And see, In Re Clark, 21 N.Y.2d 478, 485-486, 288 N.Y.S.2d 993, 998, 236 N.E. 2d 152, 156 (1968):

"As between two states, the law of that one which has the predominant, if not the sole, interest in the protection and regulation of the rights of the person or persons involved should, of course, be invoked." (per Fuld, C. J.)

This is especially true when the New York Court of Appeals sees no contravailing interest in the other state. In Re Crichton, supra; In re Clark, supra. This approach has received erudite approval:

"* * * courts must be on the alert against making exceptions to the local law that would defeat a legitimate interest of the forum state without serving the interest of any other state." Traynor, "Is This Conflict Really Necessary?", 37 Texas L.Rev. 657, 669 (1959).

We turn now to an examination of the contacts involved in this case. The most significant are:

(1) Both plaintiff and decedent were, at all times relevant to this action, New York domiciliaries.

(2) Decedent paid premiums on this policy and did so by mailing them from New York to Missouri.²

(3) The policy was issued in Missouri.

(4) The policy was issued by a Missouri corporation to its parent, a Delaware corporation doing business...