Peoples Protective Life Ins. Co. v. Smith

• Decision Date: 07 October 1974
• Docket Number: No. 73--293,73--293
• Citation: 257 Ark. 76,514 S.W.2d 400
• Parties: PEOPLES PROTECTIVE LIFE INSURANCE COMPANY, Appellant, v. Virginia SMITH, Appellee.
• Court: Arkansas Supreme Court

Page 400

514 S.W.2d 400

257 Ark. 76

PEOPLES PROTECTIVE LIFE INSURANCE COMPANY, Appellant, v. Virginia SMITH, Appellee.

No. 73--293.

Supreme Court of Arkansas.

Oct. 7, 1974.

Rehearing Denied Nov. 4, 1974.

Rose, Nash, Williamson, Carroll & Clay by Phillip Carroll, Wright, Lindsey & Jennings by James M. Moody, Little Rock, for cross-appellant

Matthews, Purtle, Osterloh & Weber by Gail O. Matthews, Givens & Buzbee by John R. Buzbee, Little Rock, for Moore Ford Co.

FOGLEMAN, Justice.

Appellee Virginia Smith is the widow of Clarence C. Smith, who died on March 4, 1972 of cancer which had caused him to be totally disabled after June 18, 1970. Smith had been employed by Moore Ford Company for a number of years. He was covered by a group life and health insurance policy issued by Mid-West National Life Insurance Company, predecessor of Progressive National Life Insurance Company, covering the employees of Moore Ford Company. On January 1, 1971, a new group policy covering these employees was obtained by Moore Ford Company. This policy, providing certain medical benefits and $6,000 life insurance to employees of Moore Ford was issued by appellant, Peoples Protective Life Insurance Company.

This appeal involves the question whether Clarence C. Smith came within the coverage of a group life and health insurance policy issued by Peoples Protective Life Insurance Company to Moore Ford Company. Appellant contends that the judgment against it should be reversed because:

I

There was no coverage for Smith under the Peoples Protective policy.

II

Smith's ineligibility under the group policy was not waived.

Mid-West issued a group health and life insurance policy to Moore and a certificate to Smith, with appellee as beneficiary. When Peoples Protective issued the policy sued on, it also issued a certificate to Smith, with appellee as beneficiary. The Mid-West policy, which lapsed for nonpayment of premiums about 20 days after the Peoples Protective policy was issued, contained a provision by which premiums were waived in case of total disability.

The Peoples Protective policy contained the following pertinent provisions:

DECLARATIONS PAGE 1

2. All Full-Time Employees to be eligible are all active employees less than 65 years of age. Full-Time employees shall be those who work 30 or more hours a week for the employer.

3. (A) All present Full-Time Employees who have completed 1 month employment on the Effective Date of this Policy shall be eligible immediately; all other Full-Time Employees shall be eligible upon completion of 1 month employment.

PART I ELIGIBILITY

An Eligible Employee shall be an employee of the Employer and of any subsidiary and any affiliate company who qualifies under Statements 2 and 3 of the Declarations Page for whom benefits are indicated in Statement 6 of the Declarations Page.

PART II EFFECTIVE DATE OF INSURANCE

If any Eligible Employee is required to contribute toward the premium for all or a part of his insurance as indicated in Statements 7 and 9 of the Declarations Page, each such employee, as a condition to becoming insured for such contributory insurance, shall make written request to the Employer on a form approved by the Company and shall agree thereon to contribute the amount required for the insurance to which he is or may become entitled. The effective date of such insurance for such an Eligible Employee, subject to the further provisions of the Part, shall be as follows:

1. If such request for insurance is made by the employee on or before the date he becomes eligible, the effective date shall be the date he becomes eligible,

2. If such request for insurance is made by the employee within 31 days after he becomes eligible, the effective date shall be the date of his request or

3. If such request for insurance is made by the employee after the end of 31 day period following the date he is eligible or is made after a previous termination of insurance because of failure to make his contribution when due, the employee shall be required to submit evidence of insurability, including good health, satisfactory to the Company and without expense to it. The effective date of his insurance shall be a date designated by the Company after the Company determines the evidence to be satisfactory.

In any case in which the employee is not actively at work on the date his insurance would otherwise become effective, the effective date of his insurance shall be the date of his return to full-time work.

EMPLOYER NOT COMPANY'S AGENT:

The Employer shall in no event be considered the agent of the Insurance Company for any purpose under this Policy.

AMENDMENT AND CHANGES:

No agent is authorized to alter or amend this policy, or to waive any conditions or restrictions herein, or to extend the time for paying a premium. This policy may be amended at any time by mutual agreement between the Employer and the Company without consent of the employees insured, but without prejudice to any loss incurred prior to the date to which premiums have been paid. No person except the President, Vice President, or Secretary, or Assistant Secretary of the Company has authority on behalf of the Company to modify the policy or to waive any of the Company's rights or requirements.

It was shown that, after Smith became disabled, he went to work again in July, 1970, and worked for some five or six weeks, but that he was not working when the Peoples Protective policy was issued or at any time thereafter. Both policies were contributory. As long as Smith worked, his portion of the premiums due Mid-West (later Progressive) was withheld from his pay. Thereafter, Smith paid the full premium to Moore Ford Company and Moore remitted it to its insurance carrier along with the premiums paid on other employees. His name was never stricken from the records of Moore Ford as an active employee. He was reported to appellant by Moore Ford as if he were a fulltime employee. In January 1971, when its policy was issued, the certificate issued to Smith by Peoples Protective recited life insurance benefits of $6,000. Appellant paid a claim submitted by Smith for medical expenses when Smith was treated in a hospital after the issuance of its policy.

United Financial Services was an agent for Mid-West and for Peoples Protective. Hale Allen was President of the agency and Scott Goodman was a stockholder and soliciting agent of United Financial Services. United Financial Services received an 'override' on all policies written by it for Mid-West. Goodman was paid commissions by United Financial Services. Hale Allen, president of the agency, testified that it had no authority to extend coverage beyond the terms of the policy. Scott Goodman negotiated both the Mid-West and Peoples Protective policies. ¹ According to Smith's daughter, Goodman advised the Smith family that a change in insurance carriers was contemplated by Moore Ford, but that, because of the noncancellable clause in the Mid-West policy, they should never let his name be dropped from the group, and that they should continue to pay the premiums, regardless of benefits or costs.

Sometime prior to the issuance of the Peoples Protective policy to Moore Ford Company, Progressive National had discontinued the writing of health policies and requested a change in carriers but had been willing to continue the coverage if Moore desired that it do so. Hale Allen, president of United Financial Services, notified Progressive National of the change in carriers. The death benefits under the earlier policy terminated January 20, 1971, but Smith, who was 62 years of age, was not eligible for extended insurance which would have been available to him had he been under 60. Even though several claims had been filed by Smith under this policy, there had been no waiver of premium, to which Smith would have been entitled upon termination of employment by total disability. This company was never notified that Smith's employment was terminated. He had a privilege of conversion of the life insurance coverage under this policy by applying to Progressive National.

Scott Goodman was aware that Smith had terminal cancer and sometime between June and December 31, 1970 had a conversation with the employee of Moore Ford who kept the company records with regard to claims and premiums on the group insurance policies. According to her, Goodman said that he had told the Smith family to continue the coverage and pay the premium directly to Moore Ford.

There was no evidence that Peoples Protective was ever actually notified of Smith's condition, except by the medical claims submitted to it.

I

The basic premise of the circuit court's holding that there was coverage is that Peoples Protective Insurance Company assumed all coverage previously afforded under the Mid-West contract, and that there was no evidence to the contrary. We respectfully disagree with the learned circuit judge. In the first place, appellee had the burden of proving coverage. State Farm Fire & Casualty Co. v. Rice, 241 Ark. 201, 406 S.W.2d 880; Southern Farm Bureau Casualty Insurance Co. v. Reed, 231 Ark. 759, 332 S.W.2d 615; Phoenix Assurance Co., Ltd. v. Loetscher, 215 Ark. 23, 219 S.W.2d 629; State Farm Mutual Automobile Insurance Co. v. Belshe, 195 Ark. 460, 112 S.W.2d 954; Atlas Life Insurance Co. v. Bolling, 186 Ark. 218, 53 S.W.2d 1; 46 C.J.S. Insurance § 1316(6), p. 399; 19 Couch on Insurance 2d 639, § 79:344 (1968). Annot: 68 A.L.R.2d 8, 145; 68 A.L.R.2d 150, 204 (1959).

The policy clearly defined eligibility for coverage. There is no evidence that Smith ever qualified for coverage under the policy. He could not have qualified for coverage until the date of his return to full-time work--which never came. See Hargraves v. Continental Assurance Co., 247 Ark. 965, 448 S.W.2d 942. We find no substantial evidence that appellant assumed the Mid-West coverage. It is quite clear that Scott Goodman was a soliciting agent only and that neither...