Philippi Motor Co. v. Investors Ins. Corp.

• Decision Date: 30 July 1979
• Docket Number: No. 103199,103199
• Citation: 597 P.2d 1267,41 Or.App. 211
• Parties: PHILIPPI MOTOR CO., an Oregon Corporation, Respondent, v. INVESTORS INSURANCE CORPORATION, a corporation, Appellant. ; CA 12472.
• Court: Oregon Court of Appeals

Page 1267

597 P.2d 1267

41 Or.App. 211

PHILIPPI MOTOR CO., an Oregon Corporation, Respondent, v. INVESTORS INSURANCE CORPORATION, a corporation, Appellant.

No. 103199; CA 12472.

Court of Appeals of Oregon, In Banc.

Argued and Submitted April 17, 1979.

Resubmitted In Banc Without Oral Argument on July 24, 1979.

Decided July 30, 1979.

Peter C. Richter, Portland, argued the cause for appellant. On the briefs were James N. Westwood, Clifford N. Carlsen, Jr., and Miller, Anderson, Nash, Yerke & Wiener, Portland.

Ken L. Betterton, Salem, argued the cause for respondent. With him on the brief were Murley M. Larimer, Stayton, and Enfield & McConville, Salem.

THORNTON, Judge.

This appeal involves a controversy between Philippi Motor Company (Philippi) and Investors Insurance Corporation (Investors) over construction of one of Investors' credit life insurance policies issued by Philippi to the late William V. Conrady in connection with Conrady's purchase of a new automobile from Philippi one week before Conrady's death.

Philippi brought this declaratory judgment action against Investors to determine whether Investors was liable to pay benefits on the subject policy. ¹ Philippi claimed that it issued the policy to Conrady in accordance with the terms of its agreement with Investors and that Investors was liable. Investors alleged as an affirmative defense that in extending coverage to Conrady, Philippi had exceeded its authority as Investors' agent and was therefore liable for payment of the benefits, I. e., satisfaction of the debt owing to Philippi by Conrady. The case was submitted to the court on stipulated facts, which are set out in the margin. ² The court found for Philippi and ordered Investors to pay the disputed sum plus costs. The court's conclusions are also set out below. ³

The parties agree that the case turns on the requirement in the group policy that the debtor be "actively employed." Investors contend that the term is unambiguous, but that even if there is some ambiguity, the rule of Cimarron Ins. Co. v. Traveler's Ins. Co., 224 Or. 57, 355 P.2d 742 (1960), that "(a) mbiguities are generally resolved against the party who prepared theinstrument" (224 Or. at 66, 355 P.2d at 746) would not apply. Investors asserts that rule is inapplicable because the term "actively employed" was adopted from a regulation of the Oregon Insurance Division.

Contrary to the trial court, we conclude that the meaning of the term "actively employed" is clear and unambiguous in the context of the present case, and does not include a person in Conrady's known physical condition and inactive employment status. Where words in an insurance policy have a plain and ordinary meaning, they must be given effect in accordance therewith. Twilleager v. N. A. Accident Ins. Co., 239 Or. 256, 260, 397 P.2d 193 (1969).

According to Webster's New International Dictionary 22 (3d ed. 1971), the word "active" means:

"Characterized by action rather than by contemplation or speculation (an active man)."

Placing the word "actively" before "employed" must have been for the purpose of adding some further meaning distinguishing between persons who were actually engaged in performing work for an employer on the date in question and those who were not. It follows, therefore, that an "actively employed" person means one who is actually on the job and performing the customary work of his job, as opposed to one who is inactively employed.

It was the obvious purpose of the policy provision in issue to permit the insurance to become effective only in the event that the applicant's health was such as to permit him to be "actively employed." Stated differently, it was the clear purpose of this provision to prevent the insurance from being effective as to any person who was so seriously ill as to be continuously confined to his bed at home and unable to be at work.

While this issue has apparently not been considered by the appellate courts in this state, an examination of the authorities in other jurisdictions in similar cases persuades us that the holding of the trial judge is in error. For example, in Boyer v. Travelers Ins. Co., 7 Cal.2d 615, 61 P.2d 925 (1936), a case involving a group life policy, the policy required that the applicant must be "actually at work" on the date that coverage was to commence. The applicant was, however, in the hospital on that date, having just suffered a heart attack. He died there shortly thereafter without ever having returned to work.

The court denied coverage, holding that in order for the insurance to become effective as to an employe, his health must permit him to be actually at work on the specified date following the making of the application and doing some of the things for which he was employed.

Similarly, in Robinson v. North American Life & Cas., 215 Cal.App.2d 111, 30 Cal.Rptr. 57 (1963), also a case involving a group life insurance policy, the court held that an applicant who was in the hospital at the time he applied for coverage was not "actively at work." Additionally, the court said that the word "actively" was not ambiguous and the term meant the opposite of "passively." The court said:

"Plaintiff also contends that the word 'actively' was ambiguous. With this we cannot agree. Actively meaning the opposite side of passively has not double connotation but merely denotes some activity. Such word is in common usage and, as applied to work of a proprietor of a service station, clearly means some actual engagement in work. * * * " 215 Cal.App.2d at 117, 30 Cal.Rptr. at 61.

Also, in Williams v. Metropolitan Life Insurance Company, 448 S.W.2d 295, 298-99 (Mo.App.1969), the court said that the phrase "actively at work" in a group life policy means that an employe is present at his usual place of employment, performing his usual and ordinary functions and duties or otherwise working at his employment under the supervision and direction of a supervisor.

Again, in Jackson v. Ins. Co., 34 Ohio St.2d 138, 296 N.E.2d 679 (1973), the court said that where a decedent was not performing his job or assigned duties on the date he would have become eligible for coverage because the plant was closed down for annual inventory, he was not "actively at work" and therefore did not qualify for coverage under the provisions of a group life policy. To the same effect, See Elsey v. Prudential Ins. Co. of America, 262 F.2d 432 (10th Cir. 1958); Augusta v. John Hancock Mutual Life Ins. Co., 11 Misc.2d 111, 170 N.Y.S.2d 908 (Mun.Ct.1958); Blum v. Prudential Ins. Co. of America, 132 N.J.Super. 204, 333 A.2d 277 (1975); Landis v. American Potash, 78 Nev. 424, 375 P.2d 402 (1962).

We hold that plaintiff wrongfully represented that Conrady was eligible for coverage and consequently should be held liable for the loss.

Judgment and decree vacated. Reversed and remanded for entry of a new judgment and decree consistent with this opinion.

BUTTLER, J., specially concurring opinion.

JOSEPH, J., dissenting opinion.

BUTTLER, Judge, specially concurring.

While I concur in the result reached by the majority, I disagree with the analysis by which the result is reached.

First, it should be made clear that this action is not one by the insured or his estate. It is apparent that the insured made a full disclosure to Philippi, Investors' agent, and Philippi issued the policy with apparent authority to do so. Therefore, we need not construe the policy, indulging in a construction in favor of the insured.

Second, it should be made clear that the only issue is whether Philippi acted within its authority as agent for Investors in issuing the policy. In this connection, it is apparent that Philippi had conflicting interests in that it is the beneficiary of the policy it issued to one of its purchasers who was dying of cancer, and was also the agent of the insurer. This conflict is inherent in credit life insurance where the creditor is the insurer's agent. Under these circumstances, Investors' instructions to Philippi that eligibility for insurance required that the debtor be "actively employed" at least placed a duty on Philippi to inquire of Investors whether, under the agreed facts, the debtor was eligible. No inquiry was made, and Philippi ought not to benefit by its failure to carry out its agency with complete fidelity.

Accordingly, I would put the loss on Philippi without construing the insurance policy, which is not involved here.

LEE and GILLETTE, JJ., join in this specially concurring opinion.

JOSEPH, Judge, dissenting.

The majority, with two voices has struggled for a result that satisfies some feeling that the plaintiff ought not to benefit from its acts of selling (credit) life insurance to a dying man. The principal opinion holds that the case hinges on the meaning of the words "actively employed" and says they are clear and unambiguous and mean that the insurance policy only covers "one who is actually on the job and performing the customary work of his job." That ought to cause some unease among the possible thousands of insureds who bought or were sold this kind of insurance. To achieve that result, Judge Thornton finds to control a quite different term: "actually at work." He concludes that Philippi "wrongfully represented that Conrady was eligible for coverage and consequently should be held liable for the loss." ¹ That is, Philippi is liable for having wrongly applied a clear and unambiguous term as to the meaning of which there are at least three views on this court.

The reader should read carefully Judge Thornton's footnote 1 (which defines the sort of insurance involved) and then footnote 2, which contains the stipulated facts to which we are restricted. Note carefully the policy language in paragraph 5 and the carrier's specific (and identical) advice to its agents in paragraph 6. Then, look at paragraphs 9-11, 13 ²-14, 16-17: Nothing in those stipulated facts charges Philippi with knowing that...