Reinisch v. Metropolitan Life Ins. Co.

Decision Date28 November 1983
Citation97 A.D.2d 135,469 N.Y.S.2d 767
PartiesCynthia REINISCH, etc., et al., Respondents, v. METROPOLITAN LIFE INSURANCE COMPANY, et al., Appellants.
CourtNew York Supreme Court — Appellate Division

J. Austin Lyons, Jr., New York City (Margaret Kelly and Mary Currie, New York City, of counsel), for appellants.

Manfredi & Bondi, New Hyde Park (Frank M. Manfredi, New Hyde Park, of counsel), for respondents.

Before GIBBONS, J.P., and O'CONNOR, BROWN and BOYERS, JJ.

BOYERS, Justice.

The issue for our consideration today would appear to be one of novel impression. It is whether, in this action to recover on a policy issued under the Federal Employees' Group Life Insurance Act of 1954 (U.S.Code, tit. 5, § 8701 et seq.), an employer-policyholder's notice of conversion granting its terminated employee an additional 15 days within which to exercise his right to obtain an individual policy without producing evidence of insurability, also extended coverage pursuant to the provisions of the statute, the regulations attendant thereto (5 CFR 870.101 et seq.), or the policy, beyond the 31-day grace period set forth in those regulations and in the policy. Special Term held that it did and that, accordingly, plaintiff's deceased, a Federal employee, was covered when he died approximately 40 days after his employment had terminated. We disagree.

In April, 1976, plaintiff's decedent Michael Reinisch began employment with the Federal Government when he was hired by the Federal Aviation Administration (FAA) as an air traffic controller. As an eligible government employee, the plaintiff's deceased husband was covered under group policy number 17000-G, bearing the effective date August 29, 1954. That policy was issued by defendant Metropolitan Life Insurance Company to the United States Office of Personnel Management 1 (OPM) pursuant to the Federal Employees' Group Life Insurance Act (hereinafter the Act) (U.S.Code, tit. 5, § 8701 et seq.; see, also, § 8702), and administered pursuant to statute and regulations promulgated by OPM, by the Office of Federal Employees' Group Life Insurance (OFEGLI), an administrative department within defendant Metropolitan Life Insurance Company (see, generally, 5 CFR 870.101 et seq.) which has been the administering insurance company on behalf of 206 participating companies since the Federal employees' group life insurance program was first authorized by Congress in 1954.

On August 3, 1981, the union representing those who manned the Nation's air traffic control facilities called a strike and President Reagan announced at a press conference that those controllers who failed to report for work within 48 hours would forfeit their jobs and be terminated (17 Weekly Compilation of Presidential Documents # 32; see, also, World Almanac and Book of Facts [1982 ed], p 38). Pursuant thereto, Mr. Reinisch, and all other striking members of his union, were terminated as of August 27, 1981. On September 28, 1981, the FAA mailed to Mr. Reinisch a completed OPM standard form 2821 entitled "Agency Certification of Insurance Status". Item five of that document informed the former employee that his insured status terminated on August 27, 1981, and item six delineated September 28, 1981, as the date of "Notice of Conversion Privilege". Form 2821 further provided, in pertinent part:

"Death within 31 days.--Under certain conditions, life insurance is payable if death occurs within 31 days after an employee's group insurance terminates even though the employee has not applied for conversion.

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"Conversion to an individual policy.--See back of this page.

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"if you are eligible and want to convert to an individual policy, complete the eligibility statement below. Send the original of this form to the Office of Federal Employees' Group Life Insurance, 4 East 24th Street New York, N.Y. 10010. The envelope containing this form must be postmarked within 31 days of the date your group insurance terminated (see item 5 on the other side of this form) or within 15 days of the date of conversion notice (see item 6), whichever basis gives you the most time."

Tragically, on October 7, 1981, Michael Reinisch died as a result of an automobile accident. Thus, his demise occurred on the forty-first day following the termination of his Federal employment, and on the ninth day after the date of the conversion notice found in form 2821. Thereafter Cynthia Reinisch, as the widow of Michael, interposed a claim for death benefits under the policy 2, which claim was denied by the OFEGLI, Metropolitan Life Insurance Company's administrative arm, on December 7, 1981, on the ground that insurance coverage pursuant to the group policy number 17000-G had ceased 31 days following Mr. Reinisch's termination as a Federal employee, and further, as he had not contacted OFEGLI and exercised his privilege to convert, he was not covered by an individual policy of insurance.

Mrs. Reinisch then instituted the instant action. Her complaint alleged three causes of action to recover, inter alia, life insurance proceeds of $57,200 under group policy number 17000-G, punitive damages and counsel fees. 3 , 4 In response to plaintiff's motion for partial summary judgment on her first cause of action for insurance proceeds, defendants cross-moved for summary judgment dismissing the complaint in its entirety. Special Term awarded judgment in plaintiff's favor on her claim for life insurance proceeds under the policy, and in defendants' favor, by dismissing the claims for punitive damages and counsel fees.

Special Term held that insurance coverage on Mr. Reinisch's life did not end 31 days following termination of his Federal employment, but rather, continued during the 15 days mentioned in the "conversion to an individual policy" portion of form 2821 mailed to Mr. Reinisch by the FAA on September 28, 1981. The court reasoned that the Federal legislation and regulations promulgated to afford the right of conversion to an individual policy was demonstrative of an intent that the coverage of insurance be coterminous with the right to convert, so that, by extending the right to convert, coverage was also extended. Special Term further concluded that it was unnecessary to reach the issue of whether principles of Federal pre-emption were applicable, stating:

"Subdivision 3 of section 204 of the Insurance Law of New York requires a group insurer to notify an insured of his right to convert, and the courts have interpreted that statute as meaning that group coverage continues during the conversion period (see Payne v. Equitable Life Assurance Society of the U.S., 14 AD2d 266 [220 N.Y.S.2d 493]; affd 8 [11] NY2d 1006 [229 N.Y.S.2d 752, 183 N.E.2d 763]; DeVille v Continental Assurance Co., 10 AD2d 386 [199 N.Y.S.2d 876], affd 8 NY2d 1080 [207 N.Y.S.2d 453, 170 N.E.2d 457].

"However, the court does not consider it necessary to decide whether subdivision 3 of section 204 of the Insurance Law and the case law interpreting it have been preempted. The court believes that by specifically affording an insured a conversion right pursuant to 5 USC § 8706(a), Congress intended that the insurer notify the insured of his conversion right and that Congress intended that coverage would continue during the conversion period".

We hold that Special Term erred in so concluding, and, accordingly, reverse.

The Federal Employees' Group Life Insurance Act (U.S.Code, tit. 5, § 8701 et seq.) authorizes the OPM to purchase for eligible Federal employees (see, e.g. U.S.Code, tit. 5, § 8701 subd. [a] ) "a policy or policies of group life and accidental death and dismemberment insurance to provide the benefits specified by [the Act]" (U.S.Code, tit. 5, § 8709, subd. [a] ), which policy or policies are held by OPM with the intent that "[t]he functions normally performed by the employer in a group-insurance plan would, under [the Federal employees' group life insurance program], be performed in the Government by the Civil Service Commission [now OPM]" (President's Message, May 19, 1954, 1954 U.S.Code Cong. & Admin.News, vol. 2, p. 3056). As of March, 1982, there were, according to the manager of OFEGLI, approximately 3.68 million Federal civilian employees covered under the program from "the 50 states of the United States, the District of Columbia, possessions and territories of the United States and almost every country in the world". A qualified employee is automatically insured on the date he becomes eligible under the program, and is provided with regular or standard basic life insurance, a proportionate share of the cost being deducted from his salary (U.S.Code, tit. 5, §§ 8702, 8707). Among other things, optional life insurance, such as that held by Mr. Reinisch, may be elected, in which case the employee bears the cost of the premium in full by a deduction from pay (U.S.Code, tit. 5, § 8714a; see, generally, 5 CFR Part 871). OPM is required to furnish each insured employee with a benefit certificate, setting forth various facts, including the benefits to which the insured is entitled and a summary of those policy provisions principally affecting the employee (U.S.Code, tit. 5, § 8703). (There is no contention on plaintiff's part that Mr. Reinisch did not receive such a certificate when he commenced work.) Further, the Act provides that OPM "may prescribe regulations necessary to carry out the purposes of [the Act]" (U.S.Code, tit. 5, § 8716, subd. [a] ). The Federal agencies employing insured employees are responsible for certain functions including certification of the amount of insurance, recordation of beneficiary designations and furnishing conversion notices to insured employees upon termination of employment.

Termination of insurance purchased under the Act is governed by subdivision (a) of section 8706 which states:

"A policy purchased under this chapter shall contain a provision, approved by the Office of Personnel Management to...

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