Romano v. New England Mut. Life Ins. Co.

• Citation: 178 W.Va. 523,362 S.E.2d 334
• Decision Date: 23 October 1987
• Docket Number: No. 17311,17311
• Court: Supreme Court of West Virginia
• Parties: Paul A. ROMANO, as Executor of the Estate of Melvin J. Romano v. NEW ENGLAND MUTUAL LIFE INSURANCE CO., a Corporation, and Paul G. Young, Trustee for the Association of Community Retailers, Inc.

Page 334

362 S.E.2d 334

178 W.Va. 523

Paul A. ROMANO, as Executor of the Estate of Melvin J. Romano v. NEW ENGLAND MUTUAL LIFE INSURANCE CO., a Corporation, and Paul G. Young, Trustee for the Association of

Community Retailers, Inc.

No. 17311.

Supreme Court of Appeals of

West Virginia.

Oct. 23, 1987.

Syllabus by the Court

1. Group insurance has been defined as the coverage of several individual persons under one comprehensive insurance policy.

2. Ordinarily the general rules which govern all contracts of insurance are held to apply as well to group contracts.

3. Where an insurer provides sales or promotional materials to an insured under a group insurance policy, which the insurer knows or should know will be relied upon by the insured, any conflict between such materials and the master policy will be resolved in favor of the insured.

4. "The essential elements in an action for fraud are: '(1) that the act claimed to be fraudulent was the act of the defendant or induced by him; (2) that it was material and false; that plaintiff relied upon it and was justified under the circumstances in relying upon it; and (3) that he was damaged because he relied upon it.' Horton v. Tyree, 104 W.Va. 238, 242, 139 S.E. 737 (1927)." Syllabus Point 1, Lengyel v. Lint, 167 W.Va. 272, 280 S.E.2d 66 (1981).

5. "A motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify the application of the law." Syllabus Point 3, Aetna Casualty & Surety Co. v. Federal Insurance Co. of New York, 148 W.Va. 160, 133 S.E.2d 770 (1963).

David Romano and James Riley, Clarksburg, for plaintiff.

James E. McNeer, Catherine D. Munster, J. Michael McDonald, Clarksburg, Paul G. Young, Herbert Underwood, Clarksburg, for New England Mut. Life Ins. Co.

MILLER, Justice:

In this appeal from a summary judgment, we consider whether the trial court erred in holding as a matter of law that a condition contained in the master policy of a group insurance plan was binding upon an insured. The master policy was not made available to the insured prior to his death, and the condition in question was inconsistent with promotional materials prepared by the insurer and relied upon by the insured.

I.

Creasey Company is a wholesale food distributor in Clarksburg, West Virginia. In 1977, a local insurance agent, Paul G. Young, began arrangements to provide group life insurance for all interested Creasey employees and customers. He spoke initially with representatives of New England Mutual Life Insurance Company, who informed him that a minimum of 100 participants were required to qualify for group insurance. A nonprofit corporation, Association of Community Retailers, Inc., was immediately chartered to serve as the group policyholder. Mr. Young was appointed as one of the directors of the corporation and as the trustee of the insurance plan. Over the next six to seven months, he actively solicited participants for the group.

Melvin J. Romano was for ten years the sole proprietor of Melvin's Key Market, a Clarksburg area grocery store which regularly purchased foods from Creasey. Mr. Romano expressed an interest in joining the group and, on October 23, 1977, signed an enrollment card. ¹ The card was retained by Mr. Young and forwarded to New England after the required 100 participants had been obtained. There was no further application requested by New England from Mr. Romano or any of the other participants in the plan. Coverage under the plan was in an amount equal to Mr. Romano's annual earnings, or $25,000.

In late 1977 or early 1978, Mr. Romano apparently ended business operations at Melvin's Key Market. He sold all of the store's inventory of merchandise, but retained several large pieces of refrigeration equipment. After the store was closed, Mr. Romano developed plans to open a custom meat shop in Clarksburg. He also worked directly for Creasey as a sales consultant, though the record does not fully disclose the nature of his employment relationship.

On June 1, 1978, correspondence was sent to Mr. Romano by Mr. Young which reported that the start-up date for the plan was July 1, 1978. It also announced that New England would charge participants in the plan a "quinquennial" premium rate which was higher than the rate previously discussed. A one page summary was enclosed which included the new monthly premium to be charged as well as a list of enrolled employees. Mr. Romano was the only enrolled employee at Melvin's Key Market. A separate page provided the complete rate schedule. Mr. Young's letter directed Mr. Romano to respond promptly if he objected to the revised rate. If a response was not received within a few days, it would be assumed the rate was satisfactory. There is no record of any response by Mr. Romano.

Also included with the letter was another typewritten enclosure prepared by New England which summarized the eligibility requirements and coverages provided under the plan. The enclosure read in part:

"WHO IS ELIGIBLE:

"All employees who work 30 hours or more a week are covered under the program.

"EFFECTIVE DATE:

"The effective date is July 1, 1978.

* * *

* * *

"GUARANTEED ISSUE:

"Under this policy no medical questions of any kind are asked. The policy is guaranteed issue without any medical evidence."

There was no mention of any policy conditions or of additional requirements for eligibility.

On June 26, 1978, Mr. Romano was hospitalized for a myocardial infarction. He died on July 2, 1978, one day after the master policy became effective. He was not provided with a copy of the master policy or a certificate of insurance prior to his death.

Within a week, Mr. Young was orally notified of Mr. Romano's death. On July 7, 1978, Mr. Young spoke by telephone with a New England claims representative to inquire what steps should be taken regarding the July premium statement. According to his deposition, he reported that Mr. Romano had been hospitalized in the latter part of June, 1978, and died on July 2, 1978, without having returned to his employment. He was advised by the representative that coverage was unavailable for Mr. Romano as he was not "actively at work" on July 1, 1978, a condition precedent to coverage under the master policy. ² As a consequence, Mr. Young was instructed to withhold the statement for Mr. Romano's monthly premium. Later in the day, he conferred with Mr. Romano's son, the plaintiff herein, who had been appointed executor of his father's estate. Mr. Young advised the plaintiff of New England's denial of coverage under the group policy and explained to him the actively-at-work requirement.

The plaintiff, during his deposition, testified that Mr. Young told him simply that the New England policy was not in effect and did not mention the actively-at-work condition. His belief, based upon the conversation, was that the group plan had not yet become operative on the day Mr. Romano died. He therefore did not pursue the matter further.

Late in 1981, the plaintiff discovered among Mr. Romano's papers the June 1, 1978 letter and the materials provided by Mr. Young. A proof of loss was promptly prepared by the plaintiff and provided to New England, and the claim was denied by letter of October 5, 1982. The basis for the denial was a determination by New England that Mr. Romano was not actively at work on July 1, 1978, and was therefore ineligible for policy coverage.

Suit was brought in the Circuit Court of Harrison County in December, 1982, seeking compensatory and punitive damages. The complaint alleged that New England had breached its contract of insurance by refusing to pay the full amount of the policy, and had committed unfair claim settlement practices in violation of W.Va.Code, 33-11-4(9). ³ It was further alleged that both New England and Mr. Young had "intentionally and wilfully conceal[ed]" information that the policy had become effective on July 1, 1978, and that benefits were payable thereunder. The defendants asserted various defenses arising under the policy, including: (1) that Mr. Romano was not actively at work on July 1, 1978, a condition precedent to coverage; (2) that proof of loss was not provided to New England within 90 days of the loss; ⁴ and, (3) that suit was not brought within 39 months of the loss. ⁵

After limited discovery, both defendants moved for summary judgment. By order of November 17, 1983, the circuit court granted the motion on behalf of Mr. Young and held that he "breached no alleged duty to the plaintiff or plaintiff's decedent, ... with reference to the group life insurance policy in question." An order granting New England's motion was entered on December 3, 1985, but the grounds upon which the court relied were not stated. This appeal followed.

II.

A.

Our principal inquiry in this case is whether Mr. Romano was covered as an insured under New England's group plan. We observe at the outset that two key issues appear to be undisputed: (1) that there was a valid contract of insurance between New England, as insurer, and Association of Community Retailers, Inc., as policyholder; and (2) that Mr. Romano had performed all acts necessary to be enrolled as an insured under the policy. New England contends, however, that Mr. Romano failed to satisfy a condition for coverage under the master policy--he was not actively at work on the effective date of the policy and did not return to active work prior to his death. It, therefore, urges us to conclude that while Mr. Romano was properly enrolled in the plan, he was rendered ineligible for coverage and benefits are not payable.

The plaintiff, in response, does not directly attack the master policy's requirement that an insured must be actively at work to qualify for coverage. ⁶ Rather, he contends that the actively-at-work condition is inapplicable, or more properly that the insurer is estopped to invoke...