Turner v. Safeco Life Ins. Co., 93-5039

• Decision Date: 18 February 1994
• Docket Number: No. 93-5039,93-5039
• Citation: 17 F.3d 141
• Parties: 17 Employee Benefits Cas. 2452 Doris E. TURNER, Plaintiff-Appellee, v. SAFECO LIFE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 141

17 F.3d 141

17 Employee Benefits Cas. 2452

Doris E. TURNER, Plaintiff-Appellee, v. SAFECO LIFE INSURANCE COMPANY, Defendant-Appellant.

No. 93-5039.

United States Court of Appeals Sixth Circuit.

Submitted Jan. 19, 1994.

Decided Feb. 18, 1994.

Robert E. Barnett, III, Kenneth E. Dunn (briefed), Barnett, Shanks & Dunn, Louisville, KY, for plaintiff-appellee.

Samuel G. Bridge, Jr. (briefed), Michelle Turner, Wyatt, Tarrant & Combs, Louisville, KY, for defendant-appellant.

Before: KENNEDY and NELSON, Circuit Judges, and CONTIE, Senior Circuit Judge.

DAVID A. NELSON, Circuit Judge.

This is an action brought in federal court pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Secs. 1001 et seq., for recovery of a death benefit under a group life insurance policy. A trucking firm of which the decedent was a partner purchased the policy from the defendant insurance company after the decedent had stopped working because of what proved to be terminal cancer. The decedent was not actively at work when the policy became effective, and he did not return to work thereafter.

Under the language of the policy, as the insurance company interpreted it, the decedent never became eligible for coverage. Disagreeing with the company's interpretation, the district court entered summary judgment in favor of the claimant. Upon de novo review, we conclude that the decedent did not meet all of the requirements for eligibility; we shall therefore reverse the judgment for the plaintiff and direct that judgment be entered for the defendant.

I

The plaintiff, Doris Turner, was the wife of Ervin Lee Turner. Mr. Turner and two of his brothers were partners in a trucking business operated under the name Turner Expediting. Mr. Turner worked at the business from 1965, when the partnership was formed, until March of 1987. He went on sick leave at that time because of lung cancer, and he died on December 13, 1989. From March of 1987 until his death Mr. Turner performed no work at the firm.

On January 29, 1988, about ten months after the commencement of Mr. Turner's sick leave, the partnership applied to defendant Safeco Life Insurance Company for a group policy insuring the lives of its full-time employees and retirees. Eligible partners (treated as "employees" for this purpose) were to have coverage in the amount of $50,000. Coverage for all other eligible employees and for retirees was to be in the amount of $10,000.

Under the heading "ELIGIBILITY" the insurance application form contained these words: "All active regular full time employees of the policyholder working a minimum of --- hours per week (must be at least 20.)" As completed by the partnership, the blank was filled in with a handwritten number "30." The eligibility of active regular full-time employees was thus to be subject to their working a minimum of 30 hours per week, according to the application. It appears that more than 50 people were eligible for coverage.

The insurance company accepted the application and issued a group policy effective February 1, 1988. The policyholder was identified as "Kent J., Kenneth E., Ervin L. Turner; dba Turner Expediting." The premiums were "self-administered" by the partnership, and premiums were paid with respect to all three partners.

A "SCHEDULE OF INSURANCE" incorporated in the policy listed three "Eligible Classes of Employees:" (1) partners, (2) all other active employees (a phrase changed effective June 1, 1988, to "all other eligible employees"), and (3) retirees. ¹ The schedule of insurance provided that membership in one or the other of the first two eligible classes extended to "[a]ll regular full time employees of the policyholder working a minimum of 30 hours each week...."

The same minimum number of working hours per week appeared in the amended schedule of insurance that became effective on June 1, 1988. Under the heading "Eligible Classes of Employees," the amended schedule referred to "All regular full time employees of the policyholder working a minimum of 30 hours each week." The amended schedule went on to classify such employees as "Partners" (Class 1) and "All Other Eligible Employees" (Class 2).

A section of the policy entitled "EMPLOYEE PROVISIONS" specified, in its first sentence, that "[o]nly the employees of the classes shown in the Schedule are eligible." The next sentence said this: "An employee becomes eligible for employee insurance upon the completion of the service waiting period." (For eligible non-union employees, the schedule of insurance provided, the "service waiting period" was the first of the month following the date of employment.)

Elsewhere in the employee provisions section of the policy, under the caption "Date Employee Insurance Becomes Effective," the following language appeared:

"Insurance will become effective on the latest of the following dates if the employee is actively at work on that date:

(a) the date the employee becomes eligible;

(b) the date the employee reapplies for insurance which ended; or

(c) the date SAFECO approves the proof of good health, if required.

If the employee is not actively at work on the latest date specified above, insurance will become effective on the date the employee returns to active work."

The phrase "actively at work," according to the "DEFINITIONS" section of the policy, meant that the employee

"(a) normally does not work at home;

(b) reports for work on the date in question at the employee's usual place of work; and

(c) upon reporting, can perform all usual and customary duties on a regular basis." ²

Under the caption "Continuance During Absence from Full-Time Work," the employee provisions section of the policy said that in the event of absence because of sickness or injury, employment would be deemed to continue indefinitely or until the policyholder terminated the employment.

After her husband's death, Mrs. Turner filed a claim for insurance benefits in the amount of $50,000. The insurance company denied the claim, explaining that the policy had not become effective as to Mr. Turner because he had not been actively at work on or after the effective date of the policy. ³ This lawsuit followed.

Having stipulated the facts, the parties filed cross-motions for summary judgment. The district court granted Mrs. Turner's motion and denied the insurance company's. The court reasoned that Mr. Turner had been actively at work upon completion of his service waiting period, shortly after the partnership was started in 1965, and he thus satisfied the eligibility requirements while actively working between 1965 and 1987. It was the court's belief that if such a person was still on the payroll when the policy became effective, even though absent because of sickness, the person remained eligible whether or not he ever returned to work.

The insurance company moved to alter or amend the judgment, inviting the court's attention to the contractual language on eligible classes of employees. The court denied the motion and made this observation on the company's argument:

"Contrary to Safeco's assertion, the policy does not define the Eligible Classes of Employees as those who are 'actively at work.' Rather, the provision limits the eligible classes to those who are 'regular full time employees.' The court's opinion is not in conflict with the provision."

The company then perfected a timely appeal.

II

It is true that the words "actively at work" do not appear in the "Eligible Classes of Employees" section of the schedule of insurance. It is not true, however, that the eligible classes include all regular full time employees regardless of whether such employees are working. As we have seen, the phrase "regular full time employees" is qualified by the words "working a minimum of 30 hours each week."

The verb is in the present tense. The insurance schedule, as we read it, speaks of regular full time employees who are working a minimum of 30 hours a week now--not employees who worked 30 hours a week before the policy became effective. And the policy, as we have noted, provides in language of absolute clarity that "[o]nly the employees of the classes shown in the Schedule are eligible." An employee not a member of a scheduled class is simply not eligible for coverage.

Membership in a scheduled class does not necessarily mean that an existing employee is covered as soon as the policy becomes effective, nor does it mean that a new employee is covered as soon as he starts working a minimum of 30 hours per week. An existing employee who is a member of a scheduled class-- i.e., an employee who is working at least the minimum number of hours per week--is covered from and after the effective date of the policy, as Safeco concedes, if he has already completed his service waiting period. An employee who starts after the...