Van Ostrand v. National Life Assur. Co. of Canada

• Decision Date: 15 May 1975
• Citation: 82 Misc.2d 829,371 N.Y.S.2d 51
• Parties: Mary VAN OSTRAND, Plaintiff, v. The NATIONAL LIFE ASSURANCE COMPANY OF CANADA and First National Bank and Trust Company of Ithaca, Defendants.
• Court: New York Supreme Court

Page 51

371 N.Y.S.2d 51

82 Misc.2d 829

Mary VAN OSTRAND, Plaintiff, v. The NATIONAL LIFE ASSURANCE COMPANY OF CANADA and First National Bank and Trust Company of Ithaca, Defendants.

Supreme Court, Special Term, Tompkins County.

May 15, 1975.

Mazza, Williamson & Clune, Ithaca (Robert J. Clune, Ithaca, of counsel), for plaintiff.

Wiggins, Tsapis, Holmberg & Gersh, Ithaca (Dirk Galbraith, Ithaca, of counsel), for defendants.

RICHARD F. KUHNEN, Justice.

This is a motion by defendants for summary judgment in an action commenced by Mary Van Ostrand against The National Life Assurance Company of Canada and her former employer First National Bank and Trust Company of Ithaca.

While plaintiff was employed by First National, the bank carried a group life insurance policy for its employees. In January of 1972 a new feature of the plan was introduced which permitted employees to purchase insurance on the life of certain of their dependents, including spouses. Plaintiff purchased a policy on her husband's life and paid the premiums by a payroll deduction system administered by her employer.

Before purchasing this policy, plaintiff was issued a booklet by the bank outlining the features and some of the provisions of the group life insurance plan. According to the booklet, upon joining the group plan the employee would receive a certificate of participation describing the group life insurance in detail. The booklet further stated that a group life policy, or master policy, had been issued to the employer bank, and that the rights and privileges of the employer, insured and beneficiaries would be governed by the terms of the master policy.

The booklet also stated that the master policy would supersede and control any and all statements or explanations made elsewhere concerning the group plan.

On January 22, 1972 plaintiff purchased a $5000 policy on the life of her then husband, Lawrence Van Ostrand. At that time she received the promised certificate describing generally the policy benefits. The certificate stated that 'it is for referen purposes only, and does not in itself confer any rights or benefits which are not conferred in the group policy.' The certificate also explained the policy's conversion privileges under which a group policy could be converted to an individual policy if employment was terminated or if the insured dependent otherwise entered an ineligible class of dependent.

On August 18, 1972 plaintiff was divorced from her husband, but she continued to pay premiums on the group life insurance policy by means of the payroll deduction. On December 22 of that year Lawrence Van Ostrand died and the plaintiff shortly thereafter submitted a claim under the policy. Defendant insurance company rejected the claim, however, on the basis of the provisions of the master policy which had been issued to the defendant bank. The insurance company based its rejection on the provisions of the group policy which provided that 'the insurance of the dependent under all coverage for which he is insured shall be discontinued on . . . the date which he ceases to be included within the definition of the term 'dependent'.' The group policy, as modified in May of 1972, defined 'dependent' as 'the spouse of an employee, while not legally divorced or legally separated from the employee.' Accordingly, the insurance company contends that the policy issued to the plaintiff on the life of her former husband on January 22, 1972 terminated on August 18, 1972, the date of her divorce.

At the time she originally contracted with the insurance company and up until her claim was rejected, plaintiff contends that she was unfamiliar with the terms of the group policy respecting termination upon divorce. She also alleges that this information was not specifically included in the booklet originally distributed to her nor was it found in the certificate issued to her at the time she contracted for the policy. In addition, plaintiff did not examine the bank's copy of the master policy which contained the provisions in question until after her husband's death nor had she been informed before his death that a copy of the master policy was available on the premises for her inspection.

Plaintiff was not advised of the effect of her divorce under the policy although some of the bank employees were familiar with her matrimonial difficulties. Specifically, Lorraine Wood, plaintiff's immediate supervisor at the bank, was aware of the fact that plaintiff had obtained a divorce and Mary Slack, a bank employee in charge of administering the group policy, knew that plaintiff was seeking a divorce although she did not learn the date of the divorce until after Mr. Van Ostrand's death.

Plaintiff's complaint sets forth two causes of action. The first cause of action, directed against the defendant insurance company, is based upon plaintiff's right to recover under the insurance contract. This cause of action alleges that the insurance company is either estopped from asserting or has waived the policy conditions upon which liability is now being disclaimed because the documents issued to her did not set forth the pertinent provisions in full; and further because the insurance company represented to her that it would issue a certificate describing the policy terms in detail, but the certificate eventually received by plaintiff did not indicate that the policy on the life of a 'spouse' terminated upon divorce.

A claim of this nature finds little support in our law. It has long been recognized that a master policy constitutes the contract of insurance between the employee and the insurer, and the certificate issued to the employee is merely evidence of the insurance. 31 N.Y.Jur., Insurance, § 1652. Moreover, where, as here, the certificate is expressly made subject to the terms and conditions of the master policy, the employee is bound thereby, and in the case of any conflict or ambiguity, it has been held that the master policy controls. Blue...