De Ville v. Continental Assur. Co.

• Decision Date: 27 April 1960
• Citation: 10 A.D.2d 386,199 N.Y.S.2d 876
• Parties: Margaret E. DE VILLE, Administratrix etc. of Ward H. DeVille, deceased, and Margaret E. DeVille, Individually, Appellant, v. CONTINENTAL ASSURANCE COMPANY, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 876

199 N.Y.S.2d 876

10 A.D.2d 386

Margaret E. DE VILLE, Administratrix etc. of Ward H DeVille, deceased, and Margaret E. DeVille Individually, Appellant, v. CONTINENTAL ASSURANCE COMPANY, Respondent.

Supreme Court, Appellate Division, Fourth Department.

April 27, 1960.

Rossi, DiGaetano & Dorsey, Rochester (John M. Regan, Rochester, of counsel), for appellant.

Nixon, Hargrave, Devans & Dey, Rochester (William B. Lee, Jr., Rochester, of counsel), for respondent.

Before BASTOW, J. P., and GOLDMAN, HALPERN, McCLUSKY and HENRY, JJ.

BASTOW, Justice Presiding.

Both parties to this action concede that there exists no triable issue but each demands summary judgment. The facts are simple. Plaintiff's intestate (hereinafter the 'insured') was a member of a carpenters' union from 1957 to 1959. On June 1, 1957 he became insured and was issued a certificate under a group plan entered into between defendant and the trustees of Mohawk Valley District Council Carpenters Welfare Fund.

The insured died on May 14, 1959. It is alleged in the amended answer and here accepted by plaintiff that the eligibility of insured for coverage under the group plan terminated on April 1, 1959. The policy, however, provides for certain conversion privileges and additional coverage during the period thereof. Among other things, it is provided that if insurance under the plan ceases because of termination of employment or membership in an eligible class the insured is entitled to have issued, without evidence of insurability, an individual policy, other than term insurance, provided written application is made and the first premium paid within 31 days after such termination. It is here conceded that no such application was ever made by or on behalf of the insured.

There is a further policy provision that if the insured dies during the period within which he would be entitled to have an individual policy issued and before it becomes effective, the amount to which he would be entitled under the individual policy shall be payable, whether or not application has been made for the individual policy or the first premium paid. This means, as applied to the facts herein, that if insured had died on or before May 2, 1959--31 days after termination of eligibility for coverage--his beneficiary would have been entitled to payment of the death benefit of $1,500. These provisions giving an insured the privilege to convert to an individual policy in the event of termination of insurance under the group plan and for coverage during the conversion period are standard provisions required to be incorporated in a group life insurance policy issued in this State to the trustees of a fund established by a labor union (Insurance Law, § 161, subd. 1, par. (e); § 204, subd. 1, par. (d). In view of the problem here presented it may be helpful to trace the legislative history of these standard provisions. Prior to the general revision of the Insurance Law (L.1939, ch. 882) the provision giving a conversion privilege only was in section 101-b of the law. The origin thereof was chapter 192 of the Laws of 1918, which mandated a provision giving the right of conversion upon termination of employment, and without evidence of insurability, upon making application to the company within 31 days after termination of employment. It should be emphasized that during these years from 1918 to 1939 there was no requirement that the policy contain provisions (1) giving the insured coverage during the conversion privilege period ro (2) requiring that the insured be given notice of the conversion privilege.

The law seems to be well established that coverage under a group plan is not automatically extended following termination of employment during the conversion privilege period in the absence of a provision giving such coverage in policy or statute (Aetna Life Ins. Co. v. Catchings, 5 Cir., 75 F.2d 628; Missouri State Life Ins. Co. v. Hinkle, 18 Tenn.App. 228, 74 S.W.2d 1082; Aetna Life Ins. Co. v. Carroll, 188 Ark. 154, 65 S.W.2d 25; Duval v. Metropolitan Life Ins. Co., 82 N.H. 543, 136 A. 400, 50 A.L.R. 1276; Fearon v. Metropolitan Life Ins. Co., 138 Misc. 710, 246 N.Y.S. 701). While these decisions undoubtedly state the logical view considerable litigation has arisen on the issue as to whether employment had been terminated and doubts have been expressed as to the wisdom from a nonlegal view of terminating coverage during the conversion privilege period. (See Crawford and Harlan, Group Insurance, §§ 32-39.)

When there was a general revision of our Insurance Law in 1939 (L.1939, ch. 882) section 101-b was renumbered section 161 and contained standard provisions which were mandated to be included in certain specified group life policies unless more favorable provisions were contained therein. Paragraph (e) of subdivision 1 of this section required that as to certain insurable groups the policy should contain the conversion privilege period of 31 days and a further provision 'that upon the death of any such employee or member during such thirty-one day period and before any such individual policy has become effective, the amount of insurance for which such employee or member was entitled to make application shall be payable as a death benefit by the insurer.' This privilege and coverage were extended to those insured under group policies issued to employees, labor unions, organized associations of civil service employees and units of state police. There were others insurable under such group policies to whom this provision did not apply. L.1939, ch. 882, § 204, subd. 1, par. (c).

After this amendment there still remained a line of authorities holding that the insured was legally obligated to know his rights in the matter of applying for an individual policy, so the insurer was not required to give him notice of the conversion privilege or of the termination of its liability. (Cf. Chrosniak v. Metropolitan Life Ins. Co., 121 Misc. 453, 201 N.Y.S. 211, affirmed 209 App.Div. 846, 204 N.Y.S. 898; Magee v. Equitable Life Assur. Soc., 62 N.D. 614, 244 N.W. 518, 85 A.L.R. 1457; Thull v. Equitable Life Assur. Soc., 40 Ohio App. 486, 178 N.E. 850.)

In 1940 the Legislature undertook to partially remedy this situation. Section 204 of the Insurance Law then defined group life insurance and in paragraphs (a) to (e), inclusive, of subdivision 1 authorized issuance of group policies to (a) an employer; (b) a labor union; (c) a creditor or vendor; (d) an association of civil service employees and (e) units of state troopers. By chapter 208 of the Laws of 1940 section 204 was amended by adding thereto subdivision 3. This provided that in the event a group policy was issued to a group described in paragraph (a) of subdivision 1 (50 or more employees of the same employer) containing a conversion privilege 'such certificate-holder shall be notified of such privilege and its duration within fifteen days after the happening of the event, provided that if such notice be given more than fifteen days, but less than ninety days after the happening of such event, the time allowed for the exercise of such privilege of conversion shall be extended for fifteen days after the giving of such notice. If such notice be not given within ninety days after the happening of the event, the time allowed for the exercise of such conversion privilege shall expire at the end of such ninety days.' The enactment went on to provide that the notice might be given by the employer or the insured and stated the requirements in each event.

It appears from the bill jacket that when this proposed legislation was before the Governor communications in regard thereto were sent to him by the respective chairmen of the Insurance Committees of the Senate and Assembly; the Department of Insurance and others. The Counsel to the Governor in his memorandum stated, among other things, that the bill 'requires a 15 day notice to be given to the employee of his conversion privilege in the event that he leaves his employer. If no such notice is given, then the policy is continued for a period of 90...