Wood v. New York Life Ins. Co.

• Decision Date: 04 December 1985
• Docket Number: No. 42341,42341
• Citation: 336 S.E.2d 806,255 Ga. 300
• Parties: WOOD v. NEW YORK LIFE INSURANCE CO. et al.
• Court: Georgia Supreme Court

Page 806

336 S.E.2d 806

255 Ga. 300

WOOD v. NEW YORK LIFE INSURANCE CO. et al.

No. 42341.

Supreme Court of Georgia.

Dec. 4, 1985.

Reconsideration Denied Dec. 19, 1985.

Richard P. Decker, Robert A. Moss, Decker, Cooper & Hallman, Atlanta, Ross J. Wood, et al.

H. Sanders Carter, Jr., Thomas E. Magill, Carter, Ansley, Smith & McLendon, Douglas N. Campbell, Laura S. Conrad, Mitchell, Loggins, Campbell & Elsberry, Atlanta, New York Life Ins. Co., et al.

BELL, Justice.

This case comes before us upon questions certified by the United States Court of Appeals, 758 F.2d 1459, for the Eleventh Circuit pursuant to Rule 36 of the Supreme Court of Georgia. See OCGA § 15-2-9. The following statement of facts and certified questions were submitted to us by the circuit court.

Statement of Facts

"On January 13, 1982, Kristofer Wood died at the age of twenty-two of respiratory failure resulting from his lifelong affliction with muscular dystrophy. Kristofer was first diagnosed as having muscular dystrophy around 1966 when he was six years old. In 1969 his father, Ross Wood, began taking out insurance on Kristofer's life augmenting the coverage with increasing frequency during the five years immediately preceding Kristofer's death. At Kristofer's death, his father had accumulated policies from fifteen different insurance companies insuring Kristofer's life in excess of $500,000.00. All the policy applications contained specific questions regarding long-term illnesses and treatment, however, Ross Wood never disclosed that Kristofer suffered from muscular dystrophy. These three cases arose after Ross Wood attempted to recover on the policies issued by New York Life, Connecticut General Life and Delaware American International Life. [Fn. omitted.] In all three cases, following cross-motions for summary judgment, the district court granted summary judgment in favor of the insurance companies.

"The three cases differ somewhat factually, however, they share many common elements and their resolutions are dependent upon the two questions certified below. In all three cases Ross Wood signed Kristofer's name to the various applications for insurance. He asserts that he did so with Kristofer's consent, an assertion accepted as fact for summary judgment purposes. Section 33-24-6(a) of the Georgia Code Annotated requires that an insured either sign the application for insurance or consent in writing to its issuance. [Fn. omitted.] The insurance companies assert that since Kristofer did not sign the application or consent to them in writing, they are void ab initio."

"Ross Wood contends that § 33-24-6(a) is not applicable in these cases because the policies involved are 'contract[s] of group life insurance' and thus excepted from the statute's requirements. Wood argues that several items in the record support this contention. First, the certificates of insurance issued by New York Life and Connecticut General state unequivocally on their faces that they are group policies. Second, an undated letter from the Administrator of the Connecticut General Group Life Plan notified Kristofer that he could increase his group coverage by signing and returning the letter to Connecticut General. Last, Wood points out that in her deposition Ms. Palma Cronk, who is a consultant for New York Life, responded affirmatively to the following question--'I take it then that it was a group insurance program as opposed to some other kind of insurance?'

"The insurance companies acknowledge the foregoing, however, they contend that the policies involved here are not the type of 'true group' policies which are intended to be excepted from the provisions of § 33-24-6(a). To support their contention they point out that the purpose of the requirement that an insured sign the application or consent in writing to its issuance is to protect the insured. The rule is designed to keep an individual from unknowingly becoming worth more dead than alive to a potential beneficiary. Group policies are excepted under § 33-24-6(a) because under a 'true group' policy the party who takes out the insurance cannot be the beneficiary. See [OCGA] § 33-27-1 (Supp.1984). The insurance companies argue that since the party taking out the insurance here, Ross Wood, could have been and was in fact the named beneficiary, the group policy exception should not be applicable. They assert that any other interpretation prevents the statute from accomplishing its goal--protection of the insured. After examining the certificates in question and analyzing the applicable Georgia law, the district court agreed with the insurance companies and concluded that the policies were 'franchise' rather than 'true group' policies and therefore held that § 33-24-6(a) was applicable. Since Kristofer had not signed the applications or consented to their issuance in writing, the court held that all the contracts were void ab initio.

"Wood further contends that even if § 33-24-6(a) does apply to the policies, the insurance companies are barred from raising the defense that Kristofer failed to sign the applications or consent to their issuance in writing because each of the policies contained an incontestability clause, as mandated by [OCGA] § 33-27-3(a)(2), [fn. omitted], which imposed a two year time limit for raising policy-validity defenses. All three of the insurance companies issued their initial policies on Kristofer's life more than two years prior to his death. New York Life issued its initial policies on October 1, 1978, and March 3, 1979, Connecticut General issued its initial policy on November 1, 1978, and Delaware American issued its initial policy on July 1, 1979. The coverage under each of the policies was raised and new certificates of insurance were issued at least once within the two years immediately preceding Kristofer's death. New York Life raised its coverage and issued new certificates for the final time on March 25, 1981 and April 28, 1981. Connecticut General raised its coverage and issued a new certificate for the final time on February 23, 1981. [Fn. omitted.] Delaware American raised its coverage and issued its final certificate of insurance on September 1, 1981. Wood contends that since the initial policies were all issued more than two years prior to Kristofer's death, the insurance companies are now barred by the incontestability clauses from raising the void ab initio defense. The insurance companies contend that the incontestability clauses are inapplicable since the policies were void ab initio and thus never in effect. In the alternative, they contend that the effective date of each certificate of insurance is its date of issuance and that since all the final certificates were issued within two years of Kristofer's death, the incontestability clauses do not bar their present claims. The district court again agreed with the insurance companies and concluded that the incontestability clauses were not applicable since the contracts were void ab initio."

Certified Questions

1. "Whether the policies issued by New York Life Insurance Company, Connecticut General Life Insurance Company and Delaware American International Life Insurance Company on the life of Kristofer L. Wood are 'contract[s] of group life insurance' within the meaning of [OCGA] § 33-24-6(a) and thus excepted from the requirement that the insured either sign the application for insurance or consent in writing to its issuance?"

2. "Whether the two year time limit imposed by the policies' incontestability clauses in compliance with [OCGA] § 33-27-3(a)(2) bars the insurance companies from now raising the defense that Kristofer neither signed the applications for insurance nor consented in writing to their issuance?"

1. Before answering the first certified question regarding OCGA § 33-24-6(a), ¹ we undertake to examine the arrangements established to obtain insurance from the insurance companies. For our purposes, an examination of one such arrangement will suffice.

On June 25, 1964, New York Life issued Group Policy No. G-9400 to the Trustee of Engineering Associations Insurance Trust (hereinafter the Trust), as policyholder. By virtue of the issuance of the group policy, the Trust granted to New York Life the right to offer members of certain organizations participating in the trust the opportunity to apply for life insurance coverage. Such organizations included the American Academy of Political and Social Science and the Operations Research Society of America. All applicants were required to submit evidence of insurability satisfactory to New York Life, and all such applications were considered by New York Life and accepted or rejected on an individual basis in accordance with company underwriting standards. After approving an applicant, New York Life would then issue the applicant a certificate of insurance in an agreed upon amount.

Having given this background information we turn to the question of whether the policies issued by the insurance companies fall with the purview of OCGA § 33-24-6(a), so as to be subject to the requirement that the insured sign the application for insurance or consent in writing to its issuance. In the Connecticut General case the district court, Chief Judge Charles A. Moye, Jr., thoroughly reviewed the issue and concluded that the policy, for purposes of OCGA § 33-34-6(a), was not a group policy and that it was therefore subject to the requirements of OCGA § 33-24-6(a). In the New York Life and Delaware American cases, it relied on its reasoning in the Connecticut General case to reach the same result. As we are in complete agreement with the district court's treatment of this issue, we quote in relevant part from its order in the Connecticut General case:

"A careful review of the public policy considerations which underlie the statute [OCGA § 33-24-6(a) ] and of the nature of the Connecticut General coverage leads to the conclusion that the statute is applicable. The...