Woodson v. Manhattan Life Ins. Co. of New York, N.Y., 87-SC-247-DG

• Decision Date: 17 December 1987
• Docket Number: No. 87-SC-247-DG,87-SC-247-DG
• Citation: 743 S.W.2d 835
• Parties: Marshall B. WOODSON, Jr., Executor of the Estate of Kenneth C. Davis, Deceased, Movant, v. MANHATTAN LIFE INSURANCE COMPANY OF NEW YORK, N.Y., Respondent.
• Court: United States State Supreme Court — District of Kentucky

Page 835

743 S.W.2d 835

Marshall B. WOODSON, Jr., Executor of the Estate of Kenneth

C. Davis, Deceased, Movant, v. MANHATTAN LIFE INSURANCE COMPANY OF NEW YORK, N.Y., Respondent.

No. 87-SC-247-DG.

Supreme Court of Kentucky.

Dec. 17, 1987.

Weldon Shouse, Larry C. Deener, Landrum, Shouse & Patterson, Lexington, W.R. Patterson, Jr., Landrum, Shouse & Patterson, Louisville, for movant.

J. Peter Cassidy, Jr., Stoll, Keenon & Park, Lexington, for respondent.

LEIBSON, Justice.

The movant, the Estate of Kenneth C. Davis, claims that he was a covered individual under the terms of a group life insurance policy issued to Kentucky Finance Company by the respondent, Manhattan Life Insurance Company of New York, at the time Davis was killed by his estranged wife on May 19, 1982. The policy coverage for Davis was $500,000, with $1,000,000 for double indemnity.

Prior to February 8, 1982, and for approximately 22 years, Davis had been employed by Kentucky Finance Company, a lending institution with its principal offices in Lexington, Kentucky. After various promotions he achieved the position of General Counsel and Senior Vice-President.

On February 8, 1982, he was called before the Executive Committee of Kentucky Finance Company and told that he must resign. The sole issue in this case is whether Davis continued to be covered under his group life insurance policy thereafter and at the time he was killed three months later. This in turn depends upon evaluating his employment status following his meeting with the Executive Committee on February 8, 1982, so the content, circumstances and results of that meeting were central to the contested issue. Unfortunately, there were no minutes. Davis has been silenced by death. And the others present were hostile witnesses, officials of Kentucky Finance Company which was a defendant on the same side of the issue as Manhattan Life, only released by a directed verdict.

Davis' Estate claims that when he was killed he was on a six months salary continuation leave of absence, albeit a terminal leave, during which he remained a covered employee. This claim is supported by the contents of a resignation letter of February 26 prepared by the Executive Committee, which Davis signed, in which he resigned from "any and all positions as officer and director," but not from his employment or his other duties as an employee. Further, Robert Curtin, the Secretary/Treasurer for Kentucky Finance, a member of the Executive Committee and the person in charge of the executive payroll, used the term "severance leave" at one point in giving testimony to describe Davis' status. Specifically, Curtin testified that Davis was on a "severance leave" with pay for six months, which would be to August 8. ¹ Curtin acknowledged that the company was committed to continuing to pay Davis' regular salary during this six months' period as with any other regular salaried employee, including deductions for taxes, savings plans, and life insurance premiums, etc. ² The monthly premium due Manhattan Life was being remitted to and accepted by the Company at the time of Davis death. This monthly salary was then discontinued after Davis' death, which is consistent with his status as an employee on leave, but which would be inconsistent if Davis was promised a fixed sum as a severance payment.

The respondent, Manhattan Life Insurance Company, claims that Davis lost his status as a covered individual at this February 8 meeting in which the Executive Committee demanded his resignation; that termination of his employment was complete then and there; and that at the time he was killed on May 19, despite continuation of life insurance premiums paid and received, Davis had no coverage.

Davis' coverage included the option to convert from a group policy to an individual policy, but he and his company were continuing the group policy arrangement rather than undertaking this option. It was obvious that both Davis and the responsible company official thought that Davis was still a covered employee, at least until after he was killed.

Section 6 of the group policy, entitled "Termination of Individual's Insurance" enumerates four events upon which the insurance "shall automatically cease." The particular event applicable to this case is subsection (d), under which insurance ceases "on the date of termination of employment with the Policyholder." Subsection (d) then states:

"Termination of employment, for purpose of life insurance hereunder, means cessation of active work for the Policyholder as provided in Section 1 hereof entitled "Definitions", except that

....

(ii) in case of the absence of an Individual from active work because of leave of absence or temporary lay-off, his employment may, for the purposes of his life insurance hereunder, be deemed to continue until terminated by the Policyholder but in no case beyond the expiration of a period of six months following the date such leave of absence or lay-off commenced."

The key language is that there is an exception to "cessation of active work" as fixing the date of termination of employment "if the individual is absent from active work because of leave of absence or temporary lay-off." (Emphasis added.) The respondent argues vehemently that both "leave of absence" and "lay-off" must be only temporary to qualify under this exception, that it does not apply to a terminal leave. But "leave" is not qualified by the word "temporary" as is the case with "lay-off." The policy language makes no distinction in the type of leave, nor does it exclude terminal leave.

The trial court submitted the case to the jury under an instruction requiring the jury to decide whether Davis' employment was "terminated on February 8, 1982," or whether he "was then granted a leave of absence as an employee of Kentucky Finance which was approved by the Executive Committee thereof and was on such leave of absence at the time of his death." The jury decided that the decedent's status was leave of absence, and found for the claimant. Manhattan Life appealed. The Court of Appeals reversed. The Court of Appeals decided that "[t]he clause providing the exceptions to automatic discontinuance of benefits because of leave of absence or temporary lay-off only becomes operative when the 'absence' is for a reason other than permanent termination." There is no such restrictive language so limiting the term "leave of absence" in the policy. Therefore, we reverse the Court of Appeals and affirm the trial court.

This is a case where there is sharp disagreement as to the facts, and even more disagreement as to what inferences from the facts are appropriate in deciding Davis' status at the time he was killed. Manhattan Life insists that the evidence is conclusive that Davis was terminated on February 8, pointing to the trial testimony of various Kentucky Finance Company officials to prove this conclusion. But Davis points to the evidence that we have referred to earlier in this Opinion as sufficient to prove his status as an employee who had been placed in a terminal leave status for six months. On appeal from a verdict for the Estate, the only question is, was there substantial evidence to support the verdict? Conflict in the reasonable inferences to be drawn from the testimony, as well as conflicts in the testimony itself, justify submitting the case to the jury. Murphy v. Homans, 286 Ky. 191, 150 S.W.2d 14 (1941). Also, Penn Central Transportation Co. v. Skaggs, Ky., 489 S.W.2d 26 (1973) and Ohio Cas. Ins. Co. v. Commonwealth, Dept. of Hwys., Ky., 479 S.W.2d 603 (1972). The role of the appellate court when deciding issues of this sort is limited to viewing the evidence from a standpoint favorable to the prevailing party. Lever Bros. Co. v. Stapleton, 313 Ky. 837, 233 S.W.2d 1002 (1950).

Manhattan Life points us to Section 1, the "Definitions" section of its policy. This defines "cessation of active work" as meaning "discontinuance of the Individual's performing all of the usual duties of his employment on a permanent full-time basis at the Member's regular place of business." As quoted above, in Section 6 termination of employment occurs upon "cessation of active work for the Policyholder ... except that ... in case of the absence of an Individual from active work because of leave of absence ... his employment may, for the purposes of his life insurance hereunder, be deemed to continue " for "a period" not to exceed "six months following the date such leave of absence ... commenced." The emphasized phrases, "except that" and "deemed to continue," establish that there is an exception while on leave and that the employee need not be performing any duties of his employment to retain coverage while in this status.

The principal thrust of the Manhattan Life's complaint that it was entitled to a directed verdict is that the policy must be read in its entirety to determine its meaning. The problem is that, absent language excluding terminal leave from the leave of absence exception, when read as a whole, the meaning of the policy urged by Manhattan Life is no more reasonable than the meaning urged by...