Hanaieff v. Equitable Life Assurance Society of the United States

Opinion by

Mr. Chief Justice Horace Stern,

Defendant Insurance Company issued to the United States Steel Corporation a group life insurance policy insuring its employes, and those of its subsidiaries, who elected to be insured thereunder.

Nikita Prewalla was an employe of Carnegie-Illinois Steel Company, a subsidiary of the United States Steel Corporation, and there was issued to him an individual certificate under the policy, the amount of Ms coverage being |2,500 in October 1946. The beneficiary named was the plaintiff, Dora P. Hanaieff. On October 19, 1946 Prewalla became ill, was totally and continuously disabled thereafter, and never again resumed work; he died on January 4, 1948.

Under the practice and rules of the employer an employe’s monthly contribution toward the insurance premium was deducted from the first pay each month for the premium due the following month; accordingly, the premium due for November, 1946 had been deducted from the first pay due Prewalla in October, 1946. Under these same rules, when an employe had no wages due on the first day from which his contribution could be deducted, he was required, if he wished to continue his insurance coverage, to make his premium contribution in cash before the end of the month for which a premium had already been paid. On November 26, 1946 Prewalla sent a relative, one Evans, to the plant with instructions to pay the premiums due for the months of December, 1946, January and February, 1947. Evans was told by the clerk that only one month’s premium could be accepted, so he paid for the month of December, 1946. On December 15 he returned for the purpose of paying the following month’s premium, but he was then informed that, because of Prewalla’s absence from his active employment for a period in excess of 30 days, it would be necessary that a medical statement in regard to his disability be presented; such a certificate was never furnished. The Carnegie-Illinois Steel Company noted on its records that Prewalla’s insurance was terminated as of December 31, 1946 for non-payment of premium contribution, and also that his employment was terminated as of January 9, 1947 because of absence from the plant for over 30 days “for cause unknown”.

The group insurance plan of Carnegie-Illinois Steel Company was operated on a “self-accounting” basis whereby the individual records were maintained by the employer, who collected the premium contributions, paid the premiums to the Insurance Company, and maintained the individual records of the employes. The policy provided that “The insurance of any employee shall automatically cease upon the occurrence of any of the following events: ... (b) the cessation of premium payments on account of such employee’s insurance hereunder, (c) the thirty-first day following the termination of his employment .... Cessation of active work by an employee shall be deemed to constitute the termination of his employment except that an employee absent from work because of disability due to injury or sickness . . . will, subject to the continuance of premium payments on account of such employee’s insurance, be regarded as still in the employment of the employer during the period of such disability . . . until the effective date of the discontinuance of such employee’s insurance as entered on the employer’s records, . . . .” There was a further provision that, although the insurance upon the life of an employe was automatically to cease upon the thirty-first day following the termination of his employment, if the employment was terminated, no matter for what reason, while he was still insured under the policy he should be entitled to have issued to him, without further evidence of insurability, upon application made within thirty-one days after such termination and upon the payment of the appropriate premium, an individual policy of life insurance.

Plaintiff bases her claim against the Insurance Company on the ground that Prewalla had made tender of premium payments but acceptance had been improperly refused; also that no notice of the termination of his employment bad been given bim, thus denying bim tbe opportunity of applying to tbe Insurance Company for an individual life insurance policy: (Jones v. Metropolitan Life Insurance Company, 156 Pa. Superior Ct. 156, 39 A. 2d 721). Tbe court below sustained a compulsory nonsuit entered by tbe trial judge and entered judgment for defendant; from that judgment plaintiff now appeals.

Wbetber or not tbe employer, Carnegie-Illinois Steel Company, was justified in refusing acceptance of tbe payments tendered for tbe premiums, and wbetber or not it was justified in entering upon its records that Prewalla’s insurance was terminated as of December 31, 1946 and that bis employment was terminated as of January 9, 1947, are questions wbicb need not now be considered for they would be pertinent only in an action brought against tbe employer. Plaintiff claims that tbe employer was tbe agent of tbe insurer, wbicb therefore could not take advantage of tbe employer’s delinquencies. But, while it is true that there is a diversity of opinion among the several jurisdictions as to wbetber, in tbe case of such group insurance policies, the employer occupies tbe role of agent of tbe employes or of tbe insurer, in our own State, as in tbe Supreme Court of tbe United States, this question has been definitely resolved against plaintiff’s contention. It was stated in Boseman v. Conneetiout General Life Insurance Co., 301 U. S. 196, 204, 205: “When procuring tbe policy, obtaining applications of employees, taking payroll deduction orders, reporting changes in tbe insured group, paying premiums and generally in doing whatever may serve to obtain and keep tbe insurance in force, employers act not as agents of the insurer hut for their employees or for themselves.” In Bahas v. The Equitable Life Assurance Society of the United States, 128 Pa. Superior Ct. 167, 193 A. 344 (affirmed per curiam, 331 Pa. 164, 200 A. 91), a Union organized by the employes of a plant of the Carnegie Steel Company, took out a group insurance policy providing death and disability benefits for its members. The members paid monthly dues to the Union and from the dues so collected the Union paid the Insurance Company the monthly installments of premium. It was held that the Union was not the agent of the insurer but acted for and on behalf of the employes, and that, for any failure on the part of the Union to transmit proofs of the plaintiff’s disability to the insurer, the Union and not the insurer was responsible. In Miller v. The Travelers Insurance Company, 143 Pa. Superior Ct. 270, 274, 17 A. 2d 907, 908, 909, (allocatur refused) it was said: “The life insurance policy before us is for a distinct form of insurance differing in many if not most of its aspects from the ordinary life insurance, where usually a beneficiary may acquire a vested interest. Under group insurance the employer acts for itself or himself, as the case may be, and on behalf of employees in order that they may obtain cheap insurance, thus rendering the employees a service. The employer receives no compensation from the insurance company and is not its agent.” In Best v. The Equitable Life Assurance Society of the United States, 165 Pa. Superior Ct. 452, 68 A. 2d 400, (affirmed per curiam on the opinion of the Superior Court, 365 Pa. 418, 76 A. 2d 220), the plaintiff, an employe covered by a group life insurance policy, contended that she had a sufficient amount due her in back pay when she stopped work from which her employer should have paid her monthly premium, and, if such payment had been made, the insurer’s defense of non-payment of premium could not have been made. The Court said (p. 456, A. p. 402) : “. . . in deducting premium payments from an employe’s wages and, transmitting them to the insurer, the employer company acted as agent of the insured and not of the insurer .... And if the employer had failed in the performance of a duty in that respect plaintiff’s right of action would have been against the employer and not the insurer.”

The group insurance policy in the present case provided that the insurance of an employe automatically ceased upon the cessation of premium payments. And, while it further provided that in the case of an employe’s absence from work because of disability due to injury or sickness he was to be regarded as still in the employ of the employer during the period of such disability until the effective date of the discontinuance of his insurance as entered on the employer’s records, the protection thus given him was made expressly subject to the continuance of premium payments on account of such employe’s insurance. Under such provisions, therefore, it is clear that either the failure of the insurer to receive payments of the monthly premiums due, or the termination of the employment and resulting discontinuance of the employe’s insurance as entered on the employer’s records, causes an automatic cessation of the employe’s insurance: Peyton v. The Equitable Life Assurance Society of the United States, 159 Pa. Superior Ct. 318, 48 A. 2d 145, (allocatur refused) ; Brown v. Carnegie-Illinois Steel Corp., 168 Pa. Superior Ct. 380, 77 A. 2d 655 (affirmed per curiam, 368 Pa. 166, 81 A. 2d 562). Since the defendant Insurance Company did not receive payment of the premiums due after December 31, 1946, Prewalla’s insurance, in accordance with the express terms of the policy, thereupon automatically ceased, nor, for the reason already stated, was there any obligation on the insurer’s part to notify him of the termination of his employment, whatever may have been the duty of the employer in that respect. In short, any alleged errors of commission or omission of the employer here complained of are not to be visited upon the insurer, and accordingly redress therefor must be sought from the employer and not from the defendant: (cf. Peyton v. United, States Steel Co., 368 Pa. 591, 84 A. 2d 192).

Judgment affirmed.