#### MARY PEARSON v. THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES.

(Filed 5 January, 1938.)

1. Insurance § 32c — Termination of employment as used in group policy refers to status of parties rather than contract of employment.

The provision of a group policy that insurance of any employee should terminate upon termination of the employment, except that the employer might elect that employees temporarily laid off, on leave of absence, disabled, or pensioned should be considered in the employment, *is held,*to refer to the *status*of the parties rather than any contractual relation, and to cover, employees employed from day to day without any contract of employment for any specified period, and when an employee is temporarily laid off, on leave of absence, disabled, or pensioned, the employer, although he might terminate his contractual relationship, may not terminate his *status*as an employee within the meaning of the policy without notice to the employee.

2. Same — Where act of employee terminates employment, he is not entitled to notice of cancellation of certificate under group policy.

The employer had a general rule, of which the employees had actual knowledge, that the employment of any employee should automatically terminate upon sentence of such employee to imprisonment. The employee in question was sentenced to imprisonment, and notice thereof given the employer, and the employee’s name was thereupon stricken from the pay roll. *Seld:*The employee was not entitled to notice of the termination of the employment and the cancellation of his certificate under a group policy.

*7323. Same — Provision that employee might convert certificate into life policy does not extend certificate after termination of employment.

The provision of the certificate and the group policy that an employee insured thereunder might obtain an ordinary life policy upon application within thirty-one days after termination of the certificate upon termination of the employment, does not have the effect of continuing the certificate in force for thirty-one days after termination of the employment when the employee does not exercise the option by applying for the life policy or by paying the premiums.

Appeal by plaintiff from *Hill, Special Judge,*at April Term, 1937,. of Eoesyth.

Affirmed.

Tbis is a civil action instituted by tbe plaintiff to recover tbe sum of $500.00, tbe face value of a certificate of insurance issued to Edward C. Pearson under a group life insurance policy issued by tbe defendant to tbe E. J. Eeynolds Tobacco Company. Tbe plaintiff is tbe beneficiary named in tbe certificate. There was a judgment of nonsuit entered at tbe conclusion of all tbe evidence to wbicb tbe plaintiff excepted and appealed.

*John D. Slawter and Richmond Bucher for plaintiff, appellant.*

*Manly, Hendren & Womble for defendant, appellee.*

Per Curiam.

There is no substantial controversy about tbe facts in tbis case. Tbe defendant issued to tbe E. J. Eeynolds Tobacco Company its group life insurance policy with total and permanent disability provisions, insuring tbe lives of tbe employees of said tobacco company. Tbe deceased, Edward C. Pearson, son of tbe plaintiff, worked continuously for tbe E. J. Eeynolds Tobacco Company from 3 December, 1929, through 17 July, 1936, save and except when be was temporarily absent from bis employment for a few days at various times during said period. A certificate of insurance dated 3 December, 1929, was issued to him in tbe sum of $500.00, payable to tbe plaintiff as beneficiary upon tbe death of tbe said Edward C. Pearson. Tbis certificate was issued subject to tbe terms and conditions of tbe master policy.

Edward O. Pearson, tbe employee, was, on 20 July, 1936, convicted in municipal court of tbe city of 'Winston-Salem on tbe charge of operating a motor vehicle upon tbe public highways of tbe State while under tbe influence of intoxicating liquors. He was on said date committed to jail, to be assigned to work tbe public roads of said county for a term of six months. On 23 July, 1936, while serving said sentence be died suddenly as tbe result of sunstroke.

Tbe contract of insurance was entered into by and between tbe E. J.. Eeynolds Tobacco Company and tbe defendant and tbe said tobacco company paid tbe premium therefor annually. In turn *733tbe said tobacco company bad an arrangement witb its insured employees by tbe terms of wbicb eacb employee paid monthly a proportionate part of tbe premium of said master policy in part reimbursement for tbe amount expended by said. company for said insurance. Tbe deceased paid bis installment for tbe month of July, 1936.

It is agreed that on tbe morning of 20 July, 1936, said employee did not report for work and bis wife informed his foreman that said employee bad been arrested and was to be tried on that morning. Later, on tbe same date, tbe wife of tbe deceased advised bis foreman that said employee bad been convicted and committed to tbe roads to serve a term of six months. Tbe evidence discloses that thereupon tbe name of tbe deceased was erased from tbe roll of employees of tbe said tobacco company and that in due course it was reported to tbe insurance company that be bad been dropped from said roll and was no longer an employee of said company. Tbe tobacco company gave tbe deceased no notice that it bad dropped him from tbe pay roll.

Under tbe terms of tbe group policy tbe insurance of any employee automatically ceased upon termination of bis employment witb tbe employer in tbe classes of employees insured under tbe policy, without regard to tbe cause of such termination, “except that the employer may elect that all employees who, while insured hereunder, are temporarily laid off or given leave of absence, or are disabled or retired on pension, shall be considered to be in tbe employment of tbe employer during such period, subject to tbe conditions contained in tbe total and permanent disability provisions hereof.”

Tbe plaintiff contends that it was tbe duty of the employer to notify tbe insured under said certificate of tbe fact that be bad been dropped from tbe pay roll of said company, and that be continued to be an employee within the meaning of the master policy and tbe certificate until and unless such notice was given. Upon tbe facts appearing-in this record this position cannot be sustained.

It may be conceded that the word “employment” as used in tbe phrase, “termination of bis employment,” in tbe group policy of insurance may be interpreted to refer to tbe *status*of tbe employee rather than to any actual contractual relationship existing between tbe employer and tbe employee. Tbe policy included employees who were working on a day to day basis without any contract for any specified period of employment. It is well said that such an employee occupies a *status*rather than a contractual relationship. The policy clearly does not use tbe word “employment” in tbe sense of a legal contract of employment. It is so drawn as to include employees working under a hiring wholly indefinite as to tbe term of its continuance. Tbe employment might, therefore, be terminated at any time at tbe will of tbe employee or that *734of the. employer. Nor does the contract apply to employees only when they are actually employed from day to day. This is apparent from the provision that if an employee “is temporarily absent, 'or. is temporarily laid off or is given leave of absence,” the employment need not be considered terminated. The word as here used is intended to indicate a continuous right to the stated benefit until the contract relation is terminated by the withdrawal of the employee or discharge by the employer, with notice to the other party. As the situation presented is one rather of the *status*of the employee in relation to his employer than of a contract of employment, the right of the employer at any time at its will to discontinue its contractual relationship to the employee is not conclusive that it might to the same extent terminate his *status*as an employee under the policy without notice to the employee. There is, therefore, sound authority for the position that when an employee is temporarily absent from his employment or is temporarily laid off, or is absent on leave, his relationship as an employee under the terms of the policy cannot be terminated by the employer without notice to the employee. *Deese v. Ins. Co.,*204 N. C., 214; *Porter v. Assurance Society*(Mo.), 71 S. W. (2nd), 766; *Emerick v. Ins. Co.,*120 Conn., 60, 105 A. L. R., 413.

The law as declared in these and other similar cases will not avail the plaintiff in the instant case. The decisions in those cases were not based upon the same factual situation. The employee may discontinue his *status*as such by his own act. When he does so there is no necessity of a notice from the employer and none is required. Whether the employer, when the employee discontinues the relationship, must recognize and act upon the changed condition by removing the name of the employee from his pay roll before the rights of the employee under the certificate of insurance are terminated is not presented. For, here, the employer did in fact promptly remove the name of the deceased from its pay roll and notified the insurance company thereof.

Did the deceased employee discontinue his employment with the R. J. Reynolds Tobacco Company so as to terminate his rights under the certificate of insurance? This proposition must be answered in the affirmative.

The evidence discloses that the employer had a general rule that the employment of any one of its employees should automatically terminate upon the sentence of such employee to imprisonment. The deceased employee was advised of this rule on a former occasion when he was arrested and put under a suspended sentence. When he was convicted and committed to the roads to serve the sentence imposed he knew that under the terms of his employment the same automatically ended when he received his sentence. Aside from this, the employee, however in*735voluntarily bis act may bave been, entered into another employment wbicb would, for tbe term of six months, require of him bis full time, both day and night. He could not serve two masters. He knew that be could no longer answer tbe call of bis former employer and that by bis own act bis *status*as an employee of tbe tobacco company.bad been terminated. Under these circumstances no duty rested upon tbe employer to notify him that tbe relationship bad been discontinued.

Both tbe certificate of insurance and tbe master policy include a provision to tbe effect that in case of the termination of tbe employment for @,ny reason whatsoever, while insured thereunder, tbe employee shall be entitled to bave issued to him by tbe society, without further evidence of insurability, upon application made to tbe society, and upon tbe payment within 31 days after such termination of tbe premium applicable to tbe class of risk to wbicb be belongs and to tbe form and amount of tbe policy at bis then attained age, a policy of life insurance in any one of tbe forms customarily issued by tbe society, except term insurance, in an amount equal to tbe amount of his protection under tbe policy and certificate at tbe time of such termination of employment. This provision does not extend tbe insurance 31 days after tbe termination of employment. It grants tbe insured employee a privilege or option under certain conditions therein stipulated. Tbe insured did not exercise this option or privilege by applying for such policy or by paying the required premium. Tbe plaintiff, therefore, has no claim against tbe defendant by reason of the terms of this provision.

Tbe deceased employee having, by bis own act, terminated bis *status*as an employee of tbe E. J. Eeynolds Tobacco Company, and tbe employer having recognized, accepted, and acted upon such termination, tbe defendant is in no wise liable to tbe plaintiff upon the certificate sued upon. Tbe judgment of nonsuit is

Affirmed.