Case Name: Marva CHENEY, Plaintiff and Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, a New York domiciled insurance company duly qualified to do business in South Dakota; the South Dakota Public Employees Insurance System, 216 East Capitol, Pierre, Hughes County, South Dakota; Al Asher as Administrator of the South Dakota Public Employees Insurance System; and Linda Nill, as Administrator of the Life Insurance section of the Public Employees Insurance System, Defendants and Appellees
Court: South Dakota Supreme Court
Jurisdiction: South Dakota
Decision Date: 1985-06-19
Citations: 370 N.W.2d 569
Docket Number: No. 14482
Parties: Marva CHENEY, Plaintiff and Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, a New York domiciled insurance company duly qualified to do business in South Dakota; the South Dakota Public Employees Insurance System, 216 East Capitol, Pierre, Hughes County, South Dakota; Al Asher as Administrator of the South Dakota Public Employees Insurance System; and Linda Nill, as Administrator of the Life Insurance section of the Public Employees Insurance System, Defendants and Appellees.
Judges: WOLLMAN and MORGAN, JJ., and WUEST, Circuit Judge, Acting as Supreme Court Justice, concur.
Reporter: North Western Reporter 2d
Volume: 370
Pages: 569–579

Head Matter:
Marva CHENEY, Plaintiff and Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, a New York domiciled insurance company duly qualified to do business in South Dakota; the South Dakota Public Employees Insurance System, 216 East Capitol, Pierre, Hughes County, South Dakota; Al Asher as Administrator of the South Dakota Public Employees Insurance System; and Linda Nill, as Administrator of the Life Insurance section of the Public Employees Insurance System, Defendants and Appellees.
No. 14482.
Supreme Court of South Dakota.
Argued Sept. 11, 1984.
Decided June 19, 1985.
Rehearing Denied July 19, 1985.
Ronald G. Schmidt of Schmidt, Schroyer, Colwill & Zinter, P.C., Pierre, for plaintiff and appellant.
William P. Fuller of Woods, Fuller, Shultz & Smith, Sioux Falls, for defendant and appellee Metropolitan Life Ins. Co.
Roger L. Severns, Jr., Sp. Asst. Atty. Gen., Pierre, for defendants and appellees South Dakota Public Employees Ins. System, A1 Asher and Linda Nill; Mark V. Meierhenry, Atty. Gen., Pierre, on the brief.

Opinion:
BERNDT, Circuit Judge.
This is an appeal from a summary judgment dismissing an action for declaratory judgment, mandamus and other relief, by appellant, Marva Cheney, to collect life insurance benefits. We affirm.
The facts of this case are before us by stipulation and are not in dispute.
Appellant was the widow of Julian Cheney. Julian Cheney took office as the South Dakota Commissioner of School and Public Lands on January 3, 1983, and thus became a state employee, eligible to join the state employees' group life insurance plan. Cheney died January 16, 1983.
Marva Cheney died subsequent to the initiation of this action. By stipulation and order, William B. Cheney and Luke A. Cheney, as co-trustees of the Marva Cheney Trust, were substituted as parties plaintiff.
Appellee, Metropolitan Life Insurance Company, hereinafter called Company, is the underwriter for the State Insurance Group Life Insurance Plan, which is administered through its agent, South Dakota Public Employees Insurance System, hereinafter called System, also an appellee.
On January 3, 1983, Cheney was furnished with an "offering brochure" and the necessary forms to apply for life insurance coverage under the State's group plan. The offering brochure, or booklet, outlines the insurance plan which was available and specifies when coverage takes effect under the heading, "When Your Insurance Becomes Effective."
Cheney signed and submitted, on January 3, 1983, the necessary application requesting to be insured for three times his basic annual earnings, which were rounded out at $102,000.00. The application authorized the State of South Dakota to make the necessary payroll deductions to cover the premium. Appellant wife was designated as the beneficiary.
There is an insurance contract, or master policy, between Company and System which was issued January 1, 1973. Page 1 of this policy states: "The provisions hereinafter contained, including those in the Exhibits, are part of this Policy as fully as if recited over the signatures hereto affixed." Under "Eligibility and Effective Dates of Insurance" this policy, Page 2, Section 2, reads as follows:
A. Eligibility. — Each Employee shall be eligible for insurance hereunder on his own account . as set forth in the Exhibit applicable to him.
B. Effective Dates of Insurance. — The insurance on account of any Employee . shall become effective as set forth in such Exhibit.
The Schedule of Exhibits lists only one exhibit, namely, Certificate Form G.3300A, F, IKE, 31, 2XYA, as applicable to all employees. In regard to this certificate, Section 7, Page 6 of the policy reads:
Certificates. — The Insurance Company will issue to the Employer, for delivery to each Employee insured hereunder, an individual certificate which shall state the insurance to which such Employee is entitled under this Policy and to whom benefits are payable, and which shall summarize the provisions of this Policy principally affecting the Employee. The word "certificate" as used in this Policy includes certificate riders and certificate supplements, if any.
This certificate, entitled "Group Insurance Certificate," sets out an employee's eligibility for insurance and the effective date thereof as follows:
Each Employee employed subsequent to January 1, 1973 shall be eligible for insurance under the Group Policy on his own account on the first warrant date for the payroll deduction for the contribution required by the Employer toward the cost of his insurance under the Group Policy next following the date of his employment.
The insurance on account of any Employee who makes such request on or before the date of his eligibility for such insurance shall become effective on the date of his eligibility for such insurance provided he is actively at work on such date. The insurance on account of any Employee who makes such request after the date of his eligibility for such insurance and on or before the thirty-first day following the date of his eligibility for such insurance (or on or before the thirty-first day following the date of his return to active work if he is not actively at work on the date of his eligibility for such insurance) shall become effective on the next following warrant date following the date of such request, provided he is then actively at work....
Company furnished to System a manual entitled "Group Insurance Administration Manual" which sets forth general information and procedures to be followed in administering the group insurance program. Chapter II of the manual covers eligibility and effective dates of the employee life insurance as follows:
Eligibility Date. — The warrant date of the first payroll deduction for the cost of the employee's insurance following the date of his employment.
Effective Date. — 1. Same as "Eligibility Date" if the card was signed on or prior to the eligibility date.
LEGAL ISSUE
Was Julian Cheney covered under the State Employees' Group Life Insurance Plan on the date of his death, January 16, 1983?
Appellant contends that Section 7, Page 6, of the policy and SDCL 58-16-38 delineate what shall be in the certificate and that these provisions do not include eligibility or effective dates. Appellant argues that the attempt to impose or construe language in the certificate as a condition to eligibility is improper and a violation of the policy language as well as of SDCL 58-16-38.
Appellant contends that the three items referenced in SDCL 58-16-38, and only these three items, are authorized by statute to be contained in the certificate. Appellant, in effect, is saying that "effective date" has nothing to do with "the insurance protection to which he is entitled" as set forth in SDCL 58-16-38. Such argument is untenable. There can be no insurance protection unless there also is an effective date; therefore, provision for an effective date in the certificate is not beyond the scope of SDCL 58-16-38.
The certificate states that it is a summary of the policy provisions concerning eligibility and effective dates and other provisions of the group policy and is not a contract of insurance, and that the group policy alone constitutes the contract under which the insurance is provided. Appellant agrees that the certificate is a part of the policy to the extent provided by the policy itself, but argues that a summary can create no conditions of eligibility. As previously noted, the policy contains no effective date provision, but refers to the certificate for such date.
Where the certificate contains provisions which are not contained in the master policy itself, the certificate is consistently construed to be an integral part of the policy. The certificate herein is the identical certificate which was held to be a part of the group life insurance policy by this court in Halverson v. Metropolitan Life Ins. Co., 286 N.W.2d 531 (S.D.1979). The court, in Halverson, stated:
The certificate involved here contains several substantive terms and conditions which cannot be found in the master policy and without which the policy of insurance is incomplete. The certificate contains the only provisions relating to eligibility, effective dates of coverage (which contains the requirement for proof of insurability), extended death benefits, conversion rights, cessation of insurance, and the schedules of insurance.
Id. at 533.
"Every insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy and as amplified, extended, or modified by any rider, endorsement or application lawfully made a part of the policy." SDCL 58-11-39.
"Words used are to be understood in their ordinary sense_" SDCL 2-14-1. Jacobs v. Pyle, 52 S.D. 537, 219 N.W. 247 (1928).
We reject appellant's argument that Section 7, Page 6 of the policy and SDCL 58-16-38 prevent the effective date provision of the certificate from lawfully being made a part of the policy.
Since the policy contains no provision for an effective date, such provision in the certificate applies.
We next consider appellant's argument that insurance coverage was in force on Cheney at the time of his death under governing relevant statutes and under the express terms of the policy itself.
SDCL ch. 58-16 authorizes the issuance of group life insurance. SDCL ch. 3-12A authorizes the State of South Dakota, acting through the Board of Trustees of the South Dakota Retirement System, to participate in a group health and life insurance plan for employees. There is nothing in either chapter which automatically places any insurance in force on Cheney, or any other employee, or which specifies an effective date.
SDCL 3-12A-25 and 3-12A-2(3) empower the South Dakota Retirement System Board of Trustees to make rules and regulations for the effective administration of SDCL ch. 3-12A, including the effective dates of coverage where not specified by statute. Pursuant to such authority, the Board, on March 2,1980, adopted an administrative rule, ARSD 62:02:03:01, which states, "Coverage begins on the first warrant date a deduction is made." Cheney was eligible for insurance under the group policy on the first warrant date for the payroll deduction for the contribution required by the State toward the cost of his insurance under the group policy next following the date of his employment. As provided by the policy certificate and the administrative rule, the effective date was the same as the eligibility date.
Appellant also contends that there is ambiguity as to the meaning of the term "warrant date." As a contract of adhesion, the policy with its certificate is subject to certain rules of construction. In case of doubt as to meaning, it will be interpreted against the insurer who furnished or prepared the policy. 43 Am.Jur.2d Insurance § 283 (1982).
Its provisions, however, "are to be read and understood according to the natural and obvious import of the language, without resorting to subtle and forced construction for the purpose of either limiting or extending their operation." 43 Am. Jur.2d Insurance § 282 (1982). See also 44 Am.Jur.2d Insurance § 1871 (1982); Vern Eide Buick, Inc. v. United States Fidelity & Guaranty Co., 273 N.W.2d 116 (S.D.1978); Cramer v. American Alliance Ins. Co., 72 S.D. 509, 37 N.W.2d 192 (1949).
The first payroll period after Cheney's employment on January 3, 1983, was the period ending January 14, 1983. Cheney died January 16, 1983. The salary warrants for the pay period ending January 14, 1983, for the Department of School and Public Lands employees, including Cheney, were printed on January 20, 1983. The date on the warrant which is cashed by employees is January 25, 1983, which is the fourth Tuesday of the month and the established date when all state employees received their warrants for their pay for the payroll period ending January 14, 1983.
The warrant is printed with a detachable "stub" which contains payroll data and information for the employee, such as base pay, regular and overtime hours worked, employer contributions and payroll deductions. The stub carries two dates: one is the date of issue, which is the same as the warrant date of issue; the other shows the payroll period ending date. The stub shows that, pursuant to authorization, the amount of $39.15 was deducted from Cheney's pay for life insurance.
Appellant contends that "the first warrant date for the payroll deduction," or as worded in the administrative rule, "the first warrant date a deduction is made," is the payroll period ending date on the stub, i.e., January 14, 1983.
SDCL 4-9-8 provides for the issuance, contents and record of warrants:
For the sums which shall be found due from the state the state auditor shall issue warrants payable at the state treasury which shall be numbered consecutively and each shall specify the date of the issue, the fund on which it is drawn, and the name of the person to whom payable; and the number, date of issue, and the name of person to whom payable, of each warrant, shall be entered upon a record and shall be carefully preserved by the auditor in his office.
SDCL 4-9-9 provides that "[t]he state auditor shall enter in progressive order, in a book or books to be provided for that purpose, the number of each warrant by him issued, the amount thereof, the date of its issue, and the name of the person to whom issued...."
SDCL 4-9-11 provides that after payment of a warrant, the state treasurer shall cause the same to be either reproduced and recorded or entered in a book by number, date, amount and name of payee.
SDCL 4-9-13 requires the state treasurer to keep a warrant register showing the number, date and amount of each warrant presented, as well as other data.
The only statutorily required date is the date affixed to the warrant, and that is the warrant date. The warrant date is not the pay period ending date shown on the stub.
A "warrant" is an order by which the drawer authorizes one person to pay a particular sum of money. Black's Law Dictionary 1756 (4th Ed. 1951).
A state warrant is an order by the auditor upon the treasurer for the payment of the amount due as ascertained by the auditor. People v. Gibbs, 413 Ill. 154, 108 N.E.2d 446 (1952).
The warrant in this case was the first paycheck issued to Cheney following his employment. January 25, 1983, was the first warrant date, the only warrant date, and, thus, the date that any insurance coverage would have taken effect had Cheney lived.
Any other interpretation of the effective date of coverage would result in a "subtle and forced construction." However attractive it might be to liberally construe a statute to avoid a result that may appear harsh, we will not so act when such action would do violence to the plain language of the statute. Burns v. Kurtenbach, 327 N.W.2d 636 (S.D.1982); Johnson v. Herseth, 246 N.W.2d 102 (S.D.1976). The same reasoning applies to construction of the insurance policy here under consideration, where the plain language of the policy and its certificate leaves no ambiguity as to the intended effective date of coverage.
The payroll period from which the premium is deducted, the act of deducting the premium, premium due date, and grace period are all matters which have been argued and considered. They do not change the effective date of coverage, which was January 25, 1983.
Count II of appellant's complaint asserts that appellees are estopped from asserting, or must be deemed to have waived, any contention that Cheney's coverage was not effective on the date of his death, because they had a duty to furnish him a certificate and failed to do so. Appellant argues that Cheney should not be held to the terms of a certificate which Cheney was never given. SDCL 58-16-38 requires the insurer to issue an individual certificate to each person insured. This argument must fail, since Cheney died before he became an insured. It is also noted that the offering brochure which was furnished to Cheney clearly states: "By enrolling during your eligibility period, you will become insured for employee insurance on the warrant date that reflects your first deduction if you are then actively at work." The warrant date is the date on his first warrant, or paycheck, January 25, 1983.
The summary judgment of the trial court is affirmed.
WOLLMAN and MORGAN, JJ., and WUEST, Circuit Judge, Acting as Supreme Court Justice, concur.
HENDERSON, J., dissents.
BERNDT, Circuit Judge, sitting for FOSHEIM, C.J., disqualified.
SDCL 58-16-38 provides:
Except as provided in § 58-16-31, a policy of group life insurance shall contain a provision that the insurer will issue to the policyholder for delivery to each person insured an individual certificate setting forth a statement as to the insurance protection to which he is entitled, to whom the insurance benefits are payable, and the rights and conditions set forth in § 58-16-39 to 58-16-41, inclusive.