Court Opinion

ID: 9527459
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:30:47.434393+00
Date Added: 2024-06-11T13:25:48.256905
License: Public Domain

HENDERSON, Justice
(dissenting).
I respectfully dissent.
Under the majority opinion, the heirs of Julian and Marva Cheney will receive $39.15 — the premium deducted from Julian Cheney’s earnings for his work period end*575ing January 14, 1983,1 which was transferred by the Employer/State to the account of the South Dakota Public Employees Insurance System.2 Under my viewpoint, radically different from the majority, the Cheney heirs would receive $102,000 from Metropolitan Life Insurance Company.
RATIONALE I.
WARRANT DATE/PAYROLL DATE
In the 1966 Legislative Assembly, the insurance industry prevailed upon the Legislature, and were successful, to inaugurate group life insurance policies in South Dakota. The general scheme developed was to permit group life insurance in South Dakota, but precluded any type or kind of a group policy to be issued unless it conformed with the requirements set forth by state statute. SDCL 58-16-1. SDCL 58-16-3 provided, inter alia: “A policy issued to insure the employees of a public body may provide that the term ‘employees’ shall include elected or appointed officials.”
On January 3, 1983, Julian Cheney, deceased, became the South Dakota Commissioner of School and Public Lands. On this date, Julian Cheney enrolled in, joined, and subscribed to the State Employees’ Group Life Insurance Plan by completing an application which authorized the deduction of premiums from his paychecks.3 Julian Cheney continued in the people’s employ and on January 14, 1983, his first pay period ended and he became entitled to his salary. This is not disputed. Julian Cheney was entitled to his salary up to this point and Metropolitan Life Insurance Company had earned an insurance premium.4 However, because of the State’s payroll system, Julian Cheney would not actually receive his paycheck or warrant for nearly two weeks.5 In the administrative hiatus between payroll earned and payroll paid, however, Julian Cheney died (January 16, 1983) and because he was not there to receive his first paycheck, the Metropolitan Life Insurance Company and the South Dakota Public Employees Insurance System seek to deny insurance coverage even though a $39.15 deduction for life insurance was withheld from this paycheck. A right to prevail is here obfuscated and lost by an administrative hiatus, namely, a gap created by the thousands of checks which must be printed for state employees. Volume and the computer world are vaulted over justice and humanity. My sense of fairness and that which was sought to be accomplished by state statute — to give all state employees and constitutional officers life insurance — regardless of their health— is offended. Jus est ars boni et aequi. Law is the science of what is good and just.
Because I would interpret “warrant date,” if indeed such a date is controlling, germane and valid to the resolve of this case, to mean the payroll ending date, I would reverse the summary judgment of *576the trial court.6 See RATIONALE IV, infra, for an explanation on the invalidity of “warrant date.” Any ambiguity or uncertainty in an insurance contract is to be construed most strongly against the insurer and in favor of the insured. See Vern Eide Buick v. United States Fidelity & Guar. Co., 273 N.W.2d 116 (S.D.1978); Dairyland Ins. Co. v. Kluckman, 86 S.D. 694, 201 N.W.2d 209 (1972); Presentation Sisters, Inc. v. Mut. Benefit Life Ins. Co., 85 S.D. 678, 189 N.W.2d 452 (1971); Wilson v. Allstate Ins. Co., 85 S.D. 553, 186 N.W.2d 879 (1971). In the case at bar, Julian Cheney did not cause or create any ambiguity or uncertainty as to the effective date of the insurance coverage. Cheney has to be accepted — and he was accepted as an insured — only his dying triggered a renunciation of contractual obligations imposed by state statute and the Master Policy. Therefore, any resolution of the insurance contract language should be in favor of appellant and against appellees. Such is not unnatural and can be done without resorting to a subtle and forced construction.
RATIONALE II.
UNCONSCIONABLE/CONTRACT OF ADHESION
This Court now takes the position that this insurance policy and the certificate is a contract of adhesion. I agree with its rationale. However, I disagree with the application of the rule wherein the majority opinion states that “[i]n case of doubt as to meaning, it will be interpreted against the insurer who furnished or prepared the policy”; for, indeed, in this case, the majority interprets this contract and the certificate against the insured rather than the insurer. I fully appreciate that the majority takes the position that it is adopting this rule in favor of the insurer because the majority believes there is no doubt as to the meaning in these insurance instruments. I must respectfully disagree that there is no doubt as to their meaning. Writing for the majority of this Court in Rozeboom v. Northwestern Bell Telephone Co., 358 N.W.2d 241, 244-45 (S.D.1984), I expressed:
North Dakota, our sister state, has not been timorous in recognizing contracts of adhesion. In applying the concept to grain purchase contracts, that state’s highest court in Farmers Union Grain Terminal Ass’n v. Nelson, 223 N.W.2d 494, 497 (N.D.1974), stated:
(1) A contract is construed most strongly against the party who prepared it * * * (2) An agreement which is essentially a “contract of adhesion” should be examined with special scrutiny by the courts to assure that it is not applied in an unfair or unconscionable manner against the party who did not participate in its drafting.
Bell prepared the contract in question. This State should examine this contract with an impartial but critical eye in determining whether it is unconscionable against Rozy, who did not participate in its drafting. In Bekken v. Equitable Life Assur. Soc., 70 N.D. 122, 143, 293 N.W. 200, 212 (1940), the North Dakota Supreme Court applied the term “contract of adhesion” to insurance contracts.
Neither Julian Cheney nor the thousands of state employees, past or present, prepared the Master Policy or the Certificate. Rather, both were prepared by Metropolitan Life Insurance Company. Special rules of construction are applicable to insurance policies for they are contracts of adhesion. 43 Am.Jur.2d Insurance § 282 (1982). Here, we have an insurance policy called a group insurance policy. It was the insurance company which drew the group insurance policy and the certificate in such fashion that it has triggered this litigation. In case of doubt as to meaning, the group insurance policy should be interpreted against Metropolitan who prepared the policy and the certificate. This Court should not adopt a construction or interpretation *577which will defeat recovery if the policy is susceptible to a meaning which will permit recovery. Julian Cheney never saw the Master Policy; neither did his wife. Julian Cheney never saw the Certificate; neither did his wife. A state law, SDCL 58-16-38, absolutely mandated that Metropolitan Life Insurance Company furnish unto Cheney an individual Certificate.7 Stipulation of Facts XL provides: “The System although the decedent, Mr. Cheney completed his enrollment and joined the group plan on January 3, 1983, when eligible, failed to issue a Group Insurance Certificate to Mr. Cheney.” It is unconscionable for Metropolitan to have bargained to insure all employees, that Cheney paid his premium, that Metropolitan had constructive possession of the premium, that Metropolitan violated a mandatory state law, and that Metropolitan end up prevailing in this case. It is unconscionable to hold Julian Cheney and his heirs to a document which was never issued or delivered to him — a document he never saw. Cheney had no bargaining power; he had to adhere to the Master Policy and the language in the Certificate. Language, if you will, which contained additional conditions totally outside of the Master Policy. Yes, the bargaining was long over and the System and Metropolitan had carved up his — and all state employees’ — rights. Metropolitan cannot escape its responsibilities, imposed by state law, by contracting with the System. To enforce an invalid provision in the Certificate, which provision exceeds the Master Policy language and deprives Cheney of insurance, is unconscionable. Halverson, 286 N.W.2d 531, is distinguishable in its facts. In Halverson, Mrs. Halverson received a certificate and then elected to convert a group policy to an individual policy. She was a payroll clerk responsible for insurance matters and received her own certificate. Here, there was no certificate issued. In each case cited by this Court in Halverson, the insured had received the certificate. We do not have such a factual scenario here. Cheney’s hands, and those of his heirs, are clean. Reason recoils against holding Cheney to a Certificate which never came into existence. Furthermore, Halverson perpetrated a deception. Again, there is no such suggestion here.
RATIONALE III.
CERTIFICATE
By express language of the Master Policy and by virtue of the language in SDCL 58-16-38, Metropolitan was required to furnish a certificate to each insured. Julian Cheney was never furnished a certificate. His widow also demanded a certificate and was refused one. In essence, an insured, who pays money via a deduction in his paycheck, is entitled to see something, hold onto something, and have something of value for his or her money. Having parted with something of value, a party is entitled to something in return. The statute aforesaid requires a certificate to encompass information concerning (1) a statement as to the insurance protection to which he is entitled, (2) beneficiaries, and (3) the rights and conditions set forth in SDCL 58-16-39 to SDCL 58-16-41, inclusive.
Metropolitan, beyond the language of the statute, seeks to impose additional conditions by way of (a) eligibility, and (b) the effective date of the insurance as to the individual employee. The majority permits this imposition. Furthermore, the majority opinion permits the “first warrant date” to be the crucial and determining factor for the basis of its ultimate decision. By placing in the certificate of insurance a statement that the “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” and then wrapping it with another condition *578that eligibility for insurance is “on the first warrant date for the payroll deduction” is imposing a condition not demanded nor authorized by state law.
The validity of imposing such conditions in the certificate cannot be moored to SDCL 3-12A-2(3) as proclaimed by the majority, for this statute, as amended, was not even enacted until after Julian Cheney’s death.8 The certificate here in question was thus imposing conditions not authorized by law at that time and Julian Cheney’s heirs cannot be obligated by them.
Moreover, Section 7 of the Master Policy expresses that the Certificate “shall summarize the provisions of this Policy principally affecting the Employee.” SDCL 58-16-38, as one can read, does not authorize any “summary.” A “certificate” can therefore not create something beyond the Master Policy. Crucially, Section 10 of the Master Policy provides: “This Policy and the application of the Employer, a copy of which is attached hereto, constitute the entire contract between the parties_” (Emphasis supplied mine.) Additionally, the Certificate itself provides:
This certificate contains only a summary of the provisions of the Group Policy. It is not a contract of insurance. The insurance is subject in every respect to the provisions of the Group Policy which alone constitutes the contract under which the insurance is provided. (Emphasis supplied mine.)
In sum, the insurance company has weaved in language which is totally unauthorized by law, and upon which it now relies, to escape liability under the group coverage policy. The System, which is supposed to be looking out for the employees, permitted language to creep into the certificate which was simply not authorized by the law of this state or the Master Policy. Thus, Cheney and his heirs are not bound by “the first warrant date” phraseology. Our state legislature’s duty is to mirror the will of the people. This is accomplished by legislative enactments which experience debate and formality. The insurance company and the System, substantively indenturing between themselves, should not be permitted to vitiate the will of the elected representatives of the people by private parchment — involving public employees and elected officials — employing words which veto legislative pronouncement.
RATIONALE IV.
ESTOPPEL
Insurance companies can be estopped from relying on policy provisions relating to the effective date of the policy. 45 C.J.S. Insurance § 674(b) (1946). This rationale is not a pioneer effort in an uncharted wilderness. Thus, assuming arguendo that the policy here in question was not in effect at Julian Cheney’s death per the warrant date phraseology argument, I would nevertheless hold that the System and Metropolitan were estopped from denying the effective date of coverage because (a) Cheney was a constitutional officer; (b) as such, he was eligible for coverage under the State Employees’ Group Insurance policy; (c) he made application and was enrolled in the State Employees’ Group Insurance Plan; (d) the insurance premium was deducted from his check; and (e) Cheney’s money was held in trust by the System for Metropolitan and thus was in the constructive possession of the latter.
The complaint filed herein alleged estop-pel and for the foregoing reasons and under the facts of this case, I would hold the System and Metropolitan estopped from denying coverage. The System and Metropolitan cannot treat the group insurance contract as valid for the purpose of deducting and collecting premiums, and invalid for the purpose of indemnity. See 15 Ap-pleman, Insurance Law and Practice § 8496, at 273 (1985); Spurlin v. Ranier, 457 S.W.2d 491, 492 (Ky.1970); Home Ins. *579Co. of New York v. Caudill, 366 S.W.2d 167, 170 (Ky.1963).
I do not relate my latter statement solely to the deduction and holding in trust of Cheney’s premium, but, rather, the thousands of premiums that are deducted each two-week period and the hundreds of thousands of dollars of premiums cumulatively collected under the Master Policy of the group life plan. When an insurance company insures against the death of all state employees under a group insurance policy, and takes the fruit therefrom arising, it should not be heard to complain that one employee under that plan has died nor that his family makes claim thereunder. It is inherent in the risk undertaken. For, like all mortals, the death of state employees and constitutional officers is inevitable. Cheney is covered under the group policy and he is entitled to its protective umbrella under the statutes of our state.

. Stipulation of Facts XXXV provides:
The amount of Thirty-Nine Dollars Fifteen Cents ($39.15) so deducted by the System from the decedent's pay for the work period ending January 14, 1983 is currently being held by the System for payment either to Metropolitan or the Plaintiff as may be ordered by the Court.

. Stipulation of Facts XXXII provides:
The amount of Thirty-Nine Dollars Fifteen Cents ($39.15) so deducted from Mr. Cheney’s pay for the work period ending January 14, 1983 was transferred by the employer to the premium holding account of the System.

. His eligibility, as an elected official, is not questioned in these proceedings to be insured under the State Master Policy; furthermore, it could not be for the only express statutory condition of eligibility for employee group life insurance is employment. SDCL 58-16-3.

. Under SDCL 58-16-34, Metropolitan could reserve the right of individual insurability if conditions were set forth in the Master Policy that a person eligible for insurance must furnish evidence to the insurer as a condition to part or all of the insured's coverage. However, Metropolitan waived any requirement of any evidence of individual insurability for employees who joined the plan, as did Julian Cheney, within the first three days after employment. Thus, Cheney was under the Master Policy.

. The State has a two-week free float on the use of all state employees’ money. If the State had paid Cheney at the end of two weeks, Metropolitan would not have an escape hatch.

. The majority opinion has, substantively, hinged its decision on those two little words. As explained below, this is extra-statutory, unwarranted language inserted into the certificate and should be entirely disregarded and held for naught.

. 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.

. The majority relies upon an amendment to the statute which became effective on July 1, 1983; however, Cheney died on January 16, 1983.