Court Opinion

ID: 9531405
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:10:37.217183+00
Date Added: 2024-06-11T13:28:26.494485
License: Public Domain

*436MR. CHIEF JUSTICE HARRISON
dissenting:
I am unable to concur in the foregoing opinion, insofar as it holds that the group insurance contract was in force and effect on and after May 1, 1953. The majority of this court concede that there was not a 75% coverage on May 1, 1953, but hold that in their opinion the provisions of the rider are ambiguous and must be construed most strongly against the party responsible for the ambiguity, in this case the defendant. I find no fault with this rule if I could convince myself that the rider is ambiguous but I am unable to do so. The majority also hold that it is plain, that the group insurance contract and the rider recognize the need for notice of cancellation in order to terminate the contract on May 1, 1953.
In order to make my position clear I should like to discuss the evidence pertaining to the execution of the rider. The record discloses that under the group insurance contract the amount paid for claims was entirely disproportionate to the amount of premiums received, in fact during the year commencing May 1, 1952, to May 1, 1953, $16,875.30 was paid in premiums, and benefits in the sum of $22,069.80 were paid out. The insurer being aware of this situation as it progressed during the year, on March 6, 1953, addressed a letter to Mr. J. E. Johnson, recording secretary of the union at Bonner, Montana, and advised him that an examination into the experience under the group insurance contract here in question indicated that the sum paid in claims was no longer in proper proportion to the premium. The letter then stated:
“The large amount paid in claims has proven the need of coverage and the valuable protection provided by your contract. You understand, we are sure, that it would not be proper for us to continue your contract on its present basis at a loss. Therefore, it will be necessary, in the event mutually agreeable arrangements for continuing protection after May 1, 1953, are not reached, to terminate the above-numbered con*437tract as of that date. We sincerely hope that agreement will be reached so that we may continue to insure your members since otherwise this letter will constitute the 30 days notice of termination required by the contract. Of course, any payment which has been or may be made, which would apply as premium for any period beyond May 1, 1953, will be applied in accordance with the new arrangement or, if agreement is not reached, will be returned.”
Thus, it will be seen that the union was advised nearly two months before the date of termination of the insurance contract that it would be necessary to make other arrangements if the insurance was to be continued, and that any payment of premiums for any period beyond May 1, 1953, would be applied in accordance with the new arrangement or, if an agreement was not reached, would be returned.
On March 16, 1953, the union, through Mr. Johnson, its recording secretary, wrote to the insurer advising that the writer had contacted the insurer’s representative and arranged a meeting with the union members for March 19, 1953. The letter also informed the insurer that the insurer’s representative had attended the union meeting on March 8, 1953, and “explained the status of our plan to the membership.” The letter further stated that “some sort of revision of our present contract with you is essential to prevent lapse of coverage on our membership. ’ ’
Mr. Johnson testified that the insurer’s representative met and discussed this matter with him, also with the insurance committee of the union, and as a result of such meetings a letter was prepared, printed and distributed to all the members of the union covered by the group insurance policy. This letter was dated March 21, 1953, and explained the changes to be made in the premium rates and other provisions of the group insurance contract, and concluded:
“If you want to discontinue coverage as of May 1, 1953, please hand resignation to your Secretary James Johnson. Other*438wise deduction will be made, if your local decides to continue program. ’ ’
Thereafter the execution of the rider was discussed with the members of the union and the same was executed by it. It is therefore apparent that the insureds well knew all the provisions contained in the rider by which the policy could be extended if they were met. The record further discloses that the premiums were payable in advance, so the premiums for the month of May 1953, were deducted by the employer from its April payrolls and at some time, not disclosed by the record, were remitted to the insurer. Since the rider provided that 75 % of the total number of eligible employees had to be insured on May 1, 1953, the insurer requested its representative to secure this information and furnish it to the insurer. On May 21, 1953, the representative advised the insurer that he could not secure the exact number, as neither the general manager nor the cashier were able to give him such information.
On May 29, 1953, the insurer wrote to Mr. Johnson, as recording secretary for the union, as follows:
“We have received a check in the amount of $1,419.90 representing payment of premium under the group insurance contract numbered above for the insurance month beginning May 1, 1953. We will hold this payment in abeyance until such time as satisfactory arrangements for the continuation of the group insurance contract covering the members of your union are completed.
“We would appreciate your sending us the total number of employees eligible for coverage under this insurance contract. If it is at all possible, an itemized listing would be desirable.
“Our representative Mr. R. K. G-ossard will be in contact ivith you A^ery shortly, if he has not already done so, to inform you of the conditions necessary for the continuance of the Hospitalization protection. ’ ’
The evidence discloses that no reply was made to such letter nor was any information furnished the insurer by the union *439or the employer as to the total number of employees eligible for coverage under the insurance contract.
On June 18,1953, the insurer returned the premiums paid and advised that they were not acceptable due to the cancellation of the group' hospital contract on May 1, 1953.
I cannot see any ambiguity in the first sentence of the third paragraph of the rider, which I feel is determinative here. It provides: “If the number of insureds under said contract on May 1, 1953, is less than 75% of the eligible employees, said contract shall be cancelled as of May 1, 1953.” It appears to me to be extremely clear in its wording, but I will admit that it does require some information to be furnished the insurer as to the number of eligible employees. I have heretofore outlined the steps taken by the insurer to ascertain this information and its lack of success. The situation confronting the insurance company is well illustrated in the testimony of John W. Crews, vice president of the group department of the insurance company, when he was asked:
“Q. Now, Mr. Crews, how could you ascertain how many were eligible for insurance or seeking insurance in the new Rider in 1953? A. We had no way ourselves of verifying the information other than to accept the information given us by either the union or the employer, or might be told to our agents and then given to us. We had no access, of course, to the records of the employer nor the records of the union; all we had to go by is what they would tell us.
“Q. How could you tell how many of those seeking insurance under the May 1 Rider,how many members comprised that number? Well, the only way we could tell for sure would be when the premium for May 1 was actually received when we could see how many people payments were being made for.”
The majority hold that it was the duty of the insurance company to notify the union that the contract had been can-celled in order to enable the union to obtain other insurance *440if they desired. I believe the evidence outlined shows conclusively that the union was aware of the provisions of the rider and in my opinion it had some obligation to the insurer to furnish information when requested, as it was in the letter of May 29, 1953. It is apparent to me that the insurer endeavored to the best of its ability to ascertain the facts as to the number of eligible employees without any assistance from the insured.
Another factor present in this case is that the trial was commenced on April 3, 1956, and recessed until such time as the plaintiffs could produce information with regard to membership in the union from their books, and thereafter and on December 19, 1956, the trial was resumed. At that time the union produced in evidence a certificate showing that the membership of the union in May of 1953 was 432, and in June it was 436. The certificate further shows that this information was taken from the monthly union per capita reports. To me it is thus clear that the union was in possession of the information requested by the insurer at all times but failed to co-operate with insurer and give it the information requested because the union was well aware of the terms of the rider and the fact that its books would disclose that on May 1, 1953, there did not exist a 75 % coverage. I agree with the majority opinion that there was some evidence that the number of eligible employees was 325 and that 75% of that number would be 243 and only 239 had paid premiums for May 1953. However such evidence was the best guess that insurer’s representative could make from the information he received. Turning to the union’s per capita reports we find there was a membership of 432 in May 1953, and the certificate states that as near as the union can determine there were between 50 and 60 members not eligible by reason of not having been employed the necessary length of time. Taking the largest figure of non-eligible employees so as to give the plaintiffs the benefit of any doubt that mig'ht exist, we thus determine from the evidence of plaintiffs them*441selves that the number of eligible employees in May 1953 was 372. Of that number 239 had the premium deducted from their salaries. This gives a total of approximately 64% of eligible employees paying premiums. The difference in membership is illustrated by the fact that 75% of 372 is 279, the number required to comply with the rider, and but 239 paid, a difference of 40.
With regard to the necessity of giving notice of intent to cancel for lack of 75% participation on May 1, 1953, as herein held by the majority, I feel that the meaning of the rider is clear. To me the provision of paragraph 3, that “If the number of insureds under said contract on May 1, 1953, is less than 75% of the eligible employees, said contract shall be can-celled as of May 1, 1953” expresses a condition precedent to defendant’s liability under the contract. The next sentence of paragraph 3, “If the number of Insureds under said contract becomes less than 75% of the eligible employees on or after June 1, 1953, the Association reserves the right to cancel said contract on any premium due date by giving thirty days notice of intent to cancel” expresses a condition subsequent. To construe these provisions any differently, in my opinion, would be to adopt inconsistencies into the contract and to vary its terms. To require notice of intent to cancel for lack of 75% participation on May 1, 1953, would require the defendant either to know the percentage of participation prior to May 1, in order to give such notice in advance, which to me is manifestly an impossibility and an absurdity, or to give such notice on or after May 1, 1953, which would be of no advantage to plaintiffs because no claims arising after May 1, 1953, would be compensable anyhow, since the contract would become ineffectual as of May 1, 1953.
R.C.M. 1947, section 58-206, defines a condition precedent. It states: “A condition precedent is one which is to be performed before some right dependent thereon accrues, or some act dependent thereon is performed.”
*442In 17 C.J.S., Contracts, section 338, it is said:
“A condition precedent in the law of contracts either may be a condition which must be performed before the agreement of the parties shall become a binding contract, or it may be a condition which must be fulfilled before the duty to perform an existing contract arises. * * *
“The question of whether stipulations in a contract constitute conditions precedent is one of construction dependent on the intent of the parties to be gathered from the words they have employed and, in case of ambiguity, after resort to the other permissible aids to interpretation.”
The words of the contract here indicate that the parties intended the contract to be ineffectual if 75 % of the eligible employees were not enrolled in the insurance plan on May 1, 1953, and that if participation dropped below 75 % after June 1, 1953, the contract could be cancelled by giving 30 days notice of such intent.
While the majority hold the contract was ambiguous and that notice was required to be given to cancel as of May 1, 1953, for lack of 75 % participation, I feel that the evidence clearly indicates that such was not the intent. The reason the rider was adopted was to raise the amount and number of premiums paid to a point where the defendant was not operating at a loss. This was undisputed. In other words, the contract was not to be continued unless 75 % of the eligible employees participated. If the insurance could be continued for any period with less than 75 % participation, the rider was a useless and idle gesture; 75% participation was thus manifestly a condition precedent to the insurer’s liability. The plaintiffs’ union knew how many members it bad. The agreement that was entered into required 75% of those eligible to participate. This was “a condition * * * to be performed before some right dependent thereon accrues.”
Since the 75% participation requirement was a condition precedent to defendant’s liability, and plaintiffs failed to al*443lege that such condition had been met, in my opinion, defendant’s demurrer should have been sustained. A condition precedent must be alleged and proved, where the right of recovery is dependent on its happening. Broat Lumber Co. v. Van Houten, 66 Mont. 478, 480, 213 Pac. 1116; Binzel v. Viehmann, 111 Mont. 6, 10, 106 Pac. (2d) 187. Here, plaintiffs alleged only that the contract “was in full force and effect.”
Aside from the pleadings, upon the trial plaintiffs offered no proof that the conditions precedent had been met.
For these reasons, since, in my opinion, the contract was not in force at the time the claims of plaintiffs arose, I would reverse the judgment of the District Court, and order the action dismissed.