Court Opinion

ID: 9443439
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:20:05.583509+00
Date Added: 2024-06-11T17:29:29.103048
License: Public Domain

COLLET, Circuit Judge.
Plaintiff-appellant brought this action in the state court of Arkansas to recover $10,-000.00 on the life of her husband, John W. Gulledge, upon a group life insurance policy. It was removed to the federal court on the petition of the defendant-appellee, a Nebraska corporation. The only question is whether the contract of insurance had become effective at the time of Mr. Gulledge’s death on December 20, 1950.
Gulledge was employed by the Crossett Paper Mills of Crossett, Arkansas, which will be referred to as the employer. For several years the employees of that company had been carrying group life insurance. Different coverage being desired, the employer on behalf of its employees requested proposals from life insurance companies. The proposal of defendant was accepted. It was conditioned upon at least 75 per cent of all of the company employees applying for insurance under the group policy. There was no distinction made in the formal proposal, the subsequent application, or the policy when issued, between union and nonunion employees. Gulledge was employed in an executive capacity and was not a member of the union. In submitting the proposals of the different insurance companies to its employees, the employer differentiated between the union and nonunion employees and by questionnaire first interrogated the union employees concerning their preference for the proposals offered. Prior to December 2, 1950, the union employees had indicated their preference for the proposal made by defendantappellee, the World Insurance Company (which will hereafter be referred to as the defendant). And prior to December 2, 1950, more than 75 per cent of the employees had made proper applications. On December 2, 1950, the employer made formal application to defendant for the group insurance. That policy was issued and states its effective date in the following language:
“World Insurance Company,
Omaha, Nebraska, U. S. A.”
“A Mutual Legal Reserve Company”
(Hereinafter called the Company)
“Agrees to Pay
Upon receipt of due and satisfactory proof of the death, while this Policy is in force, of any insured employee of
Crossett Paper Mills
(Hereinafter called the Employer)
the amount for which such employee’s life is insured hereunder in accordance with the classification schedule hereinafter set forth in Provision I.
In consideration of the application of the employer and the individual applications, if any, of the insured employees and the payment o-f premiums calculated in accordance with Provision 8 hereof, this Policy is issued for the term of one year from the third day of December, 1950, hereinafter called the policy date, with the privilege of renewal from year to year as hereinafter provided.”
Thereafter, the employer sent questionnaires to its salaried employees to determine if they preferred defendant’s proposal. On December 10, 1950, the questionnaires were counted and it was determined that the salaried employees did prefer defendant’s proposal. Mr. Allen, office manager for the employer, and Mr. Burris, manager of defendant’s field service, who was negotiating the insurance for defendant, agreed that the effective date of the insurance of the salaried employees who applied for it should be January 1, 1951. On December 15, 1950, Mr. Gulledge made formal and proper application for the insurance. On December 20, 1950, he was accidentally killed in an automobile accident.
The policy provides that it, the application made therefor by the employer, and the *160applications of the employees, constitute the contract of insurance. The application of the employer provides as to the effective date:
“The insurance for eligible employees will become effective on a date agreed upon by the Employer and the Company provided at least 75%, if on a contributory basis, or 100% if on a noncontributory basis, but not less than fifty of the eligible employees have made application for the insurance.”
Gulledge was an “eligible employee”, the insurance was on a “contributory” basis, i. e., part of the premiums was to be paid by the employer and part by the employee, and, as heretofore noted, more than 75 per cent of the employer’s employees had applied for the insurance.
The policy further provided that each eligible employee would be insured without evidence of insurability immediately upon making written application for insurance on the defendant’s form. Gulledge’s application, above referred to, was made on such form.
The policy contained the familar provision that only the President, a Vice-President, the Secretary or an Assistant Secretary of the defendant had power to “change, modify, or waive the provisions of this Policy and then only in writing”, (italics ours) and that the defendant “shall not be bound by any promise or representation heretofore or hereafter made by or to any agent or 'person other than as above.”
The application and policy contained provisions for the payment and adjustment of premiums by the employer on the individual employee’s insurance. If the policy was effective on December 3, 1950, those provisions are such that Gulledge’s premium would not be in default, he having authorized its deduction from his salary by the employer in his application for the insurance on December 15, 1950.
It is the defendant’s position that the application provided that the insurance should be effective on the date agreed upon by defendant and the employer. That it was agreed between them that it was to be effective as to union employees on December 3, 1950, and on salaried employees on January 1, 1951. That since Gulledge was killed on December 20, 1950, and he was a salaried employee, his insurance was not in force at the time of his death. The trial court so held.
That there was an agreement between Mr. Allen and Mr. Burris that, for the convenience of the employer’s accounting department, the insurance applied for by a salaried employee would not be effective until January 1, 1951, the evidence, dehors the policy and application (received over plaintiff’s objection), clearly shows. But in the light of the provisions of the policy, above quoted, could that agreement be valid and supersede the effective date of December 3, 1950, stated in the policy? It could not. It is true-that the application preceding the policy provides that the effective date of the policy should be agreed upon by the employer and the defendant. That date was agreed upon by the employer and by defendant, over the signature of the defendant’s President and Secretary, in the provision of the policy fixing its effective date. In that provision there is no qualification or reservation that it should be effective on the date fixed as to only a part of the employees. That provision of the policy carried into execution the provision in the employer’s application that the effective date should thereafter be fixed by agreement. That effective date thereupon became a part of the policy. There is no ambiguity in its unqualified statement that the term of the insurance began on December 3, 1950. On and after that date, by the terms of the contract, any eligible employee who had not theretofore applied could obtain the coverage of the policy by applying therefor and be covered immediately upon making the application.1 Mr. Burris was the manager of defendant’s field service. By the .express provision of the policy he had no authority *161to modify any of its terms. His agreement with Mr. Allen that it was not to become effective until January 1, 1951, was as invalid and ineffective as an agreement between them that the amount of Mr. Gulledge’s insurance was $100,000.00 instead of $10,000.-00 would have been. Sadler v. Fireman’s Fund Ins. Co., 185 Ark. 480, 47 S.W.2d 1086; Metropolitan Life Ins. Co. v. Minton, 188 Ark. 456, 66 S.W.2d 627; Harrower v. Ins. Co. of North America, 144 Ark. 279, 222 S.W. 39; Home Ins. Co. v. Cole, 195 Ark. 1002, 115 S.W.2d 267; Carter v. Thornton, 8 Cir., 93 F.2d 529.
Defendant cites cases holding that the insurance company and a company making group insurance contracts may modify or terminate them without the consent of the employees insured thereunder. Those cases have no application here. They do not hold that an agent of an insurance company may modify or terminate a group insurance policy in the face of a specific provision of the policy that he has no authority to do so.
The cause is reversed and remanded with directions to enter judgment for the plaintiff with such penalty and attorney fees as may be just and proper.

. There was a time limit within which the application had to be made, but since Gulledge’s application was made within that time, that provision is not material.