Court Opinion

ID: 8882126
Source: CourtListenerOpinion
Date Created: 2022-11-26 20:52:25.466926+00
Date Added: 2024-06-11T17:06:42.783811
License: Public Domain

KALODNER, Circuit Judge
(dissenting).
I would affirm the District Court’s Order entering judgment in plaintiffs’ favor and against the defendant for the reason that in my view the District Court did not err in granting summary judgment against defendant in the light of the undisputed facts established by defendant’s own proofs.
This appeal is from the District Court’s entry of summary judgment against the defendant life insurance company in a declaratory judgment action instituted by the plaintiffs, trustees under the will of Orville C. Dewey, Jr., deceased, to recover proceeds of a Certificate of Insurance issued by the defendant to Orville C. Dewey, Jr. under its group life insurance policy covering employees of Dewey’s employer, Dewey Brothers, Inc., an insurance brokerage company.
Defendant below denied plaintiffs’ claim on the ground that Orville C. Dewey, Jr. was not a qualified member of the group of employees covered by its policy in that he did not “regularly work at least thirty hours per week as an employee” of Dewey Brothers,1 Inc. as required by the group life insurance policy.
The District Court, in an Opinion accompanying its Order granting plaintiffs’ motion for summary judgment, held that defendant had by its conduct “waived” its asserted defense.
On this appeal, defendant contends that the District Court erred in granting summary judgment because the “waiver” issue presented “genuine'' issues of material fact” requiring jury determination.
The record below, via various Exhibits ; “Defendant’s Answers to Plaintiffs’ Requests for Admissions”; and the deposition of Gary C. Greis, supervisor of defendant’s group claim department, establishes these undisputed facts:
On November 2, 1960, defendant received an application for group insurance, dated October 31, 1960, signed by John Dewey, as President of Dewey Brothers, Inc. (“Dewey”). The application proposed coverage for fourteen individuals who were stated to be full-time employees of Dewey. It was accompanied by a Memorandum1 in which Dewey supplied the names of the fourteen employees. Alongside the name of Orville C. Dewey there was a notation “Covered by Government Service Health & Accident.” Defendant contracted with the Retail Credit Company (“Retail Credit”) to investigate and to determine the type of risks involved in the employee group, and in addition to verify the statement in the application that the employees did work full time. Retail Credit thereafter made a series of “Reports” to defendant with respect to its investigation in which they advised, inter alia, that (1) three of the fourteen employees proposed for group coverage, viz., Paul C. Dewey, Daniel Dewey and Nelson G. Dewey, were not full-time employees of Dewey; (2) Charles Denby was “part-time” secretary of Dewey, and “he is also an attorney self-employed” and “[h]e will put in anywhere from 15 to 40 hours a week for the firm [Dewey] as needed”;2 and (3) “Orville C. *967Dewey is the assistant treasurer of Dewey and [h]e is also known to be employed by the United States government, the exact connection in this capacity is not known.”
Since the Retail Credit reports were in part inconsistent with the initial application for the group insurance policy, defendant retained Dun & Bradstreet, Inc., nationally known credit agency, to interview John Dewey, president of Dewey, in order to clarify the nature of the employment relationship between Dewey and those proposed for group insurance coverage. In the interview which ensued, according to Paragraph 10 of “Defendant’s Answers to Requests for Admissions”, John Dewey advised Dun & Bradstreet’s representative that “the office employees and clerks worked * * * a total of 35 hours per week and that the corporation’s officers worked 40 hours per week.” The Dun & Bradstreet report to defendant of its interview listed both Denby and the deceased Dewey as working 40 hours a week. After receiving this report defendant advised Dewey on December 7, 1960, that its application for a group insurance policy had been approved and that it would be issued effective November 1, 1960. The policy was issued December 13, 1960, and a Certificate of Insurance thereunder in the amount of $20,000 was delivered to Orville Dewey.
The premiums paid to defendant for Orville’s coverage until his death on September 25, 1965 amounted to $3657.91. Total premiums paid for the group coverage during the stated period amounted to some $30,000.
The policy contained a provision which stated that it excluded coverage of all persons who “* * * do not regularly work at least thirty hours per week as an employee of the Employer.”
The policy further contained a one-year incontestability clause compatible with Pennsylvania statutory requirements.
As earlier stated, the District Court ruled that in the light of the above undisputed facts defendant had “waived” compliance with the minimum 30-hour per week employment provision of the policy.
In doing so it said in relevant part:
“The plaintiffs’ second contention3 is that the defendant is estopped or has waived any defenses that it may have upon the policy. The law of Pennsylvania, which controls this case, is that acceptance of premiums with knowledge of facts inconsistent with statements in an application may constitute waiver of a defense based upon such statements. Knowledge which is sufficient to lead a prudent person to inquire about a matter will be regard*968ed as knowledge of a fact which inquiry would have revealed. Columbia Nat. Ins. Co of Boston, Mass. v. Rodgers, 116 F.2d 70S (10th Cir. 1940); Franklin Life Ins. Co. v. Bieniek, 312 F.2d 365 (3d Cir.1962).
“In the present case, the defendant had been advised by its investigating agency that Orville Dewey, in addition to his position with Dewey Brothers, held a job (not specified) with the U. S. Government. With this knowledge before it the defendant issued its policy covering Orville Dewey and collected premiums for nearly five years.
“Knowledge of the part-time character of Orville’s employment with his company was sufficient to put the insurer on inquiry. By such inquiry, the defendant would have ascertained that Orville was employed by the Central Intelligence Agency in a full-time capacity. These facts in my opinion are sufficient to hold that the defendant, by its acceptance of premiums on the policy, waived its defense.”
As earlier stated, I am of the opinion . that the District Court did not err in granting summary judgment against defendant in the light of the undisputed facts established by defendant’s own proofs, above recited.
Pennsylvania law controls in the instant ease since the group life insurance policy and the Certificate of Insurance thereunder were delivered in Pennsylvania.4
Under Pennsylvania law, where an independent investigation by an insurance company discloses facts “sufficient to expose the falsity of the representations of the applicant or to put the insurance company upon further inquiry”, the insurance company is estopped from asserting the right to rely upon representations made by the applicant. Crawford v. Manhattan Life Insurance Company of New York, 208 Pa.Super. 150, 221 A.2d 877 (1966). It was there said (pp. 166-167, 221 A.2d at p. 886):
“We agree with the statement in 7 Couch, Insurance 2d, § 35:84 (1961), that, ‘It is a general and salutary custom of life insurance companies, however, in the interest of their policyholders as well as themselves, to obtain through various channels information in respect to applicants for life insurance additional to that which the applicants themselves afford, and it would be unreasonable to hold that such an independent investigation of itself deprives an insurer of the right to rely upon representations made by an applicant. To have this effect, the investigation must disclose facts sufficient to expose the falsity of the representations of the applicant or to put the insurer upon further inquiry.’ See also Apperson v. United States Fidelity and Guaranty Company, 318 F.2d 438 (5th Cir.1963), and cases cited therein, and 169 A.L.R. 361.” (emphasis supplied).
In Apperson, above cited, the court said at page 441:
“The mere fact that the insurer makes an independent investigation in order to test the truth of the representations made by the applicant does not absolve the applicant from telling the truth nor lessen the right of the insurer to rely upon his representations, unless the investigation either discloses the falsity of the representations or discloses facts which would put a prudent person on further inquiry.
“If the investigation discloses facts which would put a prudent man on inquiry and such an inquiry made with reasonable diligence, would have disclosed the falsity of the statements made by the applicant in the application for the insurance, then the insurer is equitably estopped from asserting such false statements as a ground for cancelling the policy.” (footnotes omitted; emphasis supplied).
In the leading case of Columbian Nat. Life Ins. Co. of Boston, Mass. v. Rodg*969ers, 116 F.2d 705 (10 Cir. 1940), cert. den. 313 U.S. 561, 61 S.Ct. 838, 85 L.Ed. 1521 (1941), cited in Apperson, the Court said (p. 707):
“Knowledge which is sufficient to lead a prudent person to inquire about the matter, when it could have been ascertained conveniently, constitutes notice of whatever the inquiry would have disclosed, and will be regarded as knowledge of the facts.” (citations omitted; emphasis supplied).
We quoted with approval the Columbi-an rule in Franklin Life Insurance Company v. Bieniek, 312 F.2d 365, 375 (1962), in declaring that once an insurance company is put to the duty of making further inquiry and fails to do so, it must “be held bound by the knowledge such inquiry would have disclosed.” We further noted in Franklin, with respect to the Columbian rule, that “Such a rule is accepted in Pennsylvania, Ratkovic v. Metro. Life Ins. Co., 126 Pa.Super. 492, 191 A. 201 (1937), and other jurisdictions.”
Applying the principles stated in the foregoing cases to the instant case, it is clear that the undisputed facts established that defendant had “waived”, and was thereby estopped from asserting, the defense that Orville Dewey was not covered by Dewey’s group insurance policy because he did not “regularly work at least thirty hours per week as an employee.”
The undisputed facts disclose that the Retail Credit investigation reports advised defendant that (1) Orville C. Dewey “is also known to be employed by the United States government, the exact connection in this capacity is not known”; (2) Charles Denby was “part-time” secretary of Dewey, and “he is also an attorney self-employed” and “[h]e will put in anywhere from 15 to 40 hours a week for him [Dewey] as needed”; and (3) three of the fourteen employees proposed for group coverage were not full-time employees of Dewey, as represented in Dewey’s application.
These Retail Credit reports put defendant on notice that Dewey’s representations in its group policy application that all of its employees and officers worked from 35 to 40 hours per week were not to be accepted at face value. They particularly put defendant on notice that Orville Dewey, in addition to his Dewey employment was in the employ of the United States. That fact, standing alone, “would put a prudent person upon further inquiry”, and it reasonably imposed upon defendant the duty to check directly with Orville Dewey as to the number of hours he worked for Dewey. Since defendant did not discharge the stated duty it was charged with knowledge of the conceded fact that Orville worked less than 30 hours per week for Dewey. That being so, defendant “waived”, as to Orville, the policy requirement as to a 30-hour per week employment by Dewey, and the waiver estops defendant from its asserted defense of Orville’s failure to meet the policy requirement.
What has been said, brings us to defendant’s contention on this appeal that entry of summary judgment was precluded in the instant case by reason of existence of “genuine issues” of material facts.
These “genuine issues” as to “material facts” are stated to be (1) whether the defendant’s “Retail Credit reports would cause a reasonable insurer to investigate further”; (2) “whether the subsequent investigation actually performed by the defendant was reasonable under the circumstances” and (3) “the liklihood that any investigation would have disclosed Orville C. Dewey’s activities in behalf of the C.I.A.”
The short answer to these asserted “genuine issues” as to “material facts” is that under defendant’s own proof5 they are little short of specious.
*970These principles as well-settled6 with respect to the application and sweep of Rule 56, F.R.Civ.P.:
The purpose and function of the summary judgment Rule is to expeditiously determine and dispose of cases when there is no genuine issue of a material fact to be decided.
Pleadings, affidavits, depositions, answers to interrogatories and requests for admissions are to be considered by a court in determining whether there is a bona fide dispute as to a material fact and neither conclusionary allegations nor general denials standing alone create an issue of fact.
Summary judgment must be granted when a court is convinced that reasonable men could not differ as to the facts. Lopez v. Denver & Rio Grande Western Railroad Company, 277 F.2d 830, 832 (10 Cir.1960).
The summary judgment granted by the District Court abundantly satisfied the requirements of the stated principles.

. Plaintiffs Exhibit No. P 7.

. In a further report on Denby, it was stated: “Charles Denby in addition to being secretary of Dewey Brothers is an attorney in the firm of Reed, Smith, Shaw and McOlay [a prominent Pittsburgh, Pa. law firm] and has been during the time known.”

. The plaintiffs’ first contention was that the incontestability clause of the policy acted as a bar to any defense that defendant could make. The District Court rejected that contention on the authority of Fisher v. United States Life Ins. Co., 249 F.2d 879 (4 Cir. 1957). It was there held that under applicable New York law the incontestability provision of a policy did not foreclose a defense premised on the ineligibility of the insured under the policy’s terms.
Subsequent to the District Court’s decision in the instant case, the Court of Appeals of New York in Simpson v. Phoenix Mutual Life Insurance Company, 24 N.Y.2d 262, 266, 299 N.Y.S.2d 835, 838-839 (1969), held that “ * * * employment, as defined in this group policy, is a condition of insurance and, therefore, since the insurer did not eon-test the employee’s eligibility within the period of contestability, it is barred from raising it, as a defense to the beneficiary’s action (Eagon v. Union Labor Life Ins. Co., 3 N.Y.S.2d 785, 164 N.Y.S.2d 37, 143 N.E.2d 793).
“Our courts in the past have stringently enforced the incontestable provision required by statute to be included in every group and individual life insurance policy because of the important purposes which it is intended to serve. The provision safeguards an insured from excessive litigation many years after a policy has already been in force and assures him security in financial planning for his family, while providing an insurer a reasonable opportunity to investigate. * * * ” [footnote omitted].

. Franklin Life Insurance Company v. Bieniek, 312 F.2d 365, 367-368 (3 Cir. 1962).

. Defendant’s Answers to Plaintiffs’ Request for Admissions ; Deposition of Gary O. Greis, supervisor of defendant’s group claims department, and its Exhibits.

. Kern v. Tri-State Insurance Company, 386 F.2d 754, 756 (8 Cir. 1968); H. B. Zachry Company v. O’Brien, 378 F.2d 423, 424-425^26 (10 Cir. 1967) ; Fitzgerald v. Westland Marine Corporation, 369 F.2d 499, 500 (2 Cir. 1966).