Inez L. Perkins v. Philadelphia Life Insurance Company

755 F.2d 632, 53 U.S.L.W. 2436, 1985 U.S. App. LEXIS 29366

• Court: Court of Appeals for the Eighth Circuit
• Decided: February 22, 1985
• Docket: 84-1451-WM
• Status: Published

Opinions

MAGNUSON, District Judge.

Philadelphia Life Insurance Company (Philadelphia Life) appeals from an order of the District Court² awarding death benefits to appellee Inez Perkins under life insurance coverage established for her deceased husband, Raymond Perkins (Perkins), during his employment as president of a Missouri Corporation, TEC, Inc. (TEC). 586 F.Supp. 296, Philadelphia Life had denied payment of death benefits because Perkins’ death by suicide was excluded by the terms of the policy. The district court found that Missouri statute, § 376.620, applied to this case and nullified the suicide exclusion. Mo.Rev.Stat. § 376.620. Section 376.620 prohibits insurance companies from employing a suicide exclusion clause in policies issued to Missouri citizens. Although Perkins was at all relevant times a citizen and resident of Kansas, the court found that the life insurance policy had been issued not to Perkins, but to his employer, TEC, a Missouri corporation. Therefore the suicide exclusion was inoperative. The sole issue on appeal is whether the Missouri suicide statute, § 376.620, applies to the policy sued on in this case.

In December, 1980, Perkins was the president of TEC. On December 5, 1980, TEC entered into an Adoption and Participation Agreement with Philadelphia Life, a so-called “wrap-around” agreement whereby TEC elected to become a Participating Employer in a PLICO 79 Trust. The Adoption and Participation Agreement and the PLI-CO 79 Trust together constituted a plan of group term life insurance under 26 U.S.C. § 79. Its effect was to increase the total amount of group term life insurance coverage from $50,000 to $100,000 for those employees classified as President — a class which contained only one member, Raymond Perkins. On the same date, Perkins executed an application for a policy of life insurance. The policy was issued in January 1981 with Raymond Perkins designated as the insured and the owner of the policy and was delivered to Perkins at TEC’s offices in Missouri. Perkins had previously received a Certificate of Participation from Philadelphia Life, certifying that he was a participant in TEC’s group term life insurance plan. An endorsement to the policy provided that it was issued under a plan of group term life insurance established by TEC. Premium payments were to be made by TEC to provide continuing group term life insurance coverage on Perkins’ life. TEC qualified for deductions on premium payments and Perkins received favorable tax treatment. TEC could terminate the policy at any time.

The policy described above was in effect at the time of Perkins’ death. The circumstances surrounding Perkins’ death strongly indicate that he committed suicide. For purposes of this appeal, the court will assume that Mr. Perkins committed suicide. Mrs. Perkins submitted notice and proof of Perkins’ death and requested payment of the policy proceeds. Philadelphia Life refused to pay the proceeds, alleging Perkins’ suicide as a defense. The defendant took the position that since Perkins was a resident of Kansas, the Missouri suicide statute did not apply to bar the suicide defense. While the district court found in favor of the plaintiff on that issue, it denied plaintiff’s claim that Philadelphia Life’s failure to pay was vexatious, arbitrary and unreasonable, finding that defendant had a “reasonable belief” that the insured’s suicide was a defense to payment under the policy.

The Missouri suicide statute, provides as follows:

In all suits upon policies of insurance on life hereafter issued by any company doing business in this state, to a citizen of this state, it shall be no defense that the insured committed suicide, unless it shall be shown to the satisfaction of the court or jury trying the cause, that the insured contemplated suicide at the time he made his application for the policy, and any stipulation in the policy to the contrary shall be void.

Mo.Rev.Stat. § 376.620 (1978) (emphasis supplied). The statute’s applicability to the present ease turns upon whether or not the insured, a Kansas resident, was the person to whom the policy was issued.

Philadelphia Life argues that this court’s decision in Bowen v. New York Life Ins. Co., 117 F.2d 298, 299 (8th Cir.1941) requires a finding that the policy in question was issued to Perkins and not to TEC. In Bowen we declined to apply the Missouri suicide exclusion to an individual life insurance policy where the insured was not a Missouri resident. However, in Bowen, there was no question that the insured directly purchased the individual life insurance policy from New York Life and was the person to whom the policy was issued.

If Perkins had purchased an individual life insurance policy directly from Philadelphia Life without any third party intervention, it clearly would have been “issued to” Perkins, a Kansas citizen, within the meaning of the statute, and this court’s holding in Bowen would permit Philadelphia Life to use Perkins’ suicide as a defense to appellee’s claim. See also Lukens v. International Life Ins. Co., 269 Mo. 574, 191 S.W. 418 (1916). However, the court finds that the participation of TEC in contracting for the life insurance policy in the instant case requires a different result.

In Bowen v. New York Life Ins. Co., 117 F.2d 298, 300 (8th Cir.1941) this court relied upon the Missouri Supreme Court’s construction of § 376.620 which stated that:

“The section, when correctly construed, is but an inhibition against making insurance contracts in this state and with citizens of this state whereby the insurer is relieved from liability in the event the insured commits suicide. The only right, privilege, or immunity which it denies is the right to contract that in case of suicide the contract obligation shall not be effective, and this denial or abridgement extends only to the citizens of this state and insurers while contracting in this state.”

Bowen, 117 F.2d 298, 300 (8th Cir.1941) quoting Lukens v. International Life Ins. Co., 269 Mo. 574,191 S.W. 418 (1916). The language quoted in Bowen indicates that the statute is designed to protect the person who procures the insurance and not necessarily the insured.

Philadelphia Life contends that Regulation 13.11 of the Missouri Division of Insurance makes the applicability of § 376.620 dependent upon the residence of the insured. Regulation 13.11 was adopted by the Missouri Division of Insurance to implement the provisions of § 376.620 and it contains two principal provisions. Section 2 of Regulation 13.11 provides that:

No policy of life ... insurance whether group, individual, or any other form, will be approved for sale to Missouri citizens unless it clearly and conspicuously includes, by rider, endorsement, or printing, appropriate wording substantially equivalent to that contained in Section three. No such policy may be sold to a Missouri citizen unless it complies with this Regulation.

Section 3 of Regulation 13.11 provides that:

Life insurance ... policies must include ... the following statement or approved substantially similar statement:

Suicide is no defense to payment under this contract where the insured is a Missouri citizen____

The language provided for in Section 3 of Regulation 13.11 is the same language contained in the policy issued by Philadelphia Life.

Regulation 13.11 does not purport to interpret the Missouri suicide statute. Rather, it is a regulation designed to implement the statute by requiring insurance companies to notify policy holders of the existence of § 376.620. The method chosen to ensure that policy holders are informed of § 376.670 is to require specific language attached to any policy “sold to a Missouri citizen.” See Regulation 13.11, Section 2. The language requiring the endorsement to be placed upon any policy “sold to a Missouri citizen” indicates that the Missouri Division of Insurance was concerned with the sale of insurance to Missouri citizens. While it is true that the endorsement language required by Section 3 states that suicide is no defense where the insured is a citizen of Missouri that is not inconsistent with the Missouri Supreme Court’s interpretation of the “issued to” language cited by this court in Bowen. In most instances the insured and the person to whom the policy is issued are the same person. Moreover, the term “insured” in group life policies is sometimes used to refer to the employer (the “definite” insured) as well as to the employee (one of many “contingent” insureds). See Appleman, Insurance Law § 46 (Rev.Ed.1981).

The court is persuaded that, while the Missouri suicide statute is susceptible of several meanings, the “issued to” language of § 376.620 refers to the person to whom the policy is sold. To determine to whom the policy was sold in the present case it is necessary to examine the nature of the contractual relationship between TEC, Perkins, and Philadelphia Life. The policy in question was issued und.er a plan of group insurance coverage maintained by TEC. The form of the insurance contract is not that of a master policy and a certificate of participation,³ but rather that of a separate insurance policy which is issued pursuant to a larger group plan entered into by TEC and Philadelphia Life. While it is true that Perkins was the owner and the insured of the policy, but all other factors indicate that the policy was sold to TEC.

Philadelphia Life looked to TEC for the payment of premiums and all of the premiums were paid by TEC. TEC retained the right to cancel the policy unilaterally and was entitled to an income tax deduction for the premium payments. Moreover, the policy at issue was sold as a plan of group term life insurance under 26 U.S.C. § 79 (1982). Section 79 provides favorable tax treatment to group life insurance purchased by employers for their employees.⁴ It clearly was the intention of the parties to have TEC purchase group⁵ life insurance for the benefit of Perkins. Thus, the structure of the arrangement between TEC, Philadelphia Life, and Perkins leads this court to conclude that the policy was sold to TEC for the benefit of Perkins and hence was “issued to” TEC for purposes of § 376.620.

For the reasons stated above, the judgment of the district court is AFFIRMED.

2 . The Honorable SCOTT O. WRIGHT, District Judge for the Western District of Missouri.

3 . If the policy was clearly a master policy of group life insurance contracted for by TEC and Philadelphia Life, with Perkins covered as an insured employee by means of a certificate of participation, it would appear that Missouri law would bar suicide as a defense.

4 . 26 U.S.C. § 162(a) provides that the employer may deduct the premiums while § 79 provides favorable tax treatment to the employee.

5 . Philadelphia Life argues that the policy at issue should be construed as an individual policy since only one employee, Perkins, was covered and for there to be a valid group insurance policy there must be more than one person covered. However, Missouri Statute § 376.691 provides that group insurance may cover either a group of employees or a class of employees— in this case those employees designated as "President”. While at the time the policy was issued there was only one person in the class, there could be more than one member of the class— both a retired President and a current President. The mere fact that only one person was covered by the policy does not necessarily mean that the policy was an individual policy of life insurance.