Life Insurance Co. of North America v. Halker

Hammond, C. J., delivered the opinion of the Court. The group life insurance policy here involved originally was issued by Life Insurance Company of North America (Insurer), the appellant, a subsidiary of Insurance Company of North America, to cover the employees of the parent company which under the policy was the “Employer” and under the applicable statutes of Pennsylvania was the “Policyholder.” 1 After the policy had been in effect ⁶²² for some time, it was amended (by Amendment No. 11) to include independent general agents of the Insurance Company of North America as “Employees” (although only employees of the agents and not the agents as such were insured), and after this Allied Insurance Services of Maryland, Inc. (Allied), one of those agents, covered its employees by the group policy. Harold Halker was employed by Allied and became insured for $20,000. Allied paid the quarterly premiums (in part contributions of its employees and in part its own funds) — often late — to Insurance Company of North America, which in turn paid them to the Insurer, until the premium due October 1, 1965 which was never paid.

The policy thus beyond doubt continued to cover Allied’s employees, including Halker, through September 30, 1965. Halker died on October 31, 1965, concededly within thirty-one days of September 30, and his widow, the appellee, made demand on the Insurer for payment of the $20,000 for which he had been insured. The Insurer refused to pay, claiming that Halker ceased to be covered at the end of September 30, the last day for which a premium had been paid, and that even though the policy recites that “A grace period of thirty-one days following the due date shall be allowed the Employer [Policyholder] for the payment of any premium after the first * * this extension of the policy is solely for the benefit of the Employer and not for the benefit of the insureds. The widow says this is manifestly double talk which may be full of sound and fury but means nothing because the policy is a term policy, the only purpose of which is to insure lives, and the grace period would be meaningless if it did not serve to extend the time during which lives were covered.

Judge Proctor, sitting in the Circuit Court for Baltimore County without a jury, agreed with the widow and on November 19, 1968, granted her a judgment against ⁶²³ the Insurer, the appellant, for $20,000 with interest from November 16, 1965 and costs. We think Judge Proctor’s decision is almost demonstrably correct. 40 Purdon’s Penna. Statutes, § 532.1 provides that: “No policy of group life insurance shall be delivered in this State unless it conforms to one of the following descriptions and to the requirements as to each set forth in sections two, three, four and five of this act. “ (1) A policy issued to an employer, or to the trustees of a fund established by an employer, which employer or trustees shall be deemed the policyholder, to insure employees of the employer for the benefit of persons other than the employer.” Although it is not necessary for the decision of the case, it appears to us that § 532.1 must be read into Amendment No. 11 and the basic policy to make Allied a policyholder or, in the words of the policy, an employer in relation to its covered employees. The basic policy gives the employer a thirty-one day grace period and adds that if the premium is not paid within thirty-one days “this policy shall automatically terminate at the expiration of the grace period * * Amendment No. 11 states that an insured’s insurance coverage shall terminate at “*