Uptegrove v. Metropolitan Life Insurance

Chappell, J. This action was brought by the administratrix of the estate of Armpstead F. Uptegrove, her deceased husband, to recover disability benefits allegedly due and accruing to him during his lifetime, under the provisions of an industrial group insurance contract. The cause was tried to a jury, but at'the conclusion of the evidence defendant moved to dismiss and plaintiff moved for judgment, whereupon the trial court discharged the jury and entered a judgment for plaintiff against defendant for the sum of $1,738 and costs, including the sum of $300' as attorney’s fees taxed as a part thereof. Defendant appealed to this court, presenting for decision the sole question of whether plaintiff is the real party in interest. We find that plaintiff as administratrix was the real party in interest and the proper person to maintain the action. — 53 — By virtue of section 20-301, Comp. St. 1929, “Every action must be prosecuted in the name of the real party in interest, except as otherwise provided in section * * * (20-304) ”, Comp. St. 1929. In giving effect to this section we have held that the real party in interest is the person entitled to the avails of the suit. Gregory v. Pribbeno, 143 Neb. 379, 9 N. W. 2d 485. Sections 20-304 and 30-803, Comp. St. 1929, expressly give an executor or administrator authority to maintain an action for the benefit of the estate of such a person. An examination of the record discloses that Armpstead F. Uptegrove, who died in the State Hospital on July 24, 1940, was employed by the Franklin Ice Cream Company, and its successor Beatrice Creamery, from 1921 until he was discharged in December, 1931. During most of this period he was a competent employee. However, for some months prior to the termination of his employment he manifested serious mental and physical decline which eventually resulted in his discharge. It appears from the evidence, without contradiction, that while he was insured and before age 60 he was totally and permanently disabled due to, or accompanied by, mental incapacity which prevented him from engaging in any occupation or from performing any work for compensation or profit from a period prior to December, 1931, and until his death. During his employment he was insured under a group or master policy issued to his employer by defendant company, who also issued to him a certificate of participation, dated April 1, 1925, evidencing his contract which was in full force and effect at the time his disability occurred. After his death the certificate was found in the employee’s safety deposit box, to which his wife, the administratrix, did not theretofore have access. In Hemmer v. Metropolitan Life Ins. Co., 131 Neb. 14, 267 N. W. 153, this court held: “When the certificate delivered to an employee, to certify that he is insured under a group or master policy issued to his employer, is also executed by the same insurance company which issued the — 54 — group policy, then such policy, the application therefor, the certificate given the employee, and all amendments and riders attached to each, together constitute the entire contract between the employee and the insurance carrier.” This rule is applicable here. We must bear in mind that the insurance contract of the employee was dual in character, that is, it was insurance upon his life and against his disability. It provided for insurance upon his life in the sum of $1,500, payable after death to his wife, Inez V. Uptegrove, as beneficiary, but it also provided that if he suffered total and permanent disability as the result of injury or disease while insured and before age 60 he was to be paid by defendant during his lifetime certain disability benefits each month for a limited period of time in lieu of payment of the life insurance to his beneficiary after death. This action is to recover such disability benefits and not the life insurance. In this connection, it will be noted that all of the disability payments accrued and were due and payable to the insured employee before his death occurred. None of these payments were ever made by defendant, and the question is whether the administratrix of his estate can now recover them. The defendant contends that under the provisions of the contract the action can only be maintained by Inez V. Uptegrove in her individual capacity as beneficiary. With reference to disability benefits, the certificate issued to the employee provides that defendant company “will pay to such employee, in lieu of the payment of the insurance under said policy at his death, equal monthly instalments, the number and amount of such instalments to depend upon the amount of insurance in force on the life of such employee at such date, as shown in the following table: Amount of Insurance $1,500 Number of Instalments 30 Amount of Each Instalment $51.75”. The group or master policy provides, “the Company will, in lieu of the payment at death of the insurance on the life of the said employee, as herein provided, pay equal monthly instalments, as hereinafter described, (as shown above) to the said Employee, — 55 — or to a person designated by him for the purpose, or, if such disability is due to, or is accompanied by, mental incapacity, to the beneficiary of record of the said Employee.” (Italics supplied.) The contentions of defendant are bottomed upon the latter provision. The company insists that it is contractually bound thereby to pay the disability benefits to the “beneficiary of record.” We are unable to give this construction to the contract. A beneficiary of an insurance contract is the person who is entitled to the proceeds or benefits which accrue and become payable under the contract. 29 Am. Jur., sec. 1271, p. 948; 2 Couch, Cyclopedia of Insurance Law, sec. 305, p. 809. Therefore, it may be rightly said that Inez V. Uptegrove, wife of the insured employee, was the beneficiary of the life benefits after his death, but the employee was himself the beneficiary of the disability benefits which accrued and became payable to him during his lifetime. Shea v. Aetna Life Ins. Co., 292 Mass. 575, 198 N. E. 909; Foster v. North Carolina Mutual Life Ins. Co., 150 S. C. 482, 148 S. E. 656. The promise of defendant to pay disability benefits was made to the employee. He is the person thus insured under the contract and his substantive rights to payment of all the installments became fixed when he suffered the permanent, total disability during the life of the certificate and survived the 30-months’ period of their duration. Not having been paid by the company to him^or the person designated by him for that purpose, then upon his death these rights passed to his administratrix. Because of mental incapacity of the employee all of the conditions precedent to recovery of disability benefits were not complied with during his lifetime, but this was impossible under the circumstances and does not preclude recovery by the administratrix who seasonably after his death, and after obtaining knowledge of her legal rights, made necessary proof and claim upon defendant for payment. Trucken v. Metropolitan Life Ins. Co., 303 Mass. 501, 22 N. E. 2d 120; Shea v. Aetna Life Ins. Co., supra. It is generally held that a pol — 56 — icy issued to the insured, he being the real party to the contract and the one to whom the benefits under the policy inure, may be sued upon by the representative of the insured’s estate where loss occurred before the insured’s death. 8 Couch, Cyclopedia of Insurance Law, sec. 2063, p. 6738; Langevin v. Prudential Ins. Co., 132 Me. 392, 171 Atl. 392. We find no conflict between the certificate and the group or master policy. The provision relied upon by defendant, which appears only in the master policy, is simply a facility of payment clause in which the option of payment is by agreement confined to a person to be designated or to one already designated by the insured to' receive payment' for him. The words “beneficiary of record” appearing therein have no significance except as an agency or a person designated to whom payment might be made for the insured. Carruth v. Aetna Life Ins. Co., 157 Ga. 608, 122 S. E. 226. The defendant company could have paid the disability benefits to the “beneficiary of record” in good faith and acquitted itself of liability to the employee or his guardian during his lifetime or his representative after his death, but it neglected to do so. While the phraseology of facility of payment clauses which appear generally in industrial insurance policies is not always identical, their definition, purpose, and legal effect are ordinarily the same. Courts have looked upon them with favor and they should be liberally construed. A facility of payment clause is merely an appointment, by agreement between the parties, of persons who may receive payment of the benefits or proceeds accruing under the contract, give receipt therefor to the insurer, in good faith discharge it from liability, and thereafter hold the amount received for the benefit of the person ultimately entitled thereto. It affords a ready method of raising money for the support, maintenance, and medical care of the disabled insured employee, but it has been generally held that such a clause is for the benefit of the insurer, to be exercised at its option, to enable it to make prompt payment without the expense of guardianship or administration proceedings, — 57 — and to remove a chance of litigation between claimants and the insurer. A facility of payment clause does not change or modify the original contract with the insured, or make the person therein designated to receive payment for him the beneficiary or owner of the proceeds, or give such person the right to maintain an action to compel the insurer to make payment to him. Therefore, the rule is that a claim to the proceeds of an industrial insurance policy is not affected by the facility of payment clause where the insurance company has failed to avail itself of the provision. Under such circumstances it cannot be used by the company to avoid liability and defeat the purposes of the policy. In the case at bar the rights of the company to pay the “beneficiary of record” for the insured and thus in good faith discharge itself of liability existed only up to the time suit was filed by the administratrix, and this cause must now be disposed of as if there were no facility of payment clause. These conclusions are supported by many authorities, including our own. See 29 Am. Jur., sec.-1278, p. 953, secs. 1279, 1280, p. 955; 31 C. J. 969-972; 2 Couch, Cyclopedia of Insurance Law, sec. 311a, p. 836; Annotation, 75 A. L. R. 1435; Caveny v. Healey, 94 N. J. Law 28, 109 Atl. 204; Ogletree v. Hutchinson, 126 Ga. 454, 55 S. E. 179; Weddle v. Prudential Ins. Co., 130 Neb. 744, 266 N. W. 624; Brown v. Ehlers, 130 Neb. 918, 267 N. W. 156. Without doubt, the provision relied upon by defendant means that if the employee is totally and permanently disabled, but mentally competent, the company will make the scheduled payments to him. In such case, only the employee, if living, or his representative after his death, could maintain an action to recover them. Defendant concedes as much. However, if he were so disabled, and mentally competent, but had designated a person to whom such payments might be made for him, the company could in good faith make the payments to such designated person and be relieved of liability, but if it refused to do so, then only the employee, if living, or his representative after his death, could maintain an action to recover them. If, as in the — 58 — case at bar, he is so disabled, but mentally incompetent, he thereafter could not legally designate any other person to receive the payments for him, in which event the company could in good faith under the contract have made the payments to the “beneficiary of record,” the person theretofore designated by him for that purpose while he was competent, and be relieved of liability; but if it refused to do so, then only his guardian, if the employee were living, or his representative after his death, could maintain the action. It follows that the judgment of trial court was right, and it is affirmed. Affirmed.