The opinion of the court was delivered by: BRYAN
Plaintiff, the widow and named beneficiary of Clarence E. Korzinek, sues to recover $ 20,000 in additional insurance benefits under two group insurance policies issued by defendant Postal Life Insurance Company (Postal) to Selinger Textile Corporation (Selinger) and its subsidiaries which covered her late husband as an employee of Selinger Pajama Fabrics, Inc., one of the subsidiaries. The case was tried before me without a jury. Jurisdiction is based on diversity of citizenship and this court has jurisdiction under 28 U.S.C. § 1332.
The insurance policies involved here were issued in New York by a New York insurance company to Selinger which has its principal place of business in New York City. Clearly, therefore, New York law controls the rights of the parties under these policies.
The evidence adduced on the trial established and I find the facts to be as follows:
Clarence Korzinek, plaintiff's husband, died on May 28, 1960 while in the employ of Selinger. He was employed as a designer by Selinger Pajama Fabrics, Inc., a subsidiary of Selinger, in March of 1959. In October or November, 1959, Disler, comptroller for Selinger and its subsidiaries, notified Postal that, effective October 1, 1959, Korzinek was to be covered under Selinger's group policies in the Postal in the class of general employees for $ 5,000. Korzinek, in the latter part of October, also signed and submitted an 'Enrollment Card' with pertinent personal information and designation of beneficiary. Postal received no other notice concerning Korzinek until after his death, at which time Disler, the Selinger comptroller requested payment of $ 5,000 under each policy.
Sometime toward the end of 1959 it was decided to combine the art departments of two Selinger subsidiaries, Selinger Design Corp. (Design) and Selinger Pajama Fabrics, Inc. (Pajama) to further closer cooperation between them and for reasons of economy. Korzinek was thereafter appointed head of the combined departments by Partnoy, head stylist of Selinger and president of Design, but he remained on the payroll of Pajama.
When deceased took over his new job he received a salary increase in excess of the normal periodic increase to which he was then entitled and continued at this salary until his death. Cohen, president of Pajama, testified that Korzinek was considered a department head. Partnoy, who appointed Korzinek to his post, testified that 'Head of Studio Department' was a formal title although the company had no formal table of organization, while Disler, the comptroller for all the Selinger companies, testified that there were no formal titles in the organization. Nevertheless, it is undisputed that Korzinek's duties included actual designing, ordering of equipment, assignment of work, screening new personnel and recommending salary increases. When he took over deceased was also given his own office just off the studio area. Furthermore, he replaced von Metzgar who was considered a department head and was carried in Postal's register as such.
Some time after taking over his new job Korzinek asked Disler if his insurance coverage would be increased. Disler told him it would not be since he, Disler, considered the new department an experiment and since he felt that there should be a six months waiting period, similar to the waiting period of new employees for initial eligibility, before he reported any increased coverage. Both Cohen and Partnoy testified, however, that the combined department was considered permanent or as permanent as any innovation could be in an industry in which change is the rule. Disler was the person charged with administration of the policies. He testified that the decision to institute a six month waiting period was his own idea and was made without reference to the provisions of the policy. Disler also testified that had Korzinek continued in the same position to the end of six months, he would have submitted his name for increased coverage.
In the light of this evidence I found at the trial that Korzinek was in fact a department head at the time of his death and from the date od his appointment on or about January 1, 1960 and that he was considered as such by his employer.
Despite this finding Postal asserts that it is nevertheless not liable to Korzinek's beneficiary for the insurance benefits provided by the policy for 'Department Heads,' on two grounds: first that it received no premiums for additional insurance on Korzinek; and second, that it was never notified to increase the insurance in force on Korzinek.
These defenses call for a construction of the insurance contracts entered into by Selinger and Postal. Although these policies must be considered as a whole, Schloss v. Fidelity Mutual Life Insurance Co., 193 Misc. 121, 122, 80 N.Y.S.2d 610 (Sup.Ct.1948), there are sections which are particularly pertinent here.
As indicated, Postal issued two master policies to Selinger. Group Policy No. 298G (Plaintiff's Exhibit 1) was a policy of straight life insurance, and No. 298A (Plaintiff's Exhibit 2) was an accidental death and dismemberment policy. As the relevant clauses of these policies are identical or substantially so, and the parties concede that if liability attaches under one policy, it attaches also under the other, all references to the policies and to section numbers apply specifically to the life insurance policy No. 298G (Plaintiff's Exhibit 1), unless otherwise indicated.
The original issue date of both policies was November 17, 1958. Since the policies were non-contributory, coverage was not elective with the employees. However, the policies covered only full time employees and section 2, in relevant part, provided that all such employees 'shall be eligible for insurance hereunder on the day immediately following the date of completion of six months of continuous employment.' Section 3, captioned 'Effective Dates of Insurance' provides: 'The Insurance hereunder on any Employee shall become effective on the date of his eligibility, provided he is actively at work on the date of his eligibility * * *.' Thus, by its terms, the policy covered all full-time employees with six months service in accordance with New York Insurance Law, § 204(1)(a) and § 221(2)(a).
Although Section 5 'Cessation of Insurance' contains specific provision for notice to Postal of termination of employment in order to discontinue coverage of employees away from active work because of sickness, injury, layoff, temporary leave of absence, etc., its basic provision is that insurance 'on any Employee insured hereunder shall automatically cease on the date of the termination of his employment.'
Plaintiff relies heavily on Section 6 of the policy. This section is captioned 'Amount of Insurance' and provides:
'The amount of insurance hereunder on any Employee shall be in accordance with the schedule set forth below and any increase or decrease in the amount of such insurance, in accordance with said schedule, shall become effective, provided the Employee is then actively at work on the date of change in the Employee's class; if such Employee is not then actively at work, any increase in the amount of insurance shall become effective on the next following day on which he is actively at work.'
The relevant part of the schedule of insurance specifies coverage of $ 15,000 for 'Department Heads, Assistant Department Heads, and Assistant Divisional Sales ...