The opinion of the court was delivered by: MOTLEY
This is an action to recover on a group insurance policy which the defendant insurer admits "was written with . . . [it] by the Employer of the Insured, for the benefit of its employees." Both sides moved for summary judgment. Fed. R. Civ. P. 56. Plaintiff's motion is granted and defendant's motion is denied.
Plaintiff was the wife of H. Wayne Oakley, deceased. At all times relevant to this action, both Mr. and Mrs. Oakley were New York domiciliaries. Oakley was a director of National Bellas Hess, Inc., ("Hess") a Delaware corporation with its principal place of business in Missouri.
At all times relevant to this action, the defendant insurer was a Missouri corporation with its principal place of business in Missouri.
Effective December 1, 1954, the insurer, then a wholly owned subsidiary of Hess, issued to Hess a group life insurance policy. In 1960, directors of Hess became eligible for coverage and, effective May 1, 1960, Oakley was covered, to the extent of $25,000. Plaintiff was the beneficiary of that coverage.
Oakley paid premiums of $150 per annum for this coverage; Hess paid an additional sum of approximately ten times this amount. Oakley paid the premiums to Hess which, in turn, paid the full premium to the insurer.
Oakley resigned as a director of Hess, effective May 26, 1965. He died on September 9, 1965, more than 31 days but less than 90 days after the termination of his employment with Hess. Oakley was not notified of his right to convert his insurance policy within 90 days after the termination of his employment.
The contract of insurance provided as follows:
"Section 10. CONVERSION PRIVILEGE -- Upon termination of employment of any Employee, all his insurance hereunder shall cease, in accordance with the Formula, and the said Employee shall be entitled to have issued to him by the Company, without evidence of insurability, and upon application made to the Company within thirty-one (31) days after such termination of employment, and upon payment of the premium applicable to the class of risk to which he belongs and to the form and amount of the policy at his then-attained age (nearest birthday), a policy of Life Insurance in any one of the forms customarily issued by the Company, except Term Insurance, in an amount equal to or, at the option of the Employee, less than the amount of his insurance under this Policy at the time of such termination.
"An individual policy so applied for shall become effective only upon the cessation of the insurance hereunder of the Employee so applying. The Company shall, upon the cessation of the insurance hereunder on any Employee because of termination of employment, be released from any liability on account of such Employee unless and until such individual policy is issued in accordance with the provisions of this Section, except as provided in Section 2 hereof."
Oakley made no attempt to convert.
The issues involved in this case were narrowed by the pretrial order of February 15, 1968. The parties agreed, and it was so ordered, that if New York law governs the contract, plaintiff is entitled to recover, and, if Missouri law governs, plaintiff is entitled to recover only if defendant waived its rights under the "Extended Death Benefit" provision.
Under New York law, if applicable, the absence of affirmative notification subsequent to the termination of employment conferred upon deceased the right to convert for 90 days after the termination of coverage, and death before the expiration of the 90 day period is deemed the exercise of the right of conversion. New York Insurance Law § 204(3); see Payne v. Equitable Life Assurance Society of the United States, 11 N.Y. 2d 1006, 229 N.Y.S. 2d 752, 183 N.E.2d 763 (1962) affirming 14 A.D.2d 266, 220 N.Y.S. 2d 493 (First Dept. 1961); DeVille v. Continental Assurance Co., 10 A.D. 2d 386, 199 N.Y.S. 2d 876 (4th Dept.) aff'd 8 N.Y. 2d 1080, 207 N.Y.S. 2d 453, 170 N.E.2d 457 (1960).
As jurisdiction of this court is grounded on diversity of citizenship, this court is bound to apply the law of the State of New York; Erie R. Co. v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938) including its conflicts of law rules; Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941); Zogg v. Penn Mutual Life Insurance Co., 276 F.2d 861 (2d Cir. 1960). The question, therefore, is whether New York, under its conflicts of law rules, would apply, in this case, New York law or Missouri law to the issue of whether a certificate holder of a group insurance policy is entitled to affirmative notice of his right to convert.
At least since Auten v. Auten, 308 N.Y. 155, 124 N.E.2d 99 (1954), New York has followed the "center of gravity" or "grouping of contacts" theory of conflicts of law. "[It] gives to the place 'having the most interest in the problem' paramount control over the legal issues arising out of a particular factual context, thus allowing the forum to apply the policy of the jurisdiction 'most intimately concerned with the outcome of the particular litigation'". Id. at 161. New York, it is clear, would apply the law of the ...