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GALLIEN v. CONNECTICUT GEN. LIFE INS. CO.

April 13, 1994

ADELE GALLIEN, Individually and as Executrix Under the Last Will and Testament of Paul Gallien, Plaintiff,
v.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY and CAREY ENERGY CORPORATION, Individually and as Administrator of the CAREY ENERGY CORPORATION GROUP LIFE AND HEALTH INSURANCE PLAN, Defendants.



The opinion of the court was delivered by: SHIRLEY WOHL KRAM

 SHIRLEY WOHL KRAM, U.S.D.J.

 Plaintiff Adele Gallien ("Plaintiff") brings this action to recover the face amount of a life insurance policy issued by defendant Connecticut General Life Insurance Company ("Connecticut General") for her deceased husband Paul Gallien ("Gallien"). She also seeks damages against Gallien's former employer, Carey Energy Corporation ("Carey"), for breach of fiduciary duty in connection with the cancellation of the policy.

 Presently before the Court is Plaintiff's motion for summary judgment on Count Three of the Complaint against Carey. Connecticut General also moves for summary judgment dismissing the Complaint against it, and for summary judgment on its cross-claims against Carey. For the reasons set forth below, Plaintiff's motion is granted. Connecticut General's motion is granted in part and denied in part.

 BACKGROUND1

 On September 30, 1986, Connecticut General and Carey entered into a written insurance agreement (the "Plan"), pursuant to which Connecticut General agreed to provide group life insurance, disability and medical benefits to Carey's employees. Carey was designated as Plan Administrator, and agreed to pay premiums for the insurance coverage provided by Connecticut General. The Plan provided, however, that Carey reserved "the right to terminate, suspend or modify the plan in whole or in part at any time." See the Group Insurance Plan at 1, annexed to the Gallien Dec. as Exh "A." Subsequently, on October 31, 1988, Carey executed a letter agreement, dated September 30, 1988, which supplemented and became a part of the Plan (the "Supplemental Plan").

 I. The Plan

 Pursuant to the Plan, Carey employees were provided with life insurance equal to two times their annual Basic Earnings, up to a maximum amount of $ 250,000. Under the Plan, insurance would be terminated: (1) if an employee ceased to be in a class of eligible employees or ceased to qualify for the insurance; (2) on the last day in which an employee made any required contribution for the insurance; (3) on the date the policy was cancelled; or (4) on the date the employee's active service ended. If an employee aged 60 or older became disabled, however, Connecticut General agreed to extend life insurance coverage until either (1) the employee reached the age of retirement; or (2) Carey discontinued premium payments for that individual.

 The Plan provided further that, if an employee's life insurance ceased, he was entitled to convert his group insurance coverage into an individual life policy within 31 days of the date that the group coverage was terminated. If the employee died during the 31-day period, Connecticut General agreed to pay the amount of insurance that could have been converted had the employee exercised his conversion option.

 The medical expense insurance policy was funded through a program known as Connecticut General's Cash Management Program (the "Cash Program"). Pursuant to the Cash Program, Carey paid a residual premium on a monthly basis to cover estimated expenses, and authorized Connecticut General to write checks against a bank account for claim payments. Carey was obligated to deposit funds into the bank account upon request, up to a maximum monthly amount, to pay such claims. In addition to this bank account funding, Carey was obligated to pay a supplemental premium on each monthly premium due date.

 The Supplemental Plan provided that, upon the Plan's termination, Carey owed Connecticut General

 
(a) An amount equal to the estimated liability for incurred but unreported claims at the close of the preceding policy year (being $ 264,454 as of October 1, 1988); PLUS
 
(b) the unpaid portion, if any, of the Maximum Monthly Payments from October 1, 1988 to the date as of which item (a) is revised.

 Carey continued to pay the premiums due under the Plan until July 1989, when it ceased making premium payments for all of its employees. See Deposition of John O'Mahony, taken on January 21, 1993 (the "O'Mahony Dep."), at 53-54, annexed to Connecticut General's Appendix of Exhibits as Exh. "D." *fn2" Carey did not disclose to any of its employees, including Gallien, that it had stopped paying these premiums. Id. at 56, 88. *fn3" Subsequently, Connecticut General terminated the Plan, effective October 18, 1989, for nonpayment of premiums.

 Connecticut General claims that Carey owes $ 89,923 in premium payments for the months of July through October 1989. As Carey also failed to fund the bank account for the payment of medical benefit claims from July through October 1989, it owes $ 94,211 in medical benefits funding. Connecticut General contends further that, pursuant to the Supplemental Plan, Carey owes the sum of $ 652,820 in supplemental premiums for medical benefit insurance. In December 1989, Carey made a single payment in the sum of $ 11,961 to Connecticut General for premiums owed.

 II. Gallien's Death Benefits

 Gallien was an active employee of Carey until January 19, 1989, when he took temporary disability status. At the time he left the company, Gallien was 60 years old and earning 100,000 per year. On March 6, 1989, Gallien applied for long-term disability benefits, and, commencing on July 21, 1989, he became eligible for them. Connecticut General continued to pay long-term disability benefits to Gallien until he died, on October 25, 1989.


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