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Smith v. Travelers Insurance Co.

JANUARY 8, 1971.




APPEAL from the Circuit Court of Cook County; the Hon. JOSEPH B. HERMES, Judge, presiding. MR. JUSTICE DRUCKER DELIVERED THE OPINION OF THE COURT:

Rehearing denied February 9, 1971.

This action was brought by the plaintiffs, as the beneficiaries of a certificate of insurance issued by the defendant, The Travelers Insurance Company (hereinafter "Travelers") under a group life policy. The trial court granted plaintiffs' motion for summary judgment and entered judgments in favor of each plaintiff for $10,000. The trial court denied Travelers' motion to vacate the summary judgments and overruled its motion for leave to file an answer to the complaint. From these orders and judgments Travelers appeals.

Based on the pleadings, affidavits and exhibits filed by the parties, the facts may be summarized. In 1954 Lucille M. Smith, Secretary of Brookline Industries, Inc., became insured under a group life insurance policy issued by Travelers to the Illinois Manufacturers Association (hereinafter "IMA"). Initially her coverage was for $10,000 but it was later increased to $20,000. In 1964 Lucille's grandsons, Donald E. Smith, President of Brookline Industries, and Robert H. Smith, also an official of Brookline Industries, were named equal beneficiaries. Each month Brookline Industries deducted an amount from Lucille's wages and paid the premium yearly to the IMA until September 1968. (In all the prior years, except in 1958, the premiums were paid before the end of October.) Around the end of September 1968 Donald E. Smith received an invoice (Exhibit 3) from the IMA for $3,152.87 for the yearly premium. This invoice, dated September 20, 1968, stated that the effective date of the IMA Group Life Insurance was September 1, 1968, and also said: "IMPORTANT. Payment is due on or before September 30th." As set forth in Donald Smith's affidavit, on or about November 13, 1968, he called the IMA and spoke to Ethel A. Stengel:

I said, "with reference to our group policy of Brookline Industries with Travelers Insurance Company, I am looking at your invoice for another premium of $3,142.87, I was thinking that over the years we have paid in more than the insurance coverage and that I would like to look around for a more economical coverage and possibly terminate the policy." The invoice I was referring to is hereto attached and marked Exhibit #3. We received this invoice around the end of September, 1968. Miss Stengel said "Hold on a moment." I waited, and after a few minutes she said, "It will be necessary for you to pay the premiums up to the present time." She said "If you pay 1/4 of the premium you will be covered up to the end of December which would include your grace period *fn1 so that you can come to a final decision before December to remain with the program or convert." I said "I will send in a fourth of this premium, which is $785.82 and will consider termination upon our finding a more economical program." She said "Send the check and a note about this."

Before the conversation with Miss Stengel he did not talk to anyone about his idea of termination. He made the phone call solely on his own thinking for the possible benefit to the company. He never instructed nor directed any person to terminate the insurance nor did he intend to terminate until a study could be made of what to do. Further, he needed time to talk to his brother and the member employees about terminating the group policy.

After his phone call with Miss Stengel he sent a letter together with a check for $785.82 to IMA. The letter read:

November 14, 1968 Illinois Manufacturers Association Group Insurance Fund RE: Invoice 9-20-68 200 South Michigan Avenue $3,142.87 Chicago, Illinois 60604 Acct. #0022 Gentlemen:

With reference to the above premium invoice and our phone conversation of November 13, 1968, we request termination of the IMA Group Life Insurance Plan.

As per provisions required in the above policy, we enclose payment of $785.82 covering one quarter of the above premium.

Yours very truly, Brookline Industries, Inc. Donald Smith President

DS/mb Encl.

In her affidavit Ethel A. Stengel, Manager of the Insurance Department of IMA, stated that when she spoke to Donald Smith on November 13, 1968:

* * * [S]he informed him that if one-quarter of the yearly premium were paid, insurance coverage would be afforded for three months from September 1, 1968 through November 30, 1968 and that there would be a thirty-one day grace period thereafter, up to and including December 31, 1968, within which the conversion privileges *fn2 under the policy could be exercised;

[S]he informed him during the aforesaid telephone conversation that he could come to a final decision "before ...

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