Crawford v. The Equitable Life Assurance Society Of The United States

305 N.E.2d 144 (1973)

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Nature of the Case

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Facts

Effective January 1, 1965, D issued a group life insurance policy to the Warm Air Heating and Air Conditioning Group Insurance Trust. The trust was established by the Warm Air Heating and Air Conditioning Association, for the purpose of providing insurance on the lives of employees of companies that were members of the association, as authorized by section 230(e) of the Insurance Code. Crawford Heating and Cooling Company, Inc. was a member of the association. P is president of Crawford Heating. In December 1964, shortly prior to the issuance of the policy, P executed and delivered to the association an enrollment form that requested insurance for three persons, each of whom he represented to be employees of his company. Among the three were P and his wife, Rose A. Crawford. A certificate of insurance was thereafter issued to Mrs. Crawford in the face amount of $10,000. The certificate also provided for certain hospital and medical expense benefits. P was named as the beneficiary. The premiums were paid by the Crawford Heating and Cooling Company. Mrs. Crawford died in February 1969. The master policy contained a provision that only a 'full-time employee' would be eligible for insurance, subject to a proviso that any employee 'whose work week calls for a schedule of less than 32 hours shall not be eligible for insurance hereunder.' The insurance certificate issued stated that the insurance provided under the policy was effective 'only if the Employee is eligible for insurance,' but did not contain the specific full-time employment requirement found in the master policy. The enrollment form executed by P did state that an employee must work at least 32 hours a week, and P marked the form in such a fashion as to indicate that each of the three persons listed did meet that requirement. The same representation was made in regular monthly statements submitted by P to the trustee with his premium payments from February 1965, until February 1969. An individual application for insurance executed by the decedent also included a representation by her that she worked 32 hours a week or more. She stated that her position with the company was that of Secretary-Treasurer and that she earned $7500 or more a year. Information as to position and salary was significant under the policy because these factors affected the amount of death benefits payable. The representations made by P and his wife were false. According to the complaint the extent of her duties was to spend several hours a month in assisting P in drawing up proposals for contracts, and in taking night telephone calls when he was on a job or out of town. She received no compensation for these functions. D made no inquiry into the circumstances until after her death. P submitted his claim to the trustee accompanied by a death certificate, which listed the decedent's occupation as that of a housewife. The trustee notified D and requested it to verify the decedent's eligibility. An employee of D then made a single call to the bookkeeper of P's company, from whom the decedent's employment status was ascertained. D then denied P's claim. The master policy also contains an incontestability clause which reads as follows: 'The validity of this policy shall not be contested, except for the non-payment of premiums, after it has been in force for two years from the date of issue; and no statement made by any employee insured under this policy relating to his insurability shall be used in contesting the validity of the insurance with respect to which such statement was made, after such insurance has been in force prior to the contest for a period of two years during such employee's lifetime nor unless it is contained in a written application signed by such employee and a copy of such application is or has been furnished to such employee or his beneficiary.' The provision incorporates portions of section 231 of the Illinois Insurance Code which specifies certain provisions that must be contained in any policy of group life insurance issued or delivered in the State. The court ruled for P and the appeals court affirmed. D appealed.