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January 8, 1973

GOODWIN, Plaintiff

Barron P. McCune, District Judge.

The opinion of the court was delivered by: MCCUNE

BARRON P. McCUNE, District Judge:

The plaintiff, the widow of Robert P. Goodwin, claims the proceeds of a life insurance policy which allegedly covered her deceased husband, Robert P. Goodwin, who died on November 28, 1970. The policy in question was a Group Insurance Policy, No. GL-9067, originally dated January 4, 1962, issued to cover the employees of the Ever-Soft Company of Pennsylvania, Inc. (herein "Ever-Soft"). The Pennsylvania law governs.

 The issues are numerous as will be observed later on. The first issue is whether decedent was an eligible employee of Ever-Soft at the time of his death. If he was, the proceeds of the policy amount to $25,000.00 and if he was an eligible employee, the other issues became moot.

 The plaintiff contends, however, that even though decedent was not eligible at his death, he had once been eligible and had never been terminated. She contends that Hartford is estopped to deny coverage because of knowledge brought to its attention and finally that the policy is incontestable.

 The policy, as finally amended, *fn1" defined the classes of employees who were eligible for insurance as follows:


"All active full time employees as follows:


1. President


2. Controller, Managers, Supervisors and Sales Training Directors


3. Sales Personnel


4. Installers


5. All other employees"

 Employees became eligible when they had completed one month of continuous service in an eligible class.

 The various classes of employees were entitled to the following coverage:


Class 1 (President) -- Basic Life -- $12,500.00, Excess Life -- $17,500.00


Class 2 (Controller, Managers, etc.) -- Basic Life -- $12,500.00, Excess Life -- $12,500.00.


Class 3 (Sales Personnel) -- Basic Life -- $12,500.00, Excess Life -- $7500.00


Class 4 (Installers) -- Basic Life -- $12,500.00, Excess Life -- $2500.00


Class 5 (All other employees) -- Basic Life only -- $10,000.00.

 It is contended that decedent was the controller of Ever-Soft and thus entitled to $12,500.00 in basic life insurance and $12,500.00 in excess life insurance.

 Active full time employees were defined as "employees who are regularly employed by the Policyholder in the usual course of the Policyholder's business and who work at least the number of hours per week established by the Policyholder as the normal work week, but in no event less than 30 hours per week."

 The defendant denied that decedent was ever a full time, active employee of Ever-Soft and argued that he was therefore not covered by the policy. The defendant admitted however, that the plaintiff widow was designated as a beneficiary on a Group Insurance Enrollment Card completed by decedent and dated August 11, 1965, and that a certificate of insurance was issued to decedent.

 The key to the first problem (whether decedent was a full time, active employee of Ever-Soft) appears to rest on the number of hours the decedent worked and whether he worked in the usual course of the employer's business.

 The owner and manager of Ever-Soft, one Philip F. Straus (herein "Straus") incorporated Ever-Soft in May of 1961 to install water conditioning equipment. Straus and his family owned all of the corporate stock. Prior to May of 1961 Straus worked for another company where he had met Francis P. Hanrahan, an independent insurance agent who sold insurance for Hartford Life Insurance Company (herein Hartford). Straus, who was also an experienced man in insurance matters *fn2" wanted a group policy for the employees of Ever-Soft and requested Hanrahan to arrange for the policy. One of the reasons for arranging a group policy was that Straus knew that he himself was uninsurable and Hanrahan also knew of this fact. Hanrahan did write the group policy for Ever-Soft with the aid of John King, Hartford's group life zone agent.

 Straus also wanted to install a pension plan and his attorney (James Bowman, Esq.) introduced Straus to decedent who was an independent accountant (uncertified) who had engaged in practice in preparing pension plans. Out of this introduction there grew a business relationship during which decedent wrote a pension plan for Even-Soft, consulted with Straus on business matters and handled the tax returns of Ever-Soft. In the summer of 1965, Straus thought it necessary to restructure his personnel because of some dissatisfaction within the corporate organization and on July 15, 1965, the directors of Ever-Soft resolved to hire decedent at $12.00 per hour to advise the corporate officers and he was designated controller. *fn3"

 On July 25, 1965, Straus suffered a heart attack and was disabled until November of 1965. He told decedent to take over and manage Ever-Soft. The decedent did so in an executive capacity until November 25, 1965, when Straus returned to assume control and decedent went back to his duties as controller.

 As heretofore noted, decedent completed an enrollment card on August 11, 1965, applying for coverage as an employee *fn4" and the defendant company on September 28, 1965, wrote to Ever-Soft enclosing a certificate of insurance (Plaintiff's Exh. 4). The effective date of the certificate was August 15, 1965, provided full time, active service was effective. The letter enclosed the enrollment card which, it instructed should be attached to the Ever-Soft files.

  Decedent was carried on the policy in Class 4 (covered for $4000.00) until July 4, 1966, when he was placed in Class 2.

 Decedent was never paid a monthly salary until May of 1970, but instead kept a record of the hours he spent on the job *fn5" each month and periodically sent a bill for the hours spent at $12.00 per hour. On May 15, 1970, he was put on the payroll at $150.00 per month. Decedent's tax return for 1965 shows that he was paid $3524.00 in 1965 by Ever-Soft. The payroll records were not available for 1965 in the office of Ever-Soft but payroll records for the following years show that in 1966 decedent was paid $7184.00 (about 600 hours at $12.00 per hour or about 11 1/2 hours per week). In the years -- 1967 $ 5988.00 1968 $ 3240.00 1969 $ 1824.00 1970 $ 900.00


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