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FRANCES M. ZERANCE v. GUARDIAN LIFE INSURANCE COMPANY AMERICA AND CARL J. BERST (06/03/83)

filed: June 3, 1983.

FRANCES M. ZERANCE, GUARDIAN OF THE ESTATE OF NICHOLAS A. ZERANCE, INCOMPETENT
v.
GUARDIAN LIFE INSURANCE COMPANY OF AMERICA AND CARL J. BERST, T/D/B/A MIDDLETOWN EAST END WAREHOUSE COMPANY



No. 329 Harrisburg 1981, APPEAL FROM THE ORDER OF NOVEMBER 5, 1981 IN THE COURT OF COMMON PLEAS OF DAUPHIN COUNTY, CIVIL NO. 3654 S, 1979.

COUNSEL

C. Kent Price, Harrisburg, for appellant.

Robert P. Reed, Harrisburg, for appellees.

Wickersham, Cirillo and Watkins, JJ.

Author: Cirillo

[ 314 Pa. Super. Page 530]

This is an appeal from the Order of the Court of Common Pleas of Dauphin County, dated November 5, 1981. The appellant, Frances M. Zerance, as guardian of the estate of her husband, Nicholas A. Zerance, an incompetent, initiated this action in assumpsit by requesting declaratory judgment. She asked the court to determine the propriety of the termination of her husband's insurance benefits by the appellee, Guardian Life Insurance Company of American (hereinafter "Guardian Life") and Carl J. Berst, t/d/b/a Middletown East End Warehouse Company (hereinafter "Warehouse"). Evidence was received by the court, and thus procedurally the proceeding was treated as a non-jury civil action. A verdict was entered in favor of the appellee

[ 314 Pa. Super. Page 531]

    and Warehouse on November 13, 1980.*fn1 Exceptions were filed, denied, and dismissed, and judgment was entered in favor of appellee. This appeal followed.

The facts are not in dispute. Effective December 27, 1973, Guardian Life issued a group policy of life and disability insurance covering the employees of Warehouse. Appellant's incompetent husband, Nicholas A. Zerance, was at that time an employee of Warehouse. In 1974, while the policy was in effect, Nicholas Zerance became totally and permanently disabled as a result of a surgical operation.*fn2 Appellant was subsequently informed by letter dated June 26, 1974, which was prepared by an employee of Warehouse pursuant to information supplied by Guardian Life, that Guardian would cover several items of medical care for her husband and that this coverage would continue until the two hundred fifty thousand dollar ($250,000.00) major medical allowance was exhausted. Benefits, which had commenced immediately, were paid yearly while the appellant's employer, Warehouse, kept the subject group policy in effect. Subsequently, on November 30, 1978, Warehouse cancelled the group policy with Guardian Life effective December 1, 1978. The appellant was notified of the cancellation and was also informed that pursuant to the termination clause in the policy, benefits would be extended until December 31, 1979. Total benefits paid by Guardian Life for appellant's husband were approximately fifty-five thousand dollars ($55,000.00).

The facts of this case present a situation not often addressed by the courts in Pennsylvania. The cases that have addressed similar situations involve policy changes made after liability has occurred. Becker v. Berlin Beneficial Society, 144 Pa. 232, 22 A. 699 (1891) (beneficial society already paying benefits, may not reduce payments by subsequent amendment); Marshall v. Pilots Association, 206 Pa. 182,

[ 314 Pa. Super. Page 53255]

A. 916 (1903) (disabled member not bound by subsequently amended by-law) or situations where group life insurance policies were canceled prior to the deaths of the beneficiaries. Miller v. Travelers Insurance Co., 143 Pa. Super. 270, 17 A.2d 907 (1941); Brown v. Carnegie-Illinois, 168 Pa. Super. 380, 77 A.2d 655 (1951). The case at bar presents a slightly different set of facts. In Miller and Brown, which were cited by the appellee, the employees' life insurance policies were cancelled. This court held, that the employer was entitled to cancel these policies, because the insureds were properly notified and had not pursued their conversion privilege within the stipulated succeeding period. Accordingly, the court denied recovery to the beneficiaries, who sought death benefits when the former insureds died after cancellation of the policies.

The case at bar presents a rather different situation. In Miller and Brown, the benefit was a life insurance death benefit. The right to receive this benefit did not exist until the deaths of the insureds. These individuals did not die until after the termination of their policies, which in turn extinguished their prospective right to the benefit. In addition, both of the cancelled policies contained a conversion privilege, which neither of the insureds exercised. In the instant matter, the appellant's incompetent became disabled and therefore entitled to disability benefits long before the ...


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