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OLKOWSKI v. PRUDENTIAL INS. CO. OF AMERICA

November 16, 1984

THOMAS M. OLKOWSKI
v.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA



The opinion of the court was delivered by: BECHTLE

 BECHTLE, J.

 Presently before the court are cross-motions for summary judgment. For the reasons stated herein, plaintiff's motion will be granted and defendant's motion will be denied.

 I. FACTS

 The parties have stipulated to all the relevant facts. The defendant is an insurance company. The plaintiff was furnished by his employer, M & S Foreign Car Service ("M & S"), with group term health and life insurance coverage under an "Employer Plan," underwritten by the defendant. Under this policy, both the plaintiff and his wife had health care insurance coverage. All of the premiums were to be paid by M & S.

 The policy provided that upon failure to make timely payment of the insurance premium the insurance coverage would terminate. It provided, further, that in the event that the coverage terminated for any reason, the plaintiff had the privilege of converting his group term health and life insurance coverage to individual life and health policies.

 In September 1981, M & S notified the plaintiff that it would pay all necessary premiums under the policy. The premium payment due on August 30, 1981, however, was not made. As a result, the defendant notified M & S a short time later that the policy had lapsed due to the non-payment and that all coverage would terminate as of September 30, 1981. Even though the defendant had in its possession personal information regarding the plaintiff and his wife, including their names, ages, social security numbers, and home address, it never advised plaintiff or his wife that the policy was in jeopardy of lapsing, that it had lapsed, or that plaintiff might consider exercising the conversion option. M & S also failed to inform the plaintiff of the impending lapse or the termination of the insurance policy. The plaintiff was left believing, without any notice to the contrary, that he and his wife were covered by health insurance.

 In late December 1981, plaintiff's wife became ill and required extensive medical and hospital care. The expenses amounted to approximately $ 34,268.86. Eventually, as a result of her illness, she died.

 The plaintiff applied to the defendant pursuant to the insurance policy for payment of the billings or for reimbursement to the plaintiff or those individuals who had provided health care to the plaintiff's wife. The defendant denied liability on the ground that, prior to December 1981, the date when the medical expenses were incurred, the policy had lapsed for non-payment of the premiums.

 In this lawsuit, the plaintiff seeks to recover the principal sum which would be due and owing to plaintiff under the terms of the policy. The parties agree and stipulate that damages, in the event that the defendant is found liable, total $34,424.11. In support of its claim, the plaintiff asserts that the defendant is liable under the policy since the defendant failed to notify the plaintiff, who relied on that insurance coverage, of the termination of that coverage.

 II. DISCUSSION

 Under Pennsylvania law, unless a non-contributory group insurance contract provides that coverage terminates automatically upon the happening of an event, the insurer must give notice of termination to each member of the group. See Poch v. Equitable Life Assurance Society of United States, 343 Pa. 119, 22 A.2d 590 (1941). See also Pa.Stat.Ann. tit. 40 ยง 756.2(d) (Purdon 1983). The court finds justification for this rule in that the burden on the insurer to send written notification of the termination to each member of the group is slight, and the risk of personal liability for high medical expenses on the insured is great. See generally Poch v. Equitable Life Assurance.

 In this case, the insurance policy's termination provision provided in relevant part:

 
All of your insurance (including any for your dependents) will terminate when: . . . (6) you fail to make any required ...

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