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No. 99-459
IN THE SUPREME COURT OF THE STATE OF MONTANA
2000 MT 155
300 Mont. 142
2 P. 3d 841
MARY GOLT,
Plaintiff and Appellant,
v.
AETNA LIFE INSURANCE COMPANY;
GENERAL AMERICAN LIFE INSURANCE COMPANY,
Defendants and Respondents.
ORIGINAL PROCEEDING: Certified Question from:
Ninth Circuit Court of Appeals
COUNSEL OF RECORD:
For Appellant:
William D. Jacobsen; Hartelius, Ferguson, Baker & Kazda, Great Falls,
Montana
Curtis Thompson (argued); Thompson, Jacobsen & Potts, Great Falls,
Montana
For Respondents:
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Robert J. Sullivan (argued); Boone, Karlberg & Haddon, Missoula, Montana
Robert C. von Ohlen, Jr. (argued); Kaplan, Begy & von Ohlen,
Chicago, Illinois (for General American Life Insurance Company)
Argued: January 27, 2000
Submitted: February 15, 2000
Decided: June 13, 2000
Filed:
__________________________________________
Clerk
Justice W. William Leaphart delivered the Opinion of the Court.
¶1 On August 26, 1999 this Court agreed to address three questions certified by the Ninth
Circuit Court of Appeals pursuant to Rule 44, M.R.App.P. The three questions certified by
the Ninth Circuit Court of Appeals are as follows:
Questions Presented
¶ 2 1. Does accidental death coverage, when provided either as part of a separate group
accident insurance policy, or as part of a "Group Life and Accident and Health Insurance
Policy," fall within Montana's statutory definition of life insurance for the purpose of
determining an insured's conversion rights? See §§ 33-1-207, MCA (definition of life
insurance), 33-20-1209, MCA (conversion rights), and 33-20-1211, MCA (effect of death
during conversion period)?
¶3 2 . Does accidental death coverage provided pursuant to a group accident insurance
policy remain in effect, if the policy contains a provision granting the insured the right to a
31-day grace period in which the group policy can be converted to an individual policy,
but where the insured dies before the expiration of the grace period without exercising the
right to convert the policy?
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¶ 4 3. If this Court determines that there is accidental death coverage in a group policy in
either of the above situations, in a case where the policy provides that the insured or the
employer must submit notice of claims to the insurer "or any authorized insurance agent of
the Insurer," does the delivery of a notice of a claim to the insured's employer constitute
notice to the insurer, on the basis that the insured's employer is an agent of the insurance
company for the purpose of submitting a claim?
Factual Background
¶5 In this diversity action, Mary E. Golt (Mrs. Golt) appealed to the Ninth Circuit Court of
Appeals from the final judgment entered following the grant of the motions of General
American Life Insurance Company (General American) and Aetna Life Insurance
Company (Aetna) (collectively Insurers) for a summary judgment in Mrs. Golt's action to
recover accidental death benefits for the death of her husband, John C. Golt, III (Mr. Golt).
¶6 Mr. Golt worked as a civilian employee of the Army and Air Force Exchange Service
(AAFES) at Malmstrom Air Force Base from August 21, 1978 through January 26, 1994
when he was discharged from his employment for cause. On February 25, 1994, thirty
days after the termination of his employment, Mr. Golt died of carbon monoxide
poisoning.
¶7 As a benefit of his employment, Mr. Golt was covered by an "accident insurance
policy" issued by General American. The policy provides that if an eligible employee dies
of an accidental cause while covered by the General American policy, his or her estate is
eligible to receive $200,000. The policy further provides that coverage will terminate on
the first premium due date after the insured ceases to be an employee. Mr. Golt ceased to
be an employee on January 26, 1994, the date his employment was terminated for cause.
The next premium due date following January 26, 1994 was February 1, 1994. The
General American policy also provides that the group accident insurance policy can be
converted to an individual policy within thirty-one days of the employee's discharge if
written application is made and if the first premium is paid. If a loss is suffered, written
notice of any claim must be provided to General American or its agents within twenty
days, and proof of loss must be provided within ninety days. AAFES routinely transmits
employee's claims to General American.
¶8 In addition, as an employee of AAFES, Mr. Golt was insured by Aetna in a policy
styled as a "Group Life and Accident and Health Insurance Policy." The policy provides
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that "[t]his plan will pay as a Life Insurance benefit the amount of Life Insurance in force
if you die from any cause while insured." The Aetna policy provides for life insurance
benefits in the amount of $32,000 for Mr. Golt. The policy also provides for "Accidental
Death and Dismemberment Coverage (AD&D) in a separate portion of the group policy
for "bodily injury caused by an accident and if, within 90 days after the accident, you lose,
as a direct result of the injury, Your Life . . . ." The policy provides an additional
accidental death benefit in the amount of $32,000 in the event of Mr. Golt's accidental
death.
¶9 The Aetna policy further provides that the group life insurance can be converted to
individual life insurance within thirty-one days of an employee's discharge, and that, if the
employee dies during this period, benefits are payable. The Aetna policy provides that an
insured must "[r]eport an illness or injury to the AAFES as soon as you can." The Aetna
policy also provides that "[c]overage under this Plan" ceases when an employee is
discharged. It does not provide for any conversion privilege within the description of the
AD&D coverage.
¶10 On March 9, 1994, Mrs. Golt forwarded her insurance claims against General
American and Aetna to Barbara Crutchfield (Crutchfield), the AAFES personnel
supervisor. Crutchfield informed Mrs. Golt that her claims would be promptly transmitted
to the AAFES headquarters in Texas and from there to both insurance companies.
¶11 The claims were transmitted to the AAFES headquarters and to Aetna, but not to
General American. Aetna paid the $32,000 benefit due under the life insurance provisions
of the policy but denied the claim for accidental death benefits on the ground that this
coverage ended when Mr. Golt's employment was terminated.
¶12 On March 30, 1994, Crutchfield sent a letter to Mrs. Golt stating that AAFES had
submitted Mrs. Golt's claims to General American and Aetna. She also informed Mrs.
Golt that her husband was not covered under either General American's accident insurance
policy or Aetna's AD&D coverage. Crutchfield did not learn until two and one-half years
later that AAFES did not forward Mrs. Golt's claim to General American.
¶13 The General American accident insurance policy provides in a paragraph labeled
"Notice of Claim" that written notice of claims must be sent "within 20 days after a
covered loss occurs" to the National Accident Insurance Underwriters, Inc. (NAIU), "or to
one of our agents." On a subsequent page under a paragraph labeled "Notice" the policy
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provides that "you [the insured] or the Policyholder [AAFES] submit notice of claims" to
the NAIU or to "any authorized insurance agent of the Insurer." In a letter dated December
15, 1995, the NAIU informed Mrs. Golt that no accidental death benefit would be payable
on the General American accident insurance policy.
¶14 Mrs. Golt commenced this action on March 25, 1996, seeking recovery for $32,000 in
accidental death benefits under the Aetna "Group Life and Accident and Health Insurance
Policy," and $200,000 in accidental death benefits under the General American accident
insurance policy, plus prejudgment interest. All parties moved for summary judgment. The
Federal District Court concluded that there was no coverage under either policy and
entered final judgment in favor of the Insurers. Mrs. Golt appealed to the Ninth Circuit
Court of Appeals.
Introduction
¶15 The issues presented arise out of a dispute regarding whether the accidental death
coverages at issue are life insurance policies under Montana law for the purpose of
determining Mr. Golt's conversion rights. Montana law specifically defines "life
insurance" under § 33-1-208, MCA (1993), and "disability insurance" under § 33-1-207,
MCA (1993). Montana law further provides that different classes of insurance may
overlap. See § 33-1-205, MCA. Minimum conversion rights are required with regard to
each type of insurance. Group life insurance policies must provide coverage to the insured
for a 31-day grace period following the termination of the insured's group coverage. See
§§ 33-20-1209 and 33-20-1211, MCA. Group disability insurance policies, on the other
hand, need only extend hospital or medical insurance if application is made and the first
premium is tendered. See § 33-22-508, MCA (1993). Thus, if accidental death coverage
provided by the Insurers is construed as life insurance, Mr. Golt was insured on the date of
his death. If such coverage is construed solely as disability insurance, he was not insured
on the date of his death.
¶16 For the reasons set forth below, we answer each one of the three certified questions in
the affirmative.
¶17 1. Does accidental death coverage, when provided either as part of a separate group
accident insurance policy, or as part of a "Group Life and Accident and Health Insurance
Policy," fall within Montana's statutory definition of life insurance for the purpose of
determining an insured's conversion rights? See §§ 33-1-207, MCA (definition of life
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insurance), 33-20-1209, MCA (conversion rights), and 33-20-1211, MCA (effect of death
during conversion period)?
¶18 The Aetna AD&D insurance under the group plan pays a benefit if, while insured, the
insured suffers a bodily injury caused by an accident and if, within ninety days after the
accident, the insured loses, as a direct result of the injury, his/her life, a hand, a foot or an
eye. The General American accident insurance policy in question provides benefits if an
eligible employee dies of an accidental cause while covered by the policy. The first
question we address is whether the above coverages constitute life insurance or disability
insurance for purposes of conversion rights.
¶19 We begin with the proposition, codified by the Montana legislature, that different
classes of insurance coverage may, by definition, overlap. Section 33-1-205, MCA,
provides as follows:
33-1-205. Definitions of kinds of insurance not mutually exclusive. It is intended
that certain insurance coverages may come within the definitions of two or more
kinds of insurance as defined in this part, and the inclusion of such coverage within
one definition shall not exclude it as to any other kind of insurance within the
definition of which such coverage may likewise be reasonably included.
¶20 Disability insurance is defined as follows:
33-1-207. Disability Insurance. Disability insurance is insurance of human beings
against bodily injury, disablement, or death by accident or accidental means or the
expense thereof or against disablement or expense resulting from sickness and every
insurance appertaining thereto.
Section 33-1-207, MCA (1993).
¶21 Clearly, both General American and Aetna's accident insurance come within the
definition of "disability insurance." The conversion rights for disability insurance are set
forth in § 33-22-508, MCA (1993), as follows:
33-22-508. Conversion on termination of eligibility. (1) A group disability
insurance policy issued or renewed after October 1, 1981, must contain a provision
that if the insurance or any portion of it on a person . . . ceases because of
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termination of his employment . . . he is entitled to have issued to him by the
insurer, without evidence of insurability, group coverage or an individual policy
issued by the insurer . . . of hospital or medical service insurance on himself, his
dependents, or family members if application for the individual policy is made and
the first premium tendered to the insurer within 31 days after the termination of
group coverage.
¶22 The above statute clearly provides that, upon termination of employment, a
person with disability insurance coverage has the right, upon timely application, to
have a policy issued for hospital or medical service. Importantly, it says nothing
about a right of conversion with regard to accidental death benefits. Thus, if the
accidental death coverage at issue is defined solely as disability insurance, Mr. Golt
would have no statutory right to convert coverage for anything other than hospital or
medical service. Mr. Golt's claim thus hinges upon whether his accidental death
coverage qualifies as "life insurance" as well as "disability insurance."
¶23 Life insurance is defined as follows:
33-1-208. Life Insurance. Life insurance is insurance on human lives. The
transaction of life insurance includes also . . . additional benefits in event of death or
dismemberment by accident or accidental means . . . . Transaction of life insurance
does not include workers' compensation insurance.
Section 33-1-208, MCA (1993).
¶24 Insurance coverage which qualifies as "life insurance" under the above definition is
subject to a mandatory conversion under § 33-20-1209, MCA, as follows:
33-20-1209. Conversion on termination of eligibility. (1) The group life insurance
policy shall contain a provision that if the insurance or any portion of it on a person
covered under the policy ceases because of termination of employment . . . , such
person shall be entitled to have issued to him by the insurer, without evidence of
insurability, an individual policy of life insurance, provided application for the
individual policy shall be made and the first premium paid to the insurer within 31
days after such termination . . . .
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¶25 Although the above statute, as with disability insurance, requires that the insured
make application for conversion of group life insurance within 31 days of termination,
unlike disability insurance, there is a statutory exception in the event the insured dies
during that 31-day period. Section 33-20-1211, MCA, provides as follows:
33-20-1211. Death pending conversion. The group life insurance policy shall
contain a provision that if a person insured under the policy dies during the period
within which he would have been entitled to have an individual policy issued to him
in accordance with 33-20-1209 or 33-20-1210 and before such an individual policy
shall have become effective, the amount of life insurance which he would have been
entitled to have issued to him under such individual policy shall be payable as a
claim under the group policy, whether or not application for the individual policy or
the payment of the first premium therefor has been made.
¶26 Thus, if a person with group "life insurance" dies during the 31-day conversion period
without having made application, he is deemed to have a claim for the same coverage he
would have had under a converted individual policy.
¶27 Mrs. Golt posits that the reason why there is no comparable provision in the disability
insurance context is that an insured who incurs a major medical expense or disability
during the 31-day conversion period is presumably still alive and capable of submitting a
timely application for conversion, even after the covered loss. Thus, the occurrence of the
covered event (disability) does not defeat the insured's ability to apply for conversion. She
contrasts this with accidental death coverage wherein the occurrence of the covered event
(accidental death) defeats the insured's ability to make timely application for conversion.
Mrs. Golt thus concludes, "it makes complete sense for the group life insurance statutes to
go further than the disability statutes, and to specifically provide that a person who dies
during the conversion period is still covered regardless of whether he has submitted his
application for conversion."
¶28 Aetna and General American argue that Montana statutes make a distinction between
life insurance and disability insurance. That is, life insurance insures for all causes of
death (excepting war, air travel, hazardous occupation and suicide within two years of the
date of the policy). Disability insurance on the other hand does not insure life from all
causes of death. Rather it only provides coverage in the event of death by accident. This
argument has merit as far as it goes. There clearly are distinctions between life insurance
and disability insurance. However, § 33-1-205, MCA, plainly provides that the definitions
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of insurance are not mutually exclusive. A particular form of insurance coverage may
come within the definition of more than one type of insurance. Thus, the fact that
accidental death coverage comes within the definition of group "disability insurance" does
not preclude it from being considered "life insurance" for conversion purposes.
¶29 Aetna contends that the reference in the definition of life insurance, under § 33-1-208,
MCA (1993), to "additional benefits in event of death or dismemberment by accident or
accidental means," is designed to encompass double indemnity benefits provided as a
specific rider to a single life insurance policy. Aetna contends, through express inference,
that the reference includes double indemnity to the exclusion of AD&D. The problem is
that the statute does not specifically refer to either double indemnity or AD&D. It does,
however, specifically include benefits for death by accidental means. Both policies in
question provide coverage for death by "accidental means." In construing statutes, the
Court's function is to " 'ascertain and declare what is in terms or in substance contained
therein, not to insert what has been omitted.' " State v. Zabawa (1996), 279 Mont. 307,
313, 928 P.2d 151, 155. We note that the last sentence of the statute defining life
insurance, § 33-1-208 MCA (1993), specifically states that the "[t]ransaction of life
insurance does not include workers' compensation insurance." If, as Aetna suggests, the
legislature meant to exclude AD&D from the definition of life insurance, it would have
explicitly done so, as it did with workers' compensation insurance.
¶30 Aetna and General American cite to decisions from three other jurisdictions for the
proposition that accidental death insurance is not subject to statutory provisions relating to
group life insurance: Life Ins. Co. of North America v. Klingler (Tex. App. 1987), 730 S.
W.2nd 32; Henkin v. Northrop Corp. (9th Cir. 1990), 921 F.2d 864 (construing
California's insurance code); and Gamino v. General American Ins. (N.J. Super. Ct. App.
Div. 1996), 671 A.2d 1108. We note that the courts in Henkin and Klingler did not address
statutes comparable to Montana's § 33-1-205, MCA, which states that definitions of
insurance coverage are not mutually exclusive. Further, California's Insurance Code
provides that, "[l]ife insurance includes insurance upon the lives of persons or
appertaining thereto, and the granting, purchasing, or disposing of annuities." Cal. Ins.
Code Sec. 101 (West 1993). California's definition of life insurance, unlike Montana's,
does not reference accidental death.
¶31 As Aetna acknowledges, the Gamino decision is distinguishable for the reason that the
policy in question contained specific language that the AD&D could not be converted to
an individual policy. See Gamino, 671 A.2d at 1109. Although Aetna's policy provides
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that AD&D insurance ceases upon termination of employment, it does not, unlike the
Gamino policy, prohibit conversion of AD&D.
¶32 For the above reasons, we determine that these decisions are distinguishable and are
not persuasive authority. Under § 33-1-205, MCA, an insurance coverage may come
within the definition of two kinds of insurance. We therefore hold that although accidental
death coverage is disability insurance, it is also, for purposes of conversion rights, life
insurance as defined in § 33-1-208, MCA (1993). That is, it is insurance on a human life
for death by accidental means. As life insurance, accidental death coverage is subject to a
31-day conversion right upon termination of coverage pursuant to § 33-20-1209, MCA,
and, in the event of death within the 31-day conversion period, it is subject to automatic
conversion under § 33-20-1211, MCA.
¶33 2. Does accidental death coverage provided pursuant to a group accident insurance
policy remain in effect, if the policy contains a provision granting the insured the right to a
31-day grace period in which the group policy can be converted to an individual policy,
but where the insured dies before the expiration of the grace period without exercising the
right to convert the policy?
¶34 Having answered question number one in the affirmative, question number two must
also be answered in the affirmative. We have determined that accidental death coverage
provided under a group accident policy is, for purposes of conversion rights, life insurance
under § 33-1-208, MCA (1993) (defining life insurance) and § 33-20-1209, MCA
(providing conversion rights for life insurance) and § 33-20-1211, MCA (addressing effect
of death during conversion period). These statutory interpretations control over any
contrary provisions contained in the policies in question. Thus, accidental death coverage
as provided in the General American policy remains in effect, even where the insured dies
during the 31-day grace period without exercising the right to convert the policy by
making application and paying the first premium.
¶35 3. If this Court determines that there is accidental death coverage in a group policy in
either of the above situations, in a case where the policy provides that the insured or the
employer must submit notice of claims to the insurer "or any authorized insurance agent of
the Insurer," does the delivery of a notice of a claim to the insured's employer constitute
notice to the insurer, on the basis that the insured's employer is an agent of the insurance
company for the purpose of submitting a claim?
¶36 Mrs. Golt argues that her tender of a claim to her deceased husband's employer
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AAFES within the specified 20-day period satisfied the notice requirement of General
American's Certificate of Insurance.
¶37 General American contends that Section V of the Certificate plainly informed both
Mrs. Golt and her attorneys that notice of claim and proof of loss were to be sent to NAIU
or one of General American's agents. Further, it contends that AAFES was the policy
holder, not an agent of General American.
¶38 Finally, General American points out that although Mr. Golt died on February 25,
1994, the first notice of a claim that its agent NAIU had was the letter sent by Mrs. Golt's
attorney on September 21, 1995--almost four months beyond May 26, 1995, the date that
General American asserts was the absolute deadline under the Certificate by which Mrs.
Golt had to submit proofs of loss concerning her husband's death. General American
concludes that since the claim was not submitted to an authorized agent within the
prescribed time limit, Mrs. Golt failed to satisfy a condition precedent to the right of
recovery for any loss arising under the insurance policy.
¶39 Mrs. Golt argues that, in submitting her claim to AAFES, she complied with the
provisions of the "Notice" which was appended to the policy:
NOTICE
Please take notice that you are an insured under the policy . . . issued by [General
American] to the Policyholder [AAFES]. . . . The Policyholder submits premiums
and you or the Policyholder submit notice of claims to the Insurer at the office of
NAIU or to any authorized agent of the Insurer. [Emphasis added.]
¶40 Mrs. Golt argues that even if she had sent her claim directly to NAIU at the only
address listed in the Certificate of Insurance, the claim would not have reached
NAIU because it had moved from the listed address and the post office had ceased
forwarding mail to the new address before Mr. Golt died. Furthermore, although the
Certificate indicates that the claim should be sent to NAIU "or to any authorized
agent of the insurer," it fails to identify any acceptable "agents." Thus, given that the
Certificate of Insurance listed an invalid address for NAIU and did not specify any
alternative agents, Mrs. Golt, in submitting the claim to the employer AAFES, did
everything she reasonably could do. Additionally, Mrs. Golt points out that the
Notice provides that claims may be transmitted to General American either by the
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insured or through the policyholder, AAFES.
¶41 We agree with Mrs. Golt's analysis of the substance of the Notice. Given that the
Certificate of Insurance gives an invalid address for NAIU and that the Notice does not list
any agents, the Policy is ambiguous as to how and to whom an insured would directly
submit a claim. This ambiguity must be resolved in favor of the insured, Mrs. Golt.
Furthermore, the Notice provides that claims can be submitted through the employer/
policyholder, AAFES. Here, it is undisputed that Mrs. Golt timely submitted a claim to
AAFES for submission to the insurer. However, through no fault of Mrs. Golt's, AAFES
did not pass the claim on to General American.
¶42 There is a split of authority on the broad question of whether an employer is an agent
of the insurer in performing duties of administrating group insurance policies. See 1 J. & J.
Appleman, Insurance Law and Practice, § 43 (Rev. 1981). General American argues that a
group policyholder like AAFES is akin to an insurance broker and cites Nautilus Ins. v.
First Nat. Ins., Inc. (1992), 254 Mont. 296, 299, 837 P.2d 409, 411 (citation omitted), for
the proposition that an "insurance broker is usually regarded as the agent of the insured."
Mrs. Golt argues that the greater weight of current authority holds that the employer is an
agent of the insurer. She cites numerous decisions including Norby v. Bankers Life Co. of
Des Moines, Iowa (Minn. 1975), 231 N.W.2d 665, in which the Minnesota Supreme Court
held:
Administration of group insurance policies entails some rather routine functions,
such as enrolling employees through their completing applications for themselves
and dependents; collecting employee contributions, if any, and remitting premiums
to the insurer; terminating and reinstating insurance; and assisting in the processing
of claims. . . . To the extent the employer, with the consent of the insurer, performs
the functions of the insurer, it may properly be considered the insurer's agent.
Norby, 231 N.W.2d at 669.
¶43 In the case sub judice, General American's policy clearly allows claims to be
submitted through the policyholder/employer, AAFES. Further, the Ninth Circuit Court of
Appeals noted that the record shows that AAFES routinely transmits employees' claims to
General American. Under these facts, we hold that the insured's employer, AAFES, with
the express permission of the insurer, is, when accepting or processing a claim, performing
a function of the insurer and is properly considered the insurer's agent.
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Conclusion
¶44 We answer each one of the three certified questions in the affirmative. First,
accidental death coverage constitutes "life insurance" for purposes of conversion of
benefits upon termination of group coverage. Second, §§ 33-20-1209 and 33-20-1211,
MCA, control the conversion rights under an AD&D policy. Such a policy thus remains in
effect, even where the insured dies during the 31-day conversion period without first
exercising the right to convert through making application and paying the first premium;
and, third, since the Notice specifically states that claims may be submitted by the
policyholder/employer, the claim that Mrs. Golt submitted to AAFES was a timely
submitted claim.
/S/ W. WILLIAM LEAPHART
We concur:
/S/ J. A. TURNAGE
/S/ WILLIAM E. HUNT, SR.
/S/ JIM REGNIER
/S/ JAMES C. NELSON
/S/ TERRY N. TRIEWEILER
/S/ KARLA M. GRAY
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