Stockham v. Life Insurance Co. of North America

Citations: 3 P.3d 97; 27 Kan. App. 2d 639; 2000 Kan. App. LEXIS 579Docket: 84,023

Court: Court of Appeals of Kansas; June 9, 2000; Kansas; State Appellate Court

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Kazuko Stockham and Kathy Stockham, appellants, sought to recover life insurance proceeds following the death of Richard Stockham. The trial court denied their claim, leading to this appeal, which was ultimately affirmed. The case involved two group accidental death and dismemberment insurance policies from Life Insurance Company of North America (LINA) provided to Stockham by his employer, the City of Wichita. These policies terminated on May 17, 1996, following Stockham's resignation on May 3, 1996, and were never converted to individual policies as allowed within 31 days of termination. 

Additionally, Stockham was employed by Maude Carpenter Children's Home (MCCH) and had submitted an enrollment form for a new group insurance policy from Advance Insurance Company, which became effective June 1, 1996. However, Stockham died on May 29, 1996, prior to the policy's effective date. The trial court determined that neither the LINA nor the Advance policies provided coverage at the time of Stockham's death.

The plaintiffs contended that the LINA policies constituted life insurance under K.S.A. 40-434, necessitating a statutory interpretation. The court emphasized that statutory interpretation is a legal question, and when a statute is clear and unambiguous, courts must adhere to the legislature's intent without adding interpretations not found within the statute. The court indicated that the legislature is presumed to have intended reasonable construction to avoid unreasonable outcomes.

K.S.A. 40-434 mandates that group life insurance policies in Kansas must include specific provisions, including the right for individuals to convert to an individual life insurance policy without supplementary benefits if their group coverage ends due to employment termination. Additionally, if an insured individual dies during the eligibility period for conversion, the amount that would have been issued under the individual policy is payable under the group policy, regardless of whether an application or payment has been made.

However, no Kansas cases have evaluated K.S.A. 40-434 in relation to accidental death and dismemberment (AD&D) policies, which differ fundamentally from life insurance policies. Precedent indicates that proving accidental death requires additional proof beyond that for standard life insurance. Consequently, it is concluded that AD&D policies are not governed by K.S.A. 40-434, which specifically pertains to life insurance.

In this case, the plaintiffs' decedent was covered under a group AD&D policy, supplemented by life insurance. Since K.S.A. 40-434(8) permits conversion only to a life insurance policy without supplementary benefits, the group policy from LINA was not eligible for conversion under this statute. The trial court's ruling, affirming that there was no conversion right under K.S.A. 40-434, is upheld.

Additionally, the trial court found that the Advance life insurance policy did not cover the decedent's death because he was not part of the 'Original Enrollment' group, thus subjecting him to a waiting period that concluded after his death. Since coverage did not start until June 1, 1996, the court did not address the issue of failure of consideration, as it determined there was no coverage. This conclusion is also agreed upon. The plaintiffs’ argument for independent conversion rights was not raised at the trial level, making it inapplicable for appeal.

The Advance group insurance policy stipulates that benefits are payable upon the death of an 'insured employee.' An 'insured employee' is defined as an eligible employee of the group policyholder who has completed an enrollment form. An 'eligible employee' must meet specific criteria: their employment must be their principal occupation, they must be regularly scheduled to work a minimum number of hours per week, and they must have been actively at work for at least 15 of the 20 working days before their eligibility date. 

Eligibility for coverage begins either on the policy's issue date or on the first day of the insurance month following the completion of a company-imposed waiting period, which is 30 days, but does not apply to 'original enrollment.' The plaintiffs argue that the term 'original enrollment' is ambiguous and should be interpreted in favor of the claimant, suggesting that Richard Stockham’s enrollment qualified as 'original' and thus became effective immediately with no waiting period. 

However, the court disagrees, noting that if Stockham's enrollment were considered 'original,' he would have been eligible on May 1, 1996, just one day after his hiring, despite not meeting the requirement of being actively at work for the necessary days prior. Furthermore, he had not completed the enrollment form until May 14, 1996. The policy explicitly states it would become effective on June 1, 1996, three days after Stockham's death on May 29, 1996. The plaintiffs’ argument that Stockham was 'eligible' does not prove he met all criteria to be an 'insured employee' or that they can claim benefits from a policy that had not yet taken effect. The court finds no ambiguity in the term 'original enrollment' and confirms the policy's effective date of June 1, 1996, postdating Stockham's death. The court's decision is affirmed.