FSM SUPREME COURT TRIAL DIVISION

Cite as John v. Chuuk Public Utility Corp., 17 FSM Intrm. 66 (Chk. 2008)

[16 FSM Intrm 66]

CIVIL ACTION NO. 2006-1024

Decided: August 18, 2008

APPEARANCES:

HEADNOTES

    When a group insurance policy is non-participatory in that the employee contributes nothing to the payment of the premiums, no contractual relationship arises between the employee and the insurer. Therefore the insurer was under no contractual obligation to provide the decedent employee with notice that the group policy lapsed. John v. Chuuk Public Utility Corp., 16 FSM Intrm. 66, 68 (Chk. 2008).

    The effect of an employer’s cancellation of the master policy in regard to an employee’s coverage depends primarily on the time at which the employer does so. If it occurs before liability under the policy has attached, the insurer is released from any liability that might subsequently accrue so that when the insurer’s coverage of CPUC employees lapsed before its employee died, and therefore before liability under the policy attached, the insurer, as a matter of law, was not liable. John v. Chuuk Public Utility Corp., 16 FSM Intrm. 66, 68 (Chk. 2008).

    The court can take judicial notice of a fact not subject to reasonable dispute in that it is either 1) generally known within the trial court’s territorial jurisdiction or 2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned, and the court must take judicial notice if requested by a party and supplied with the necessary information. John v. Chuuk Public Utility Corp., 16 FSM Intrm. 66, 69 (Chk. 2008).

    When the court has not been supplied with the information necessary for the court to take judicial notice that life insurance was a state employee benefit when CPUC was created and what the insurance coverage’s terms were or to conclude that CPUC has not adopted its own merit system with changed benefits, there are genuine issues of material fact that preclude either party being entitled to summary judgment: 1) whether state employees in 1997 were afforded life insurance benefits and on what terms (contributory, non-contributory; on the job only, 24-hour; etc.); 2) whether CPUC has since established its own merit system and then altered the benefits; and 3) whether, if notice of the lapse of insurance coverage was required, it was given for the July 2004 lapse. John v. Chuuk Public Utility Corp., 16 FSM Intrm. 66, 69 (Chk. 2008).

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COURT’S OPINION

DENNIS K. YAMASE, Associate Justice:

    This comes before the court on summary judgment motions by defendant Chuuk Public Utility Corporation ("CPUC") and defendant Oceania Insurance Company ("Oceania"), each filed on July 28, 2008, and on the plaintiff’s opposition to both motions, filed on August 7, 2008. Oceania’s motion is granted. CPUC’s motion is denied.

I. Summary Judgment for Oceania Insurance Company

    Oceania moved for summary judgment on the ground that its life insurance policy with CPUC covering the lives of CPUC employees was not in force when CPUC employee Ronny John died on November 18, 2004. It is undisputed that CPUC’s Group Insurance Policy: Employees’ Protection Policy had lapsed due to CPUC’s non-payment of the premiums; that CPUC canceled the policy as of July 30, 2004; and that the insurance premiums had been wholly paid by CPUC until then. The plaintiff does not dispute these facts or advance a legal theory whereby Oceania would be liable under these facts.

    Oceania does not state whether it gave direct notice to the CPUC employees that their insurance coverage had lapsed. But "where a group insurance policy is non-participatory, in that the employee contributes nothing to the payment of the premiums, no contractual relationship arises between the employee and the insurer. Therefore [the insurer] was under no contractual obligation to provide the decedent with notice that the group policy lapsed." Watson v. Pilot Life Ins. Co., 741 S.W.2d 342, 343-44 (Tenn. Ct. App. 1987); accord Abbiativi v. Buttura & Sons, Inc., 639 A.2d 988, 991 (Vt. 1994) (no contractual relationship between employee and insurer when employee contributes nothing to the premium); Taylor v. Continental Assur. Co., 144 N.E.2d 213, 217 (Ohio Ct. App. 1956) ("There is no requirement that specific notice of termination of the group policy be given to insured employees . . . ."); but see Cannon v. Katz Drug Co., 577 S.W.2d 82, 87 (Mo. App. Ct. 1978) (contributory group life employee entitled to notice of lapse).

    "The effect of the employer’s cancellation . . . of the master policy in regard to an employee’s coverage depends primarily on the time at which the employer does so. If it occurs before liability under the policy has attached, the insurer is released from any liability that might subsequently accrue." 44A Am. Jur. 2d Insurance § 1853, at 323 (2003). Oceania’s coverage of CPUC employees having lapsed before Ronny John died and therefore before liability under the policy attached, Oceania, as a matter of law, is not liable to the plaintiff. Nor, for the reasons stated above, would Oceania be liable, even if it had not directly given notice to Ronny John that coverage had lapsed.

    Oceania being therefore entitled to judgment as a matter of law, its summary judgment motion is granted.

II. No Summary Judgment on Claim Against CPUC

    CPUC moves for summary judgment on the ground that since there was no life insurance benefit available when Ronny John died and that life insurance was an employee benefit only when CPUC had available funds, it is not liable to the plaintiff. CPUC put forward evidence that whenever CPUC received termination notices from the insurer, it would generally, although, in its view, it was not required to do so, give notice of the cancellation to CPUC employees whose usual response was that was fine because no premiums had been deducted from their pay. Aff. Tos Nakayama (CPUC CEO) paras. 10, 11 (July 24, 2008): Aff. Larry Gouland (CPUC Asst. CEO) paras. 14, 15 (July 28, 2008).

[16 FSM Intrm 69]

    The plaintiff does not put forward any competent evidence to rebut these supporting affidavits. The affidavits, however, do not aver that CPUC employees were specifically given notice of the July 2004 lapse in insurance coverage.

    The plaintiff contends that CPUC should be denied summary judgment and that judgment should be granted in her favor. She relies on the Chuuk Public Utility Corporation Act of 1996, which provided that after CPUC was set up it could "adopt the State Personnel Merit System as its own, or establish its own different from the State Merit System. All employees of the CPUC shall continue to receive the same benefits enjoyed as employees of the State, subject to change in accordance with the CPUC merit system." Chk. S.L. No. 3-97-05, § 25. The plaintiff contends that there is no indication that the CPUC merit system has changed since 1996 and asserts that life insurance was an existing state employee benefit in 1996 that continues to the present and she asks that the court take judicial notice of this "fact."

    The court can take judicial notice of a fact not subject to reasonable dispute in that it is either 1) generally known within the trial court’s territorial jurisdiction or 2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned, FSM Evid. R. 201(b), and the court must take judicial notice "if requested by a party and supplied with the necessary information," FSM Evid. R. 201(d). The court has not been provided with the information necessary for the court to conclude that life insurance was a state employee benefit when CPUC was created and what the insurance coverage’s terms were or to conclude that CPUC has not adopted its own merit system with changed benefits.

    There being genuine issues of material fact: 1) whether state employees in 1997 were afforded life insurance benefits and on what terms (contributory, non-contributory; on the job only, 24-hour; etc.); 2) whether CPUC has since established its own merit system and then altered the benefits; and 3) whether, if notice of the lapse of insurance coverage was required, it was given for the July 2004 lapse. These genuine issues not being undisputed neither CPUC nor the plaintiff is entitled to summary judgment.

CPUC’s summary judgment motion is therefore denied.

III. Conclusion

    Accordingly, defendant Oceania Insurance Company’s motion for summary judgment is granted and defendant Chuuk Public Utility Corporation’s summary judgment motion is denied. Counsel for plaintiff Sinisia John and Chuuk Public Utility Corporation shall appear at 2:00 p.m., Thursday, August 21, 2008 for a status conference for the purpose of setting further proceedings in this matter.