BONNIE L. SMITH, individually and as assignee of the Estate of Charles M. Harting, Plaintiff-Appellee, v. NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY, Defendant-Appellant, 72 Haw. 531

OPINION OF THE COURT BY MOON, J. This is a life insurance case involving cross-motions for

summary judgment on the issues of coverage and standing. Bonnie L. Smith (Smith), plaintiff-appellee, claims that she is entitled to $25,000 of life insurance proceeds under a policy issued by defendant-appellant New England Mutual Life Insurance Company (New England). The circuit court agreed with Smith and granted

summary judgments on both issues in her favor and against New England. We reverse on the issue of coverage and remand this case for entry of judgment in favor of New England. I. The facts are not in dispute. New England issued an employee group life insurance policy to Hawaii Pacific College (HPC) on July 1, 1984. The insured in this case was Smith’s sister, Ellen F. Harting (Mrs. Harting). Mrs. Harting was employed by HPC continuously, on a part-time temporary basis, beginning the spring semester of 1985. She became a full-time employee on August 24, 1987.

Less than three months later, on November 2, 1987, she committed suicide. New England’s policy provided that benefits be paid to an employee’s designated beneficiary at the time of the employee’s death. However, the policy also provided for a waiting period before an employee was eligible for insurance coverage, as follows: Subject to the

section of this Policy entitled “Eligibility for Coverages”, each employee to be insured under any part of the employee insurance provided hereunder shall be eligible upon completion of the waiting period shown below. * * *

(2) Persons who become employees after the effective date of the Policy, upon completion of three months of continuous active service. (Emphasis added.) “Employee” was defined in the policy as [a]ny person employed and compensated for services by the Policyholder . . . on a regular full-time permanent basis. (Emphasis added.) II. A. One of the circuit court orders now being appealed granted

summary judgment in favor of Smith on the issue of coverage. The trial court agreed with Smith that the policy language “continuous, active service” as used in the three-month waiting period provision was not limited to full-time employment. Because Mrs. Harting had been continuously employed by Hawaii Pacific College for more than three months at the time of her death, and was in fact a full-time employee when she died, the court below found that she was eligible for coverage under the policy. We disagree with the trial court because we find that the policy language in this case is clear.

Smith has attempted to create an ambiguity where none exists. Hawaii Revised Statutes (HRS) § 431:10-237 provides that “[e]very insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy.” Smith’s construction of the waiting period exclusion of the policy in question completely ignores the definition of “employee.” Under the policy, eligibility for benefits vests after “completion of three months of continuous active service” by an employee, who is defined as “[a]ny person employed ... on a regular full-time permanent basis” (emphasis added).

The clear implication of the waiting period provision is that coverage is effective only after three months of continuous service as a full-time permanent employee. Smith argues that if this is the meaning New England intended, it could have made that meaning clear by specifically adding the implied phrase. However, we find the waiting period exclusion, as written, to be clear and unambiguous because the term “employee” as used therein must be read and construed according to its meaning as defined in the policy. HRS § 431:10-237.

The court below found that two prerequisites determined coverage: one, the status of the insured as a full-time employee; and two, completion by the insured of three months of continuous, active service. With respect to the second requirement, the court found that Mrs. Harting’s part-time employment could be included in satisfying the three-month requirement. We disagree with the trial court’s

interpretation of the policy. Specifically, we find the court’s statement that “the policy does not limit continuous, active service to [full-time] employees only” to be incorrect. First, HRS § 431:10-237 requires that the stated definition of employee be used wherever that term appears in the policy. Thus, we need only substitute its meaning where the term is used.

The waiting period provision would then read, “. . . each [person employed and compensated for services by the Policyholder... on a regular full-time permanent basis]... shall be eligible ... upon completion of three months of continuous active service.” Second, it is clear from a reading of the entire waiting period provision that “continuous active service” is limited to full-time service, and should not include service as a part-time employee. The waiting period provision, in its entirety, reads as follows: Waiting Period-Employees. Subject to the

section of this Policy entitled “Eligibility for Coverages”, each employee to be insured under any part of the employee insurance provided hereunder shall be eligible upon completion of the waiting period shown below:

(1) Persons who are employees on the effective date of the Policy, on the date of issue of the Policy or upon the completion of three months of continuous active service, whichever is later;

(2) Persons who become employees after the effective date of the Policy, upon completion of three months of continuous active service. Keeping in mind that “employee” is defined in die policy, it is obvious that subparagraphs (1) and (2) were meant to separate employees of HPC, employed on a full-time basis, into two categories: 1) those who were full-time employees on the date the policy was issued, and 2) those who became full-time employees subsequent to the date of issue.

It is clear that under subparagraph (1), any full-time employee who had already completed three months of continuous active service would be covered as of the date of issue; if on the date of issue a full-time employee did not have three months of continuous active service, then that employee would be required to complete the three months before coverage is effective. Under subparagraph (2), a person who becomes a full-time employee after the policy issue date would be required to complete three months of continuous active service from the date upon which that employee attained full-time status.

The clear implication from a reading of both subparagraphs is that the point from which the three month period is calculated is from the date the employee attains full-time status. Thus, even if it can be said that Mrs. Harting’s consecutive semester employment was “continuous” and “active,” such service was not rendered as an employee with full-time status. We find that the trial court’s

interpretation of the waiting period exclusion not only ignored the stated definition of employee but required that phrases be taken out of context. In Northwestern National Life Insurance Co. v. Brevell, 291 S.W.2d 957 (Tex. Ct. App. 1956), a case on point, Douglas Brevell worked part-time for his employer for several years. On June 5, 1954, he became a full-time employee. Five months later, on November 9,1954, he died.

The life insurance policy under which Brevell’s mother claimed benefits provided that “new employees shall be eligible for insurance hereunder on the day of completing six months of continuous service with the employer.” “Employees” was defined in the policy as “all full time employees.” The claimant argued that there was “no requirement in the policy that any employee have six months of continuous service as a full time employee in order to become eligible for insurance,” and that the insurance company had written the phrase “as a full time employee” into the policy. 291 S.W.2d at 959.

The Texas Court of Appeals disagreed, commenting as follows: Obviously, the requirement that an employee be a full time employee for six months is not a creature of imagination of the [insurance company] for the purposes of this lawsuit, but was included in the amendments to the policy. Such amendments were in effect when the deceased first went to work for the employer.

It must be conceded that if the policy did not define “employee” as a full time employee of [the employer], then the [claimant] would have good cause to argue that the deceased was eligible under the terms of the group policy, since there is no question but that he had been in the continuous service of the company for more than six months at the time of his death. However, the definition is included in the insurance agreement between the [insurance company] and the employer and it is a part of the contract. 291 S.W.2d at 959.

In the present case, we have a similar insurance policy and similar arguments in favor of coverage. Smith argues that the Brevell case is distinguishable because the Texas court did not interpret the “ambiguity” in favor of the insured. According to Smith, Brevell “is old, is wrong, and would have been decided differently under Hawaii law.” However, the requirement that the court construe ambiguities in favor of coverage only applies if there is truly an ambiguity.

We agree with New England’s position in this case that the policy in question clearly provided that an employee was only entitled to coverage “upon completion of the waiting period” of “three months of continuous active service.” The policy separately defined “employee” as including only full-time permanent employees, and that definition applied throughout the policy. We simply see no ambiguity. Ambiguity is found only where the policy, when taken as a whole, is reasonably subject to differing

interpretations. Liberty Mut. Ins. Co. v. United Nat’l Ins. Co., 69 Haw. 37, 40, 731 P.2d 167, 170 (1987). A court must “respect the plain terms of the policy and not create ambiguity where none exists.” First Ins. Co. of Hawaii, Inc. v. State ex rel. Minami, 66 Haw. 413, 423-24, 665 P.2d 648, 655 (1983). When we view the policy here as a whole, we fail to see how it is reasonably subject to more than one

interpretation. We would concede, as did the court in Brevell, that if the policy had not defined the term “employee,” Smith would have good cause to argue that Mrs. Harting had been in continuous active service for more than three months prior to her death. However, that is simply not the case here. The minority ignores the definition of “employee” as specified in the policy and by doing so creates the ambiguity it claims exists. We also disagree with the minority view that there are genuine issues of material fact in this case. Even the parties do not argue the existence of genuine issues of material fact that would preclude

summary judgment. In fact, the parties agree that the material facts are not in dispute. The record in this case is clear. The unchallenged affidavit of Donald S. Gedeon, Vice President of HPC, attached to New England’s motion for

summary judgment states: 8. That Mrs. Harting became a full-time permanent employee of HPC as of August 24, 1987 when she was appointed as an Instructor of English for the 1987-1988 Academic Year; 9. That prior to August 24,1987, Mrs. Harting was not a full-time permanent employee of HPC; [and] 10.That prior to August 24,1987, Mrs. Harting was a part-time employee of HPC who, on occasion, was appointed to part-time or temporary teaching assignments by HPC[.] Further, in Smith’s own cross-motion for

summary judgment on the issue of coverage, she agrees that “[t]he facts in this case are undisputed. Ellen F. Harting was employed by HPC on a continuous, active basis as a part-time employee beginning in 1985. She became a full-time permanent employee on August 24, 1987.” (Emphasis in original.) Smith also states that “[Mrs. Harting] had been a continuous, active part-time employee of HPC since 1985.

This is undisputedf,]” and that “[b]efore the date of her death, she had continuously actively served HPC as a part-time employee for at least two and one-half years.” (Emphasis added.) In support of her contention that there are no factual disputes, Smith attached the business records of HPC to her cross-motion, which included part-time temporary faculty appointment letter agreements between HPC and Mrs. Harting. Each letter agreement for temporary employment covered the period of one semester and indicated that Mrs.

Harting’s appointment as an instructor was either “part-time” or “temporary.” Beginning with the spring semester of 1985 up through the spring semester of 1987, HPC and Mrs. Harting entered into five separate letter agreements for temporary employment. On February 20,1987, Mrs. Harting and HPC entered into a sixth agreement for employment for the 1987-1988 academic year, which began on August 24, 1987, wherein her status was changed to full-time. Additionally, at the hearing on the cross-motions for

summary judgment on February 14, 1990, the following exchange between court and counsel occurred: [New England’s Counsel]: ... In this case Mrs. Harting became a regular, full-time, permanent employee of HPC on August 24, 1987. THE COURT: That’s not disputed, really, is it? [Smith’s Counsel]: Not at all, Your Honor. I don’t think there’s any factual dispute at all. From our review of the evidence, including the business records of HPC, we agree with the parties that there is no dispute that 1) Mrs. Harting became a full-time permanent employee on August 24, 1987, and 2) prior to August 24,1987, Mrs.

Harting’s employment status was on a part-time, temporary basis. As Smith in her answering brief so aptly states: “The question for the court is to take these undisputed facts and apply the policy wording to them.” However, despite the position of the parties that the question presented on appeal is one of law, the minority points to the record and curiously seeks to advocate the existence of genuine issues of fact where the parties themselves agree that none exist. The minority in urging that a genuine issue of fact exists states: Why appellee’s counsel’s concession that Mrs.

Halting was a “part-time” employee is conclusive to the majority, while the concession of the appellant insurance company’s counsel at oral argument that she was full-time in the preceding semester is of no significance to the majority is a little difficult to comprehend in the context of a

summary judgment. (Emphasis in original.) The portion of the oral argument that the minority refers to is as follows: Justice Padgett: When you.say part-time, what we’re trying to do is to find out — you know, for a moment there, I thought you were describing a situation where the college doesn’t consider her a full-time employee because they are employing her one semester at a time, even if she is working the same number of hours during that semester as a full-time employee would be working. Counsel: That appears to be, ah, what the situation is.

You’ve got, ah, contracts issued on a semester basis as opposed to an entire year and the college took the position that she became a[n] “instructor” by virtue of the contract that went one year .... (Emphasis added.) The minority misinterprets the above exchange as a concession by New England’s counsel that Mrs. Halting “was full time in the preceding semester,” within the context of the issue presented. Counsel for New England, in responding to the court, merely agreed with what the undisputed facts were, that is, that HPC did not consider Mrs.

Harting to be a full-time employee while working on a semester basis. New England’s counsel simply agreed with the court that even if Mrs. Harting was working the same number of hours during a particular semester as a regular full-time employee, HPC did not consider her to be “full-time.” It is common knowledge that many employers hire workers on a part-time or temporary basis, and that such employees may actually work eight-hour days and forty-hour weeks.

While such employees may consider themselves to be working “full-time,” their employment status is determined by their employer and not by the employees themselves. Thus, the fact that Mrs. Harting, prior to August 24,1987, was working the same amount of hours as a regular full-time employee does not change her employment status. Lloyd v. Franklin Life Insurance Co., 245 F.2d 896 (9th Cir. 1957), involved an action by a beneficiary under a life insurance policy. On cross-motions for

summary judgment, the insurer attempted to condition an admission of fact only for the purpose of its motion for

summary judgment. The Ninth Circuit Court of Appeals held such condition invalid and stated: A concession of fact on motion for

summary judgment establishes the fact for all time between the parties. The party cannot gamble on such a conditional admission and take advantage thereof when judgment has gone against him. This Court will not emasculate thus the efficient devices of

summary judgment. ... This is not to say that there could be no relief by the court from an erroneous admission of a party. But there cannot be a tentative or conditional admission on a motion for

summary judgment, which by definition posits that there are not in truth any unresolved issues of material fact which must be tried if the wheel turns wrong. Of this all practitioners should take notice. The facts should be established first, and the law can only be laid in light thereof. In this case, Smith placed no condition on her representation that the facts were undisputed only for the purpose of her motion for

summary judgment. Moreover, she does not assert on appeal that such concessions of facts were erroneous admissions. Nor do we find that they were erroneous. Counsel’s decision to controvert or admit facts in a

summary judgment proceeding is presumed to be based on examining and analyzing all of the evidence available, especially that which has been submitted in support of the motion for summaiy judgment. Such decisions may be tactical or strategic and are best left to counsel, who presumably have full knowledge of all aspects of their respective cases. Where the parties agree that the facts are undisputed and the question for the court is one of application of law, the role of the appellate court in review should not include second guessing counsel’s reasons for his or her position.

In urging coverage, Smith also points to the fact that, as of October 1, 1987, New England charged and collected a premium from Hawaii Pacific College to cover Mrs. Harting. New England did not refund the payments until after it learned of Mrs. Harting’s death. Accordingly, Smith argues that New England’s course of conduct estops it from claiming that Mrs. Harting was not entitled to be covered on the date of her death. However, it is apparent that the reason New England charged a premium for Mrs. Harting is that it was supplied incorrect information by Hawaii Pacific College.

In short, the estoppel argument has no bearing on this case. The life insurance policy in question was an employment benefit for which the insured was not required to pay any premiums herself. Moreover, her employer provided the information to the insurance company upon which the insurance company based its collection of premiums. Such circumstances do not support a finding that Mrs. Halting was entitled to insurance coverage at the time of her death. This same issue was also raised in Brevell.

The employer in Brevell deducted an amount from the deceased’s paycheck to cover the premium for a group life insurance policy. Plaintiff in that case argued that the deduction proved that the deceased was eligible for the insurance coverage.

The Texas Court of Appeals held otherwise, stating: We are unable to see how this payroll deduction can operate to make the insurance carrier liable, when all of the evidence shows conclusively that under the terms of the policy itself the deceased was not eligible to participate in the group insurance at the time the deduction was made, and was not so eligible at the time of his death in November, 1954. Brevell, 219 S.W.2d at 959. In the present case, we also conclude that the payment of an insurance premium by Mrs.

Harting’s employer does not operate to make New England liable when the policy provisions clearly excluded her from eligibility at the time of her death. B. The second order being appealed, also granting

summary judgment in favor of Smith, concerns the issue of Smith’s standing to claim any life insurance benefits. Smith claims to be entitled to the proceeds of the insurance policy either as a designated beneficiary or as the assignee of Mrs. Harting’s husband’s estate. Having found in favor of New England on the issue of coverage, we need not consider the issue of Smith’s standing. m. Based on the foregoing, we reverse the

summary judgment on the issue of coverage in favor of Smith and remand this case for entry of

summary judgment in favor of New England. David F. Simons for plaintiff-appellee Bonnie L. Smith. Archie T. Ikehara (Ward F. N. Fujimoto with him on the brief) for defendant-appellant New England Mutual Life Insurance Company.