1. INSURANCE — City Employees' Rights — Share of Surplus — Must be Premised — Policy or Contract. City employees' rights, if any, to a proportionate share of annual surplus of premiums distributed by insurance company to city must be premised upon the policy, or upon a contract, express or implied, between city and employees.
Opinion by JUDGE BERMAN.
Plaintiffs, employees of the City of Colorado Springs, commenced this class action to recover a proportionate share of the annual surplus distributions paid to the City by the insurer under a group life insurance policy. Coverage under the policy is mandatory for all permanent employees, and the premiums are paid partially by the City and partially by each employee via a payroll deduction. The trial court granted summary judgment of dismissal on the ground that plaintiffs' case was barred by the statute of limitations, and that the insurance policy created no enforceable rights in the employees to the relief they sought. Plaintiffs appeal. We affirm.
Prior to December 7, 1964, the insurance policy (not made a part of the record) contained the following clause:
"Annual Surplus Distribution. On each policy anniversary following a year during which this policy has been in force, there shall be distributed hereon such share of divisible surplus as may be apportioned hereto by the Company.
"Any such surplus shall be paid in cash to the Employer or, at the election of the Employer, may be applied in abatement of premium payments. In either event, such divisible surplus is to be distributed or applied by the Employer according to the respective rights thereto, if any, of the parties contributing to the premiums hereunder."
During the period the above provision was in effect, the City received approximately $34,500 in annual surplus distributions. The employees had no notice of, and received no share of, such distributions. On December 7, 1964, the above provision was amended by agreement between the City and the insurance company. The amended provision provides that to the extent the divisible surplus exceeds the City's "net cost of the insurance," it shall be applied by the City "for the sole benefit of the employees." No issue concerning the amendment is involved in this appeal.
[1] Plaintiffs' right, if any, to a proportionate share of the annual surplus distributed prior to December 7, 1964, must be premised upon the policy, Massachusetts Mutual Life Insurance Co. v. De Salvo, 174 Colo. 115, 482 P.2d 380; 3 J. Appleman, Insurance Law and Practice § 1571, or upon a contract, express or implied, between the City and the employees. Pelelas v. Caterpillar Tractor Co., 113 F.2d 629 (7th Cir.), cert. denied, 311 U.S. 700, 61 S.Ct. 138, 85 L.Ed. 454.
[2] Contrary to the plaintiffs' contention, the above-quoted provision of the policy in effect prior to December 7, 1964, does not give the employees any right to share in the surplus because it does not define the rights of the parties who made premium contributions. As ruled in Pelelas, supra, this absence of a definitive right is made clear by the clause requiring the employer to distribute the surplus "according to the respective rights thereto, if any, of the parties contributing to the premiums. . . ." (emphasis added)
Nor does this treatment of the provision render the clause meaningless, as plaintiffs contend. Said provision, like the amended provision now in effect, was designed to protect the insurance company, after payment to the employer-policyholder, against claims by the employee-insureds where the employer refuses to pay the employees. See Keniston v. American National Insurance Co., 31 Cal. App. 3d 803, 107 Cal. Rptr. 583.
[3] Plaintiffs contend that since all employees are required to pay a portion of the premium from which the surplus distributions are derived, a contract to share in those distributions should be implied. However, the record does not contain the insurance policy, the City council resolution authorizing the insurance program, nor any agreement, employment contract, or contracts between the City and the employees relating to the policy program.
Since plaintiffs have shown no right to share in the surplus distributions, there is no need to discuss the City's statute of limitations defense.
Judgment affirmed.
JUDGE PIERCE and JUDGE SMITH concur.