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ESTATE OF ETHEL IRENE OSBORN v. GERLING GLOBAL LIFE INSURANCE COMPANY

MAY 11, 1988

ESTATE OF ETHEL IRENE OSBORN
v.
GERLING GLOBAL LIFE INSURANCE COMPANY, ET AL.



ON PETITION FOR REHEARING

EN BANC

ZUCCARO, JUSTICES, FOR THE COURT:

This case is an appeal from the Circuit Court of Montgomery County, where on June 17, 1986 a summary judgment was entered dismissing the complaint of the Estate of Ethel Osborn against Gerling Global Life Insurance Company. The Estate of Ethel Osborn appeals this decision. We reverse.

 FACTS

 On November 9, 1982, Ethel Osborn bought a health

 insurance policy from State Security Life Insurance Company (hereinafter State Security). The term of the policy was November 25, 1982 through May 25, 1983. By renewal, the policy term was extended through November 25, 1983.

 The financial base of State Security was shaky at best, and there existed constantly questions concerning its ability to pay the claims of policyholders. Consequently, Insurance Commissioner George Dale demanded that State Security show cause why its license to sell insurance in Mississippi should not be revoked. In response to the Insurance Commissioner's demands, State Security began to negotiate a reinsurance agreement with Gerling Global Life Insurance Company (hereinafter Gerling Global). While these negotiations were in process, the president of State Security was required by Dale to pledge a personal letter of credit in the amount of $250,000 for the protection of policyholders. On July 15, 1983, State Security and Gerling Global entered into an agreement whereby Gerling Global would coinsure a portion of State Security's risks on all of its accident and health insurance policies. It is this reinsurance agreement that forms the basis for the present case.

 On August 3, 1983, Ethel Osborn was found to have a malignant cancerous growth in her pancreas (metastatic adenocarcinoma). As a result of this condition, Osborn was hospitalized for sixty-five (65) days between July 25 and October 21, 1983. The claims of Osborn for her bills and expenses resulting from the infliction were ultimately denied by State Security.

 On March 1, 1984, Osborn filed suit against State Security, its agents, and Gerling Global for $25,256.45 in compensatory damages plus $2,500,000 in punitive damages. Subsequently, Osborn died on September 14, 1984, but her suit, which forms the basis for the present appeal, was revived by her estate. Further, the axe of financial instability finally fell on State Security, and it was declared insolvent by the Insurance Commissioner on October 12, 1984. State Security was placed into receivership by the Chancery Court of Rankin County, and Osborn's lawsuit, like all other suits against State Security, was stayed in order to allow the received to assume control of the business. See State Security Life Insurance Co. v. State, 498 So.2d 825 (Miss. 1986).

 On November 4, 1985 Gerling Global filed its motion for summary judgment on the grounds that appellant had failed to state a claim upon which relief could be granted. The trial court granted Gerling Global's motion holding:

 (1) Mrs. Osborn did not have any privity of contract with Gerling Global and therefore cannot base any claim against Gerling Global based on breach of contract, and

 (2) Mrs. Osborn cannot maintain any claims based on a third party beneficiary because the reinsurance contract was not intended to benefit Mrs. Osborn or any other insured of State Security.

 It is this adverse decision that the Estate of Osborn now appeals.

 I. DID THE LOWER COURT ERR IN HOLDING THAT THE SUBJECT INSURANCE AGREEMENT WAS A TRUE CONTRACT OF REINSURANCE SO AS TO DENY OSBORN A DIRECT ...


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