82 So. 175 | Ala. | 1919
The suit was upon a policy of life insurance in Code form, and resulted in judgment for the plaintiff.
Defendant's pleas were: (1) A denial of liability under its policy; (2) that the application which is made a part of the contract provides that the policy shall not become effective "until the first premium is paid and the policy delivered to and received by the applicant during her life and good health"; that the insured died before the payment of the first premium and before the policy was delivered; (3) that the policy was not delivered until after the death of the insured, of which defendant did not know, at the time of delivery of the policy; (4) that the policy was procured to be delivered by the fraud of the plaintiff in withholding (before and at the time of that delivery) information of insured's death.
Defendant's demurrers to the several replications were overruled, and this ruling is duly assigned as error.
Were the replications full answer to the several pleas? Referring to the specific averments of the latter, "the replication for the insurance policy which is made a part of the policy here sued on" was a part of the policy as required by the statute and its construction by this court. Code 1907, § 4579; Prudential Casualty Co. v. Kerr,
"The application for the policy sued which is made a part hereof and was signed by the assured stipulates that the policy should not take effect until the first premium is paid and the policy delivered to the applicant during her lifetime and good health, and * * * that said premium had not been paid and the policy delivered when the insured died, but that the policy was procured to be delivered by the fraud of the plaintiff in this, that plaintiff, after the death of the insured, called up the defendant by long distance phone, and asked that said policy be delivered, and concealed from the defendant the fact that the insured was then dead, and thereby induced the defendant to forward said policy attached to a draft for the first premium to the bank of New Hope to be delivered on the payment of the draft, and thereafter plaintiff paid said draft and secured the policy before defendant had any knowledge of the death of the insured, and gave no notice thereof until several days after her death and until he had secured and delivered the policy as above stated."
Plaintiff took issue on these pleas. Further replying to pleas 2, 3, and 4, he said that on the date of the application for insurance (October 26, 1916) the defendant through its authorized agent signed and delivered to the plaintiff an instrument in writing, known in insurance law as a "binding slip or memorandum" (Sun Ins. Office of London v. Mitchell,
"The defendant did not, prior to the death of said Bertha Brannum, or prior to the delivery of the policy, notify the plaintiff or said Bertha Brannum, by notice brought home to them or either of them, that said instrument in writing or receipt was not further binding on defendant."
It is a familiar declaration of the courts that contracts of insurance are liberally construed in favor of the assured, and, if doubtful, such contracts are construed against the insurer. Union Cent. Rel. Asso. v. Johnson, 73 So. 816;3 Allen v. Standard Ins. Co., 73 So. 897;4 Empire Life Ins. Co. v. Gee,
Where the language is unambiguous and there is but one reasonable construction of the contract, the court will expound it as made. Union, etc., v. Johnson. supra; Empire Co. v. Gee, supra; Union Mut. Aid Asso. v. Carroway,
A contract of insurance is not complete until the minds of the parties have met and they arrive at an understanding of the terms of the agreement, proposals of the one party being accepted by the other, and the risk does not attach until the conditions precedent have been fulfilled. An application for insurance is a mere proposal on the part of the applicant. When the insurer signifies acceptance of it to the "proposer," the minds of the parties meet and the contract is made. Webster's International Dictionary, p. 1719, Proposal; Commercial Fire Ins. Co. v. Morris,
It is certain that the common law makes no requisition that contracts for insurance be in writing (1 Phillips on Ins. §§ 8 et seq., 10, 13; 1 Duer on Ins. 60; Mobile Dock Marine Ins. Co. v. McMillan,
"* * * Both insurer and insured under an interim receipt are bound by the conditions of the policy ordinarily issued by the company. * * * Agents not unfrequently make minutes of their contracts in what are called 'binding books,' and in this way may bind several companies to one insured, each for its proportion of the total insurance required." Section 59. "A contract of insurance made by what is sometimes called an intermediary receipt given by an agent, that is, a receipt for the premium, containing a statement that the receipt is subject to the approval of the insurers, to be notified to the insured, and certifying that meanwhile the applicant is insured for a specified time, may be canceled within the time specified, and at any period prior to that time, if notice of disapproval be given." 1 May on Ins. (4th Ed.) § 69.
Mr. Joyce, in his Law of Insurance, § 64, summarizes the general purport of the decisions on this question as follows:
"(1) If the act of acceptance of the risk by the agent and the giving by him of a receipt is within the scope of the agent's authority, and nothing remains but to issue a policy, then the receipt will bind the company. (2) Where an agreement is made between the applicant and the agent whether by signing an application containing such condition, or otherwise, that no liability shall attach until the principal approves the risk and a receipt is given by the *149 agent, such acceptance is merely conditional, and is subordinated to the act of the company in approving or rejecting; so in life insurance a 'binding slip' or 'binding receipt' does not insure of itself. When properly executed it protects the applicant for insurance against the contingency of sickness intervening its date and the delivery of the policy, if the application for insurance is accepted. If the latter is not accepted, or refused, in the valid exercise by the company of its rights, the 'binding slip' ceases eo instanti to have any effect. (3) Where the acceptance by the agent is within the scope of his authority, a receipt containing a contract for insurance for a specified time which is not absolute but conditional, upon acceptance or rejection by the principal, covers the specified period, unless the risk is declined within that time, and it has been held in these cases that the company may not arbitrarily reject after a loss."
As illustration of the construction other courts have placed on such contracts to insure, in Marks, Adm'x, v. Hope Mut. Life Ins. Co.,
"No. 1002. $1,200. D. S. F. M. Ins. Co., Wilmington, Del. This certifies that we have this day entered in the name of L. C. Co., for whom it may concern, on our open policy No. 1002, with (said Co.) a risk of $1,200 on bark P. at and from June 20, 1878, to June 20, 1879, loss, if any, payable in current funds to Messrs. L. C. Co., or order, according to the terms and conditions of the policy. [Signed] J. S.W., Agent."
This paper was delivered by the broker to L. C. Co., and by them assigned in writing to plaintiff. No policy was ever issued by the company. In a suit on said paper for a loss on said vessel, it was held that the same did not constitute a valid and binding contract of insurance, nor could an action be maintained on it as such, for the reason it referred "to a policy which contains the contract and specifies its terms." Del. State F. M. Ins. Co. v. Shaw, supra.
Before the approval of the act of February 18, 1897 (Gen. Acts 1896-97, p. 1377), "To regulate the business of insurance in the state of Alabama," the general rule of parol contracts of insurance, of binding books, receipts, slips, or memoranda was recognized in this jurisdiction. Mobile Marine Dock Mutual Ins. Co. v. McMillan Son,
When the act of 1897 was codified, its section 27 found place in the Code of 1896 as section 2602, and in the Code of 1907 as section 4579. It contains the following:
"No life, nor any other insurance company, nor any agent thereof, shall make any contract of insurance, or agreement as to policy contract, other than is plainly expressed in the policy issued thereon. * * *"
Our construction of this statute eliminated therefrom bonds of indemnity assuring the fidelity of employés (Surety Co. v. Donaldson, supra); insurance contracts issued by fraternal and mutual benefit associations operated merely on the assessment plan (Locomotive Engrs. Ins. Asso. v. Hughes, supra); and mutual benefit insurance by secret benevolent societies. Eminent Household of Col. Woodmen v. Blackerby, supra; Supreme Ruler, etc., v. Darwin, supra.
Of recent decisions of this court, it may be well to advert to Sun Ins. Office v. Mitchell,
In Prudential Casualty Co. v. Kerr,
"No written or oral misrepresentation, or warranty * * * in the negotiation of a contract or policy of life insurance, * * * shall defeat or void the policy, * * * unless such misrepresentation is made with actual intent to deceive, or unless the matter misrepresented increase the risk of loss."
This provision would thus appear to recognize a distinction between a "policy of insurance" and a "contract to insure." In sections 4573, 4574, Code, the provisions are limited to a policy of insurance. The forms for suit under section 5382 are, respectively, on "a policy of life insurance" (form 12), "a policy of fire insurance" (form 13), "a policy of marine insurance" (form 14).
The Mitchell Case, supra, held that form 13 was adaptable to a parol contract of insurance, and was broad enough to support a judgment where the proof showed that no formal policy had issued, but that such parol agreement for insurance was consummated between the parties. In Royal Exchange Assurance, etc., v. Almon,
"Appellee further suggests that, if the policy were void, the jury may have found a verbal contract of insurance, and that such a finding would support a judgment on a complaint in Code form. It is deemed enough to say on this point that the evidence pointed to no other contract than that alleged to be shown by the instrument in evidence. Any action for a breach of promise to insure must be brought against the agent of the defendant."
This is not at variance with the Mitchell Case, supra.
In Pacific Mutual, etc., v. Hayes (2),
"In the application for reinstatement the insured had agreed that appellant would not be liable under the policy should he die by his 'own hand or act, whether sane or insane, within one year from the date of such placing in force.' And the violation of this agreement is relied upon by the appellant as a complete defense to this cause of action. One of the grounds of demurrer assigned to the pleas, setting up this defense, takes the point that it does not appear that such an agreement in the application for reinstatement is plainly expressed in the policy sued on, as required under section 4579 of the Code of 1907. It is insisted on the part of the appellant that the provisions of the above-cited statute have no application to a renewal or the reinstatement of a policy, but only have reference to the original contract of insurance. This question was considered, however, by this court, in the comparatively recent case of Mutual Life Ins. Co. v. Allen,
— wherein it was held that the statute was broad enough to include any contract or agreement as to the policy, whether it related to the issuance of the policy, or to a renewal, revivor, or reinstatement of same.
The statute under discussion was again considered in Norris v. New Eng. Mut. Life Ins. Co., 73 So. 377.8 The evidence was without dispute that the amount of the first premium was to be paid in quarterly installments. The insured had executed his note to the soliciting agent in payment of the first installment, which note was discounted by the general agent of the company and the portion due the company remitted thereto. The other three notes were payable to the defendant company, and due, respectively, three, six, and nine months after date, stipulating that such sums were for a part of the premium on the policy, and reciting that the note, if not paid at maturity, was not to be considered as a payment of the premium, and that the policy would become forfeited without notice. No part of said notes were paid. It was said:
"We are also clear to the view, under the authority of the Satterfield Case [
Of this, in the case of Satterfield v. Fidelity Mutual Life Ins. Co.,
"While the taking of the notes doubtless waived the actual payment until the maturity of the notes, yet it is evidently competent to show by parol that said notes were not paid at maturity, in which event the policy became, according to the contract, absolutely void. 17 Cyc. 656 et seq., and notes; Pitt, Adm'x, v. Berkshire Life Ins. Co.,
Under the foregoing construction given section 4579 of the Code, if recovery may not be defeated under different or superadded terms of a written reinstatement not made a part of a policy by a "rider agreement" affixed thereto (Ins. Co. of N. A. v. Williams,
An analogous case from Virginia is where the written agreement of the parties and that binding the applicant is the application for the policy, providing that the insurance should take effect only on payment of the first premium and delivery of the policy during the continuance in good health of the insured. Held, such was the condition precedent to the company's liability, notwithstanding the verbal agreement of the agent that the policy would be delivered as soon as issued by the company. Oliver v. Mutual Life Ins. Co.,
"The application for insurance was no more than a proposition from the deceased to the appellant to enter into a contract of insurance. It has not in it a word proceeding from the appellant. It was the act of, and proceeded from, the deceased alone; and it remained his act, a mere proposition for a contract, until the appellant assented to it, and agreed to accept the risk on the terms stated. * * * The receipt given by the agent to the deceased, at the time of receiving the application, indicates the real character of the transaction. Neither party then contemplated a contract complete in itself, or supposed there was more than a proposition for a contract. It is stated in express terms in this instrument that the deceased has made an application for a policy of insurance on his life for $5,000, the payment of a certain part of the first annual premium, interest, and policy fees in cash, and the execution of the note of the deceased for the remainder of the premium. It is further stated the deceased was to be considered insured from the date of the receipt, 'if said applicationshall be approved and accepted by said company, in which case apolicy shall be issued to him and this receipt surrendered; butif said application should be rejected, then the amount named,and the note given shall be returned to said George Blakely,and this receipt shall become null and void.' "
In the instant case, defendant says by its second plea that the application for insurance, made a part of the policy, provides that said insurance shall not become effective until the "first premium is paid and the policy delivered to and received by the applicant during her life and good health." The plaintiff's replications set out the "binding receipt" containing as its first and precedent condition that, "if apolicy be delivered on said application, said company shall accept this receipt as cash towards the payment of the first premium of said policy;" and (sixth clause) "if full settlement has been made with the application the insurance will be in force from date of approval of the completed application by the company's medical director."
Under Satterfield v. Fidelity Mut. Life Ins. Co., supra, the taking of a note (by an agent with authority) for the first premium waives actual payment of such premium until the note becomes due according to contract provisions; and default in payment of such premium at maturity renders the insurance uncollectable. Norris v. New Eng. Mut. Life Ins. Co., supra; Powell v. Prudential Ins. Co.,
Keeping in mind the recognized distinction between a contractto insure and a contract of insurance (the executed agreement to insure), we may inquire, What is the contract set up by the respective pleadings? According to the averments of the pleading, When were the premiums in the instant application for insurance due and payable on the part of the assured, and when did the approval of the application for the insurance and the contract become the binding policy of insurance of defendant? As to the subject-matter and dates of maturity of said notes, it is averred that the first premium for the insurance was evidenced by notes, "one for $50, due on delivery of the policy and the other for $28.08, due on January 15, 1917." The complaint avers the death of the insured to have occurred on January 6, 1917. When the replication is referred to and considered with the complaint as a statement by plaintiff of the executed contract on his part and of his accrued right of recovery thereon, the note maturing after insured's death (according to the agreement of parties to the application and binding receipt) is treated as a cash payment accompanying the application for insurance. Not so of the note for $50; that became due only on delivery of the policy. The time of delivery of the policy, stipulated in the application for insurance, was dependent on the concurring conditions precedent to a completed contract of insurance: Full payment of the first premium, embraced in the two notes; and the delivery to and receipt by the applicant (here the insured) during her lifetime and in good health of the policy of insurance. The contract stipulation of the application for payment of premiums and delivery to, and receipt by, the applicant of the policy during her life and good health is averred in the replications to have been waived by the authorized agreement of defendant, in giving the binding receipt, in that the delivery to insured of the policy was not conditioned on her continued "good health." If so modified there are still the two conditions precedent to the "contract of insurance": (1) Payment of first premium on the contract of insurance by the applicant or insured; and (2) the delivery of the contract of insurance to the insured "during her lifetime," and after approval of the completed application by the company's medical director. Powell v. Prudential Ins. Co., supra. It must result that the note for $50 became due and payable only when the policy was delivered, or when in law the policy is held subject only to the act of delivery to the insured (she being in life) under the "contract to insure," on the approval of the application by the company's medical director, though she may experience or be subject to subsequent (following the application and the initial medical examination made a part of the same) changed and enfeebled condition of health.
The averment of the replications that all premium notes were "paid when due" and the policy was delivered to plaintiff, when tested, as it must be, by its weakest averment (Nat. Park Bank v. L. N. R. R. Co., 74 So. 6910), is not the equivalent of the necessary averment that all premiums were paid when due, and the policy was thereafter delivered to and received by the insured, the applicant for insurance, while she was in life. Nor are the allegations of replications 2 and 3 that said completed application for insurance was approved by defendant's medical director on January 4, 1917, "prior to the death of said Bertha M. Brannum," full answer to pleas averring the policy of insurance was never delivered to the insured while in life. These replications were subject to demurrer.
The additional averment in replications 4 and 5 sought to set up an estoppel that defendant did not, prior to the death of the said Bertha M. Brannum or prior to the delivery of the policy, notify plaintiff or said Bertha M. Brannum that the receipt was not further binding on the defendant. This averment does not relieve said replications from the ground of demurrer to which replications 2 and 3 were subject. Testing the replications by their weakest averment, it is shown on their face that the first premium was not paid as required in the application for insurance, as to the $50 note; and it is not apparent therein that full settlement was made as provided in the contract of the parties, evidenced by the application and the binding receipt in question. Norris v. New Eng., etc., Co., supra; Satterfield v. Fidelity, etc., Ins. Co., supra. The parties to the contract knew its contents, were chargeable with the legal effect thereof; and defendant was under no obligation to advise plaintiff or the said Bertha M. Brannum as to the legal effect of the binding receipt in question, as it had reference to or was a modification of the application for insurance and on which the policy was to issue. Moreover, the replications were departures from the complaint.
For the error of the trial court in overruling demurrer to replications 2 to 5, inclusive, the judgment is reversed, and the cause is remanded.
Reversed and remanded.
ANDERSON, C. J., and MAYFIELD and SOMERVILLE, JJ., concur.