150 F.2d 631 (3rd Cir. 1945), 8555, Bush v. Prudential Ins. Co. of America

Docket Nº:8555.
Citation:150 F.2d 631
Case Date:July 06, 1945
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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150 F.2d 631 (3rd Cir. 1945)




No. 8555.

United States Court of Appeals, Third Circuit.

July 6, 1945

Argued Oct. 16, 1944.

James J. Henry, of Philadelphia, Pa. (Raymond S. Shortlidge, of Philadelphia, Pa., on the brief), for appellant.

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Kendall H. Shoyer, of Philadelphia, Pa. (Andrew C. Dana, of Philadelphia, Pa., on the brief), for appellee.

Before BIGGS, GOODRICH, and McLAUGHLIN, Circuit Judges.

BIGGS, Circuit Judge.

Vasta D. Bush, the widow of Charles F. Bush, brought suit against the defendant, The Prudential Insurance Company of America, seeking to recover a sum asserted by her to be due from the defendant on a policy o insurance in the face amount of $3, 000 issued by the defendant to her late husband. The jury rendered a verdict for Mrs. Bush in the amount sought by her but the court below entered judgment n.l.v. 1 for the defendant. The plaintiff appealed. The sole question presented is whether the policy was in force at the time of Bush's death. If a dividend due on the $5, 000 policy may be applied pro tanto to the payment of the fourth quarterly premium due on the $3, 000 policy and if the grace period of the $3, 000 policy may be employed to extend the coverage, the policy sued on was in force at the time of Bush's death. In view of the fact that the jury found a verdict for the plaintiff all inferences to be drawn from the evidence must be those most favorable to the plaintiff. From the evidence the jury could have found the following.

Bush had been insured under a policy of term insurance in the face amount of $5, 000 issued by the defendant. This policy contained a provision whereby within twelve years it might be converted into other insurance than term insurance. In June, 1930, within the period stipulated by the policy, Bush reached the conclusion that he desired to convert the $5, 000 term policy into a $3, 000 insurance policy giving protection for life. The defendant's agent, one Dougherty, had informed Bush that if the $5, 000 policy was not converted within a specified time unfavorable rates would render conversion unprofitable. On June 21, 1930 Bush surrendered the policy to Dougherty and received a receipt therefor. Nine days later Bush went with Dougherty to a doctor for a physical examination in order to qualify for the converted policy. The result of the examination being favorable to Bush, on returning home Bush paid Dougherty $5 as a down payment against the premium which would become due when the converted policy was issued. Dougherty gave Bush two receipts, one for the $5, 000 policy and another for the $5. The receipt for the policy states: 'Received of Charles F. Bush, policy No. 5497121 for $5, 000 to be converted into a $3, 000 policy, endowment at age 85. Policy No. 5497121 is paid to July 16, 1930. A Dougherty, Agent.' The receipt for $5, though repeatedly referred to by the witnesses, seems not to have been introduced in evidence. The Insurance Company received the $5 from Dougherty. Dougherty took the $5, 000 policy in order to surrender it to the Company but did not do so. A dividend on the $5, 000 policy in the amount of $18.80 was due to Bush from the Insurance Company. He directed Dougherty to apply this dividend against the first premium to become due on the $3, 000 policy but upon Dougherty's representation that an application of the dividend would take some time, Bush paid the first entire quarterly premium of $32.82 due on the new policy with the understanding with Dougherty that the dividend due from the $5, 000 policy would be applied as soon as possible against the premiums coming due on the $3, 000 policy.

The $3, 000 policy was issued to Bush. On July 14, on October 14, 1930, and on January 14, 1931 he paid the full quarterly premiums due on it. On the occasions when Bush made these payments he requested Dougherty to see that the dividend was credited as had been agreed. Dougherty stated repeatedly that this would be done, but the dividend in fact was never credited on the books of the defendant against premiums due or coming due on the $3, 000 policy. Bush did not pay the quarterly premium due on the $3, 000 policy on April 14, 1931 because he believed it was time that the Insurance Company should apply the dividend as Dougherty had agreed.

Shortly after April 14, 1931 a clerk from the defendant's local (Oxford, Pennsylvania) office called the Bush home on the telephone and talked to Mrs. Bush in regard to the unpaid premium. Mrs. Bush told the clerk of her husband's difficulty in securing the benefit of the unpaid dividend. On June 1, 1931, Pinno, an assistant superintendent of the defendant in charge of its local office, wrote a letter to Bush as follows: 'I have been informed by my clerk

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that when she called you up to remind you of the overdue premium she was informed by Mrs. Bush that you were dissatisfied in some way or other regarding the methods employed by our representative, Mr. Dougherty. Mr. Dougherty operates out of the Oxford Office under my supervision, and I wish to assure you that we will appreciate any comments which you may have regarding the service rendered you and in the future will appreciate it if you will call matters of experiences such as you have had to the attention of this office. In the meantime, if there is anything at the present time upon which you wish to be enlightened, kindly make your wants known.' Nothing was done in respect to the dividend and the April 14, 1931 premium was never paid by Bush. He died in an accident which took place on June 11, 1931.

Mrs. Bush first sued the Insurance Company in the United States District Court for the Eastern District of Pennsylvania seeking recovery on the $5, 000 policy. The court gave judgment for the Insurance Company. Mrs. Bush had alleged that the $18.80 dividend should be applied to the $5, 000 policy which thereby would have remained in force until Bush's death. The defendant contends that the issue presented by the instant case was adjudicated in the defendant's favor by the judgment in the prior suit.

Jurisdiction in the case at bar is based on diversity of citizenship. Bush was a resident of Pennsylvania. The policy was delivered there. Accordingly, the law to be applied is that of Pennsylvania. See Pierkowskie v. New York Life Ins. Co., 3 Cir., 147 F.2d 928, 932, and the...

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