American Life Ins. Co. v. Nabors

• Decision Date: 28 November 1934
• Docket Number: No. 1498-6237.,1498-6237.
• Citation: 76 S.W.2d 497
• Parties: AMERICAN LIFE INS. CO. v. NABORS.
• Court: Texas Supreme Court

76 S.W.2d 497

AMERICAN LIFE INS. CO. v. NABORS.

No. 1498-6237.

Commission of Appeals of Texas, Section B.

November 28, 1934.

Error to Court of Civil Appeals of Second Supreme Judicial District.

Suit by Neoma Lee Nabors, a minor, by and through John A. Miller, as her next friend, against the American Life Insurance Company. Judgment for plaintiff was affirmed by the Court of Civil Appeals [48 S.W.(2d) 459], and defendant brings error.

Reversed and rendered.

Seay, Malone & Lipscomb, of Dallas, and Garnett & Garnett, of Gainesville, for plaintiff in error.

Murphy & Murphy, of Gainesville, and Edwards & Robinson, of Oklahoma City, Okl., for defendant in error.

CRITZ, Commissioner.

This suit was instituted in the district court of Cooke county, Tex., by Neoma Lee Nabors, a minor, by and through her uncle, John A. Miller, as her next friend, against American Life Insurance Company, a corporation, duly authorized to do business in this state. The action is based on an alleged tort, as will later more fully appear. Trial in the district court, where the case was submitted to a jury on special issues, resulted in a verdict and judgment for Neoma Lee Nabors for $1,250. This judgment was affirmed by the Court of Civil Appeals at Fort Worth. The insurance company brings error.

For convenience we shall hereafter refer to Neoma Lee Nabors as plaintiff, and to the insurance company as defendant.

For the purposes of this opinion we will assume that the record in this case shows that Allie Lee O. Parkey, now deceased, was the mother of the plaintiff; that during her lifetime Mrs. Parkey made application in due form to defendant for a policy of life insurance, naming plaintiff as the beneficiary therein; that the application was for what is generally known as a "non-medical" policy, that is, no medical examination was contemplated; that at the time the application was delivered to the defendant's agent Mrs. Parkey paid the first premium as required by the defendant; that the defendant's agent then gave Mrs. Parkey a receipt for such premium which expressly stipulated that, if "the application is approved by the company for the form of policy applied for and in that event, the insurance as applied for will be in force from the date of the application"; that at the time Mrs. Parkey made application she was a young strong woman in good health, and was not affected by any of the diseases inquired about in the application; that after making the application, and paying the first premium, Mrs. Parkey was intentionally killed by her estranged husband, who in turn killed himself; that at the time of Mrs. Parkey's death the insurance company had not passed on her application, and had never accepted or rejected it; that the insurance company had a reasonable time in which to pass on Mrs. Parkey's application before her death, and, if such can constitute negligence, was guilty thereof in failing to do so.

The record also shows that after Mrs. Parkey's death the defendant rejected her application, and directed its agent, who took the same, to return the premium paid by her. We gather from the record that the agent attempted to do this by forwarding to John A. Miller, who acts as next friend herein, a money order for the correct amount. Miller refused to receive the money order, and it was again tendered to him during the trial. This seems to be the only tender offered by defendant.

The application signed by Mrs. Parkey is contained in the record. It provides that: "If the first premium is paid at the time the application is made and the policy is issued in every particular as originally applied for, the insurance shall be in force immediately upon approval of the application by the company, and the first policy year shall begin with the date of this application unless a different date is specifically requested herein."

Simply stated, plaintiff's counsel contend that an insurance company can be guilty of negligence in failing to pass on an application for insurance within a reasonable time. In this connection they contend that a tort action for damages will lie in favor of the beneficiary named in an application for life insurance for unreasonable delay in passing on such application. Plaintiff's counsel further contend that recovery should be measured by the insurance applied for. These contentions were sustained by the Court of Civil Appeals, and such ruling is here assigned as error by the defendant.

A decision of this case involves the proper application of the following well-known rules of law:

(a) Delay in passing on an application for insurance will not give rise to an action ex contractu against a life insurance company. Connecticut Mutual Life Insurance Company v. Rudolph, 45 Tex. 454; Great Southern Life Insurance Company v. Dolan (Tex. Com. App.) 262 S. W. 475; Brownwood Benevolent Association v. Maness (Tex. Civ. App.) 30 S.W.(2d) 1114 (writ ref.); Victory Life Insurance Company v. Ferrell (Tex. Civ. App.) 24 S.W.(2d) 774.

(b) It is the law of this state, and the general rule, that a tort is "the infringement of a right created otherwise than by a contract." Jones v. Hunt, 74 Tex. 657, 12 S. W. 832, 833 "The distinguishing feature of torts, as applied to legal actions, is that they never arise ex contractu." 26 R. C. L. p. 756, § 2. Of course all tort actions are not completely disconnected from contracts, because the existence of a contract may sometimes constitute the circumstance necessary to give some particular conduct the character of a breach of duty, and thus constitute such conduct a tort. 62 C. J. pp. 1092, 1093. In other words, there are certain contracts which bring into existence duties which are prescribed by law, as well as the contractual duties brought into being by the will of the parties. A breach of such a contract may give rise to a tort action. Id.

(c) A refusal to contract may constitute a tort where the law imposes the duty so to do, otherwise a refusal to contract is not a tort. 62 C. J. 1094, 1095.

(d) Where the law imposes no duty to contract, there can be no such thing as negligence of a party in the matter of delay in accepting or rejecting an offer so to do.

(e) A life insurance company is at liberty to choose its own risks, and may accept or reject those who apply to it for insurance as it sees fit.

When we come to consider the case at bar we find that there is no contention made by plaintiff that any insurance contract was ever entered into between the defendant and Mrs. Parkey. It therefore follows that the tort action here attempted cannot be sustained on any theory of a breach of contract. In other words, it cannot be said that the defendant committed a tort by breaching a contract which brought into being duties prescribed by law.

Since it is the law that a life insurance company is at liberty to choose its own risks, and may accept or reject those who apply to it for insurance as it may see fit, the judgment of the Court of Civil Appeals cannot be sustained on the theory that defendant owed Mrs. Parkey a duty to accept her application.

From what has been said, it plainly appears that this action cannot be maintained unless it is held that the general rule above announced, to the effect that, where the law imposes no duty to contract, there can be no such thing as negligence in the matter of delay in accepting or rejecting an offer so to do, does not apply to insurance companies. The opinion of the Court of Civil Appeals holds in effect that life insurance companies are excepted from such general rule. The opinion cites the following authorities as directly supporting its ruling: Duffie v. Bankers' Life Ass'n, 160 Iowa, 19, 139 N. W. 1087, 1089, 46 L. R. A. (N. S.) 25; Strand v. Bankers' Life Ins. Co., 115 Neb. 357, 213 N. W. 349; Security Ins. Co. v. Cameron, 85 Okl. 171, 205 P. 151, 27 A. L. R. 444; Boyer v. State Farmers' M. Hail Ins. Co., 86 Kan. 442, 121 P. 329, 40 L. R. A. (N. S.) 164, Ann. Cas. 1915A, 671; Behnke v. Standard Acc. Ins. Co. (C. C. A.) 41 F.(2d) 696. These cases seem to support the holding.

The original and leading case cited by the Court of Civil Appeals is the Duffie Case, supra. The holding in that case sustains the ruling of the Court of Civil Appeals in the case at bar. The Duffie Case is by the Supreme Court of Iowa. A careful reading of the opinion discloses that it upholds the recovery for damages as for tort in a case like this on the theory that the general rule, to the effect that, where the law imposes no duty to contract, there is no such thing as negligence of a party in the matter of delay in accepting or rejecting an offer so to do, does not apply to life insurance companies. The Iowa court bases its ruling on the holding that life insurance companies are excepted from the general rule on the theory that they operate under franchises from the state, and that their business is of such general public interest that the receipt of an application implies "a duty on the part of the insurance company to act on the proposed risk within a reasonable time under the circumstances surrounding the transaction." We here quote the following from the opinion: "But it is said that a certificate or policy of insurance is simply a contract like any other, as between individuals, and that there is no such thing as negligence of a party in the matter of delay in entering into a contract. This view overlooks the fact that the defendant holds and is acting under a franchise from the state. The legislative policy, in granting this, proceeds on the theory that chartering such association is in the interest of the public to the end that indemnity on specific contingencies shall be provided those who are eligible and desire it, and for their protection the state regulates, inspects, and supervises their business. Having solicited applications for insurance, and having so obtained them and received payment of the fees or premiums exacted, they are bound...