Barnes v. Atlantic & Pac. Life Ins. Co. of America, CER--3

• Decision Date: 18 December 1975
• Docket Number: CER--3
• Parties: Margie C. BARNES v. ATLANTIC & PACIFIC LIFE INSURANCE COMPANY OF AMERICA, a corporation.
• Court: Alabama Supreme Court

Page 143

325 So.2d 143

295 Ala. 149

Margie C. BARNES v. ATLANTIC & PACIFIC LIFE INSURANCE COMPANY OF AMERICA, a corporation.

CER--3.

Supreme Court of Alabama.

Dec. 18, 1975.

E. Ray Large, Birmingham, for plaintiff-appellant.

Ollie L. Blan, Jr., Birmingham, for defendant-appellee.

CERTIFICATE FROM THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT TO THE SUPREME COURT OF ALABAMA, PURSUANT TO ARTICLE 6, SECTION 140(B)(3) OF THE CONSTITUTION OF ALABAMA OF 1901, AS AMENDED

BLOODWORTH, Justice.

The plaintiff, Margie C. Barnes, began this litigation by filing suit in the United States District Court, Northern District of Alabama, Southern Division, seeking to recover, as the beneficiary, the proceeds due under a life insurance policy. The district judge, determining that there was no genuine issue as to any material fact and that the insurer was entitled to judgment as a matter of law, granted the insurer's motion for summary judgment. The plaintiff beneficiary has appealed the district judge's decision to the Court of Appeals for the Fifth Circuit.

Encountering uncertainty in the Alabama law, the Court of Appeals has posed certain certified questions to us under provisions of the Alabama Constitution, Article 6, § 140(b)(3). The questions are:

1. Does the insurer's failure to issue the policy exactly as applied for within 30 days of the date of application preclude coverage from attaching as of the date of application pursuant to Condition 3 of the binding receipt?

2. Was there a waiver of Condition 3 of the binding receipt by the insurer's issuance of a policy after 30 days from the date of application without knowledge that the insured had become uninsurable before the date the policy was prepared and issued?

3. Did the policy clause providing that 'this policy will be effective as soon as it has been delivered to the owner and the first premium has been paid during the lifetime and Continued insurability of the proposed insured' preclude coverage under the policy from attaching as of November 6, the date in which the insurer placed the policy in the mail to its agent, in view of the fact that the decedent was admitted to a Birmingham hospital on November 4 suffering from a gunshot wound which ultimately resulted in death on November 13 when the evidence shows insurer had no knowledge of the injury to the insured?

4. Does the insurer's statement that the policy was issued on the basis of medical information furnished with the application estop the insurer to deny coverage from the date of the Binding Receipt although the policy was not issued within 30 days Even though insurer was unaware at the time it made the statement that the insured had become uninsurable? ⁸

5. Is there an ambiguity between the policy and the Binding Receipt concerning the effective date of the policy? If so, which provision controls under the facts of this case? ⁹

Barnes v. Atlantic & Pacific Life Insurance Co., 514 F.2d 704, 709 (5th Cir.1975).

The facts of this case as set out by the Court of Appeals and as stipulated by counsel, are as follows:

H. M. McClendon, the defendant-appellee's soliciting agent, first called upon Robert O. Barnes and Margie C. Barnes, husband and wife, in August of 1970 soliciting their application for insurance upon the life of Robert O. Barnes on behalf of the defendant-appellee. Agent McClendon represented to the Barnes that a monthly automatic premium check-off at the Barnes' bank in Columbiana, Alabama would be made by the defendant-appellee. H. M. McClendon again called upon Robert O. Barnes, the insured, and Margie C. Barnes, the Beneficiary, husband and wife, on September 8, 1970 at their home in Columbiana, Alabama; and he secured an application for life insurance and an initial premium payment by cash of Twenty-two and 47/100 Dollars ($22.47) from Robert O. Barnes giving him in return a Binding Receipt. The application was for a policy of life insurance in the amount of $10,000. The premium for a $10,000 policy applied for by Robert O. Barnes was $21.57 per month. Said printed Binding Receipt reflects in Agent McClendon's handwriting the receipt of a Twenty-two and 47/100 Dollar ($22.47) initial monthly premium and 'amount . . . $10,000.00 . . . $20,000.00.' The Binding Receipt stipulates the effective date of the policy will be the later of:

'date of application, or date of medical examination, if required, provided that the

1. proposed insured is determined by the Company at its Home Office in Atlanta, Georgia, in accordance with its rules and practices, to be insurable on such date for the policy exactly as applied for;

2. first full premium is paid in cash on date of application;

3. policy is issued exactly as applied for within 30 days from this date;

4. total insurance in force with the Company on the life of the proposed insured, including amount now applied for, will not exceed $50,000.00.'

The application was filled out by Agent McClendon, signed by Robert O. Barnes and provided, Inter alia medical information to the company. There had been discussion between Agent McClendon and Robert O. Barnes about additional coverage for accidental death. No notation was made on the application concerning any double indemnity coverage for accidental death, except there was a premium notation of payment in advance of $22.47 on the application--the total amount of premium including accidental death benefits coverage on a policy as applied for by Barnes. The application was referred to in and made a part of the policy. Robert O. Barnes disclosed on the application that he had a lung operation at Prattsburg Air Force Base, New York, while in military service. 'A week or two after McClendon took Barnes' application' he returned to Barnes' residence and secured Barnes' signature to a medical authorization form to be used by the defendant-appellee's underwriting department in determining if they were to issue the policy. No further contact was made between McClendon or defendant-appellee with Robert O. Barnes or his beneficiary until after his death on November 13, 1970.

The binding receipt was never sent to defendant by its agent. The application was forwarded to defendant and was processed for a policy of life insurance in the amount of $10,000.

On November 4, 1970 the insured was admitted to the Veterans' Administration Hospital in Birmingham, Alabama with gunshot wounds to the face and died on November 13, 1970 due to cerebral concussion and hemorrhagic pneumonia.

On November 6, 1970 defendant prepared a policy of life insurance on the life of Robert O. Barnes in the amount of $10,000 with an effective date of November 5, 1970 and with an initial premium of $21.57. This policy was mailed to defendant's agent for delivery to Robert O. Barnes along with a letter dated November 5, 1970, addressed to Robert O. Barnes, referring to Policy Number 70K2580, reflecting a carbon copy to 'Agent: H. M. McClendon' and enclosed therewith 'Receipt for First Premium and Record of First Payment.' Neither defendant nor its agent had any knowledge on November 6, 1970 or prior thereto that Robert O. Barnes had suffered gunshot wounds on November 4, 1970 and was in the hospital on November 6, 1970.

Agent McClendon attempted physical delivery of the policy to the Barnes' home on November 14, 1970--the funeral date of Robert O. Barnes. Defendant's agent did not know when he attempted to deliver the policy to Robert O. Barnes on November 14, 1970 that Robert O. Barnes had been shot and had died the day before. When he learned Mr. Barnes was dead, the agent mailed the policy back to defendant's Home Office.

On December 4, 1970 the defendant-appellee mailed its check payable to the plaintiff-appellant for Twenty-two and 47/100 Dollars ($22.47) stating 'during our investigation of the pending application pertaining to his past medical history, we were unable to issue and deliver the insurance policy as he applied for during his good health, insurability and lifetime.' This quoted verbiage is taken from that paragraph of the policy which is styled 'Effective Date' except the words 'good health' are added by the writer thereof--C. Ervin Waller, President of defendant-appellee. The paragraph in the policy entitled 'Effective Date' is as follows:

'Effective Date--This policy will be effective as soon as it has been delivered to the owner and the first premium has been paid during the lifetime and continued insurability of the proposed insured. If the first premium is paid in exchange for a binding receipt on the date of application, then this policy will become effective as provided in the binding receipt.'

514 F.2d at 707--09.

The Court of Appeals has determined that the sole question before it is 'whether pursuant to a (1) binding receipt or (2) policy itself a policy of life insurance was in effect covering appellant/beneficiary's deceased husband at the time of his death.' 514 F.2d at 706.

Rather than responding to the questions in the form certified, we have followed the suggestion of the Court of Appeals to direct our attention to what we consider to be the basic issues underlying those questions. See Martinez v. Rodriquez, 394 F.2d 156 (5th Cir. 1968), permitting 'the (state) Supreme Court's restatement of the issue or issues and the manner in which the answers are to be given, whether as a comprehensive whole or in subordinate or even contingent parts.' Id. at 159, n. 6. See also the suggestion of Chief Judge Brown to like effect at footnote 10, p. 709, Barnes v. Atlantic & Pacific Life Insurance Co., supra.

Had there been no binding receipt issued on the date of the application, it is clear from our relevant case law that the proposed coverage would never have become effective under the provisions of the policy itself. The policy provides that it 'will be effective as soon as it has been delivered to the owner and the first premium has been paid during the lifetime and continued insurability of the...