Barnes v. Atlantic & Pac. Life Ins. Co. of America

• Decision Date: 16 June 1975
• Docket Number: No. 73-4032,73-4032
• Citation: 514 F.2d 704
• Parties: Margie C. BARNES, Plaintiff-Appellant, v. ATLANTIC & PACIFIC LIFE INSURANCE COMPANY OF AMERICA, a corporation, Defendant-Appellee. Summary Calendar. *
• Court: U.S. Court of Appeals — Fifth Circuit

Page 704

514 F.2d 704

Margie C. BARNES, Plaintiff-Appellant, v. ATLANTIC & PACIFIC LIFE INSURANCE COMPANY OF AMERICA, a corporation, Defendant-Appellee.

No. 73-4032

Summary Calendar. ^*

United States Court of Appeals, Fifth Circuit.

June 16, 1975.

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

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

Appeal from the United States District Court for the Northern District of Alabama.

Before BROWN, Chief Judge, and THORNBERRY and AINSWORTH, Circuit Judges.

JOHN R. BROWN, Chief Judge:

This is a historic case, not because of the intrinsic difficulty of the issues, but because this is our first published opinion utilizing the certification provisions recently adopted by the citizens of Alabama. ¹ We have repeatedly been the judicial beneficiaries of similar such procedures permitted by Florida ² and more recently Louisiana ³ and now we welcome the opportunity to refer to the Supreme Court of Alabama questions of Alabama law on which it is not only the latest word as we might Eiriely be but the last word.

This technique of certification to the highest court of a state under carefully controlled restrictions of important and doubtful questions ⁴ has just recently been given another boost by the Supreme Court. ⁵ As is our regular practice, we obtained from counsel their agreed questions and stipulated facts and present them here for the use of the Alabama Supreme Court. As the case comes to us, the sole question for decision 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.

In resolving this question, the District Judge found against the Insured on both the facts and the Alabama law and granted the Insurer's motion for summary judgment. While we do not denigrate the conclusions of the District Judge, we select the certification option because of the uncertainty of the Alabama law governing this case. This uncertainty coupled with the not infrequent result that a Federal Court of Appeals is "reversed" by the highest court of the Erie state ⁶ make this a peculiarly appropriate case for certification. Indeed, it is precisely these ordinary, repetitive contract interpretations which, because of their recurring nature involving literally hundreds of contracts with many public policy factors affecting the welfare of local citizens, call for unequivocal resolution by the final court.

We are acutely aware of how identical contract language takes on diverse meanings when viewed from opposite sides of that imaginary line separating two adjacent states. Understandably, policy considerations differ in their impact on the jurisprudence of individual states. ⁷ When the state law is in doubt especially on the underlying public policy aims, it is in the best administration of justice to afford the litigants a consistent final judicial resolution by utilizing the certification procedure.

Summary Of The Arguments Pro and Con

In order to reduce the case to more manageable proportions, we summarize in brief the arguments of the litigants. In seeking to establish coverage under the Binding Receipt, the Insured maintains that Condition 3 (set out in the certificate at page 12, infra ) should be construed as allowing the insurer to reject the application within the 30-day period. Absent such rejection, the policy should be deemed in effect as of the date of application. Moreover issuance of the policy on November 5 after the 30-day conditional period had elapsed amounted to a waiver of Condition 3 and created coverage that reverted to the date of the initial Binder Receipt, September 8.

In addition, the Insured theorizes that the policy paragraph controlling the effective date of the policy (as shown in the certificate at page 14, infra ) reactivated the binder. This paragraph, the Insured reasons, creates ambiguity in determining whether the provisions of the binder or the policy control where the conditions of the binder are not met and such an ambiguity should be resolved in favor of the Insured. New York Life Ins. Co. v. Torrance, 224 Ala. 614, 141 So. 547 (1932).

Conversely, the Insurer maintains that the Insured's construction of Condition 3 is in effect an impermissible attempt to create primary liability through waiver. See, Protective Life Insurance Co. v. Cole, 1935, 230 Ala. 450, 161 So. 818 (1935); St. Paul Fire & Marine Insurance Co. v. Air Comfort Engineers, Inc., 47 Ala.App. 301, 253 So.2d 525 (1971). Cf. Kaminer v. Franklin Life Insurance Co., 5 Cir., 1973, 472 F.2d 1073.

As an alternative argument, the Insured contends that even if the policy did not become effective pursuant to the binder, the policy was activated prior to the date of death when it was mailed to the Insurer's agent on November 6. As support the Insured points to the fact that under Alabama law, the placing of a policy in the mail to the soliciting agent constitutes delivery to the Insured. See, United Insurance Company of America v. Headrick, 275 Ala. 594, 157 So.2d 19 (1963); Life and Casualty Insurance Company of Tennessee v. Latham, 255 Ala. 160, 50 So.2d 727 (1951). Therefore, delivery within the meaning of the policy provision occurred on November 6 when the assistant secretary of the Insurer placed the policy in the mail to the agent. Under this theory of Insured's case, the question then is whether the proposed Insured remained in a state of "continued insurability" the other prerequisite for the effectuation of the policy as of the date of delivery.

While there is no Alabama precedent precisely on point, the Insurer in response cites some relevant Alabama case law. Cf. Southern States Life Ins. Co. v. Dunckley, 226 Ala. 588, 148 So. 320 (1933); Cherokee Life Ins. Co. v. Brannum, 203 Ala. 145, 82 So. 175 (1919). Additional weight is added to the Insurer's position by the legion of Alabama cases construing the more common "good health at the time of delivery" provision as a warranty, the breach of which allows the Insurer to avoid liability where the risk is materially increased. See, e. g., North Carolina Mutual Life Ins. Co. v. Coleman, 248 Ala. 32, 26 So.2d 120 (1946); Vredenburgh v. Liberty National Life Ins. Co., 246 Ala. 251, 20 So.2d 207 (1944); Protective Life Ins. Co. v. Fischer, 234 Ala. 436, 175 So. 391 (1937). Moreover, Insured notes the analogous law of other states on this point. See Mathews v. Metropolitan Life Co., 89 So.2d 641 (1956, Fla.); Leach v. Millers Life Ins. Co., 5 Cir., 1968, 400 F.2d 179 (Miss.).

QUESTIONS CERTIFIED

CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT TO THE SUPREME COURT OF ALABAMA,

PURSUANT TO ALABAMA CONSTITUTION ARTICLE

6, SECTION 140(b)(3)

To the Supreme Court of Alabama and the Honorable Justices thereof

It appears to the United States Court of Appeals for the Fifth Circuit that the above-styled case in this Court involves a question or proposition of the law of the state of Alabama which is determinative of the cause, and there appear to be no clear, controlling precedents in the decisions of the Supreme Court of Alabama. This Court certifies the following questions of law to the Supreme Court of Alabama for instructions concerning said questions of law, based on the facts recited therein, pursuant to Alabama Constitution Article 6, Section 140(b)(3); such case being an appeal from the United States District Court for the Northern District of Alabama.

MATTERS ON WHICH COUNSEL FOR THE PARTIES ARE IN AGREEMENT

STATEMENT OF FACTS

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 of life insurance of the type 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...