Bruegger v. National Old Line Insurance Company

• Decision Date: 31 January 1975
• Docket Number: No. C74-25.,C74-25.
• Citation: 387 F. Supp. 1177
• Parties: Norma L. BRUEGGER, Plaintiff, v. NATIONAL OLD LINE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Wyoming

387 F. Supp. 1177

Norma L. BRUEGGER, Plaintiff, v. NATIONAL OLD LINE INSURANCE COMPANY, Defendant.

No. C74-25.

United States District Court, D. Wyoming.

January 31, 1975.

COPYRIGHT MATERIAL OMITTED

George A. Clarke, Lusk, Wyo., for plaintiff.

G. G. Greenlee, of Murane, Bostwick, McDaniel, Scott, Greenlee & Owens, Casper, Wyo., for defendant.

MEMORANDUM OPINION

KERR, District Judge.

This diversity action involves a single issue, viz.: Was the $150,000 insurance policy issued by National Old Line Insurance Company National in effect at the time of the death of the insured?

This matter was originally filed in the District Court for Niobrara County, Wyoming, and later removed to this Court, pursuant to 28 U.S.C. §§ 1332 and 1441. Counsel have filed a Stipulation of Facts and have mutually agreed upon the exhibits to be considered by the Court. Likewise, the parties have appropriately submitted the matter for determination on motions for summary judgment. There being no genuine issue as to any material facts, the matter is ripe for summary judgment.

Norma L. Bruegger brings this action as the owner and primary beneficiary of a life insurance policy issued by National, seeking to recover the value of the policy, $150,000, together with attorney's fees, interest and costs. On March 12, 1971, National issued life insurance policy Number 0632120, wherein John Bruegger, husband of the plaintiff, was the insured. This policy was executed and delivered to the insured within the State of Wyoming. Premiums on the policy were payable on a quarterly basis and were timely paid until March 1973. A premium was due on March 12, 1973, and notice thereof was properly given. The amount of the premium was $374.35. This premium was not paid on or before March 12, 1973. The policy provided:

"A grace period of thirty-one (31) days without interest will be allowed for the payment of every premium after the first, during which period this policy shall continue in force. . . . Except as otherwise provided herein, this policy shall be cancelled and forfeited at the expiration of the grace period for the payment of a premium, if such premium is not paid before the end of such period."

Such a grace period was in keeping with Wyoming law then in effect. See Wyo.Stat. § 26.1-341 (1967). Under this thirty-one day grace period, the policy continued in full force and effect until April 11, 1973, when the policy lapsed for nonpayment of the premium. The policy also provided for reinstatement upon lapse:

"This policy may be reinstated at any time within five years after date of default in payment of premium upon presentation of evidence of insurability satisfactory to the Company, the payment of all premium arrears, and the payment of interest at 5% per annum, compounded annually, on each unpaid premium from its due date."

Wyoming law permits reinstatement within three years of default. See Wyo.Stat. 26.1-348 (1957).

On or about April 27, 1973, National mailed a notice captioned "Special Offer" wherein National offered to revive the lapsed policy. On May 2, 1973, National sent to the deceased a partially completed application for reinstatement of the lapsed insurance policy. This application contained the following assurance and stipulation:

"(b) It is further represented and stated that all persons named in question 2 above referring to insured are now in good health, free from all disease, deformities or ailments, and of temperate habits; that since the date of the issuance of the above described policy . . ., each of the persons named in question 2 above insured has had no injuries, ailments or illnesses, and has not been sick from any cause.

. . . . . .

It is also further agreed that said policy shall not be considered reinstated until this application shall be approved by the Company at its Home Office during the lifetime and good health of all persons named insured in question 2 above . . ., and that any payment of premiums made by the undersigned in advance or any receipt therefor, shall not be binding upon the Company until this application is so approved."

On or about June 11, 1973, the insured drew a check in the amount of $374.35, as payment for the premium due on March 12, 1973. The application for reinstatement was completed and mailed, with the check, on June 12, 1973. Any interest due under the reinstatement clause of the policy has been waived by National. On June 12, 1973, the insured was alive and in good health and on that same day he departed for Chicago, Illinois. The next day, June 13, 1973, at approximately seven o'clock in the evening, the insured was shot by an assailant in Chicago, Illinois. The application for reinstatement and the check were received by National at its home office in Little Rock, Arkansas, on Friday, June 15, 1973. On Monday, June 18, 1973, the application for reinstatement was approved by National, with the policy being paid to June 12, 1973. On June 24, 1973, John Bruegger, the insured, died in a Chicago hospital as a result of the gunshot wound inflicted on June 13, 1973. A notice of reinstatement dated June 26, 1973, was sent to the plaintiff, the policy being paid until June 12, 1973. This notice reinstated the original policy. National contends that the approval of June 18 was tentative and that approval of the reinstatement was not final until the notice of June 26, 1973. From the affidavits filed by National, it appears that National was not aware of and had no knowledge of either the insured's injury or subsequent death prior to granting approval of the reinstatement application. The insured's check was deposited on June 27, 1973, by National. On or about June 26, 1973, a notice was mailed to plaintiff of the premium due on June 12, 1973, and on July 2, 1973, plaintiff drew a check for this premium. On July 2, 1973, one of National's agents sent a telegram notifying National of John Bruegger's death and requesting that claim forms be forwarded to plaintiff. On July 5, 1973, plaintiff also wrote to National requesting such claim forms. Finally, on September 28, 1973, National notified plaintiff that it was its position that the policy had not been effectively reinstated, and this action was subsequently commenced.

The policy was initially delivered to the insured within the State of Wyoming, premiums were paid by checks drawn on Wyoming banks, and the insured was a resident of Wyoming. Therefore, the laws of Wyoming determine the rights and liabilities of the parties. See Wyoming Farm Bureau Mutual Insurance Co. v. State Farm Mutal Automobile Insurance Co., 467 F.2d 990 (10th Cir. 1972); Bush v. Prudential Insurance Co. of America, 150 F.2d 631 (3rd Cir. 1945). This Court has not found after extensive research any Wyoming cases dispositive of the issues presented by this matter. A thorough study has shown that the various courts which have been confronted by similar facts and issues are in conflict and that it is not possible to reconcile many of the decisions. Such a conflict necessarily decrees that the particular facts and circumstances in each specific case cannot be overlooked.

In order to narrow the scope of this decision it is worthwhile to note what this case does not involve. This matter does not present the issue of "unreasonable delay" on the part of the insurance company, see Gressler v. New York Life Insurance Co., 108 Utah 173, 156 P.2d 212 (1945); nor is there any issue present of fraud in the application of reinstatement, see Colorado Life Co. v. Winegarner, 95 Colo. 261, 35 P.2d 860 (1934); and likewise, there is no issue of waiver by or estoppel of the insurance company, see Life & Casualty Insurance Co. v. Walters, 207 Ark. 910, 183 S.W.2d 515 (1944). Several issues are raised and are properly before the Court, the threshold issues being those of determining what right of reinstatement the insured had and the nature of that right.

It is not in dispute that certain axioms of general application form the framework upon which insurance law rests. Thus, insurance is viewed as a special application of the law of contracts deriving its judicial importance from the critical purposes it serves. 43 Am.Jur.2d Insurance § 1. Although it is not disputed that insurance policies are to be interpreted much as other contracts and that there exists a contractual relationship between insurer and insured; however, it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured or his beneficiary and strictly as against the insurer. True, there are exceptions to this rule but this constitutes the general rule. 44 C.J.S. Insurance § 297, p. 1165.

After expiration of the grace period on April 11, 1973, the policy lapsed. Two months later insured submitted his application for reinstatement. One day after submission of the payment and application he was shot, an injury which ultimately directly caused his death. It is unfortunate that his prescience was not of such a degree as to have afforded him the opportunity to avoid such a consequence. Nevertheless, contrary to what counsel for National states, Jackson v. United Benefit Life Insurance Co., 54 Wyo. 62, 86 P.2d 1089 (1939), does not stand for the proposition that reinstatement is "purely one of a separate agreement." That issue was not resolved in that case. It is true that there were separate agreements or policies but the case arose because of confusion as to which of two policies payment tendered by the insured was to be applied. As stated by the court, 86 P.2d at 1092:

"The controlling question herein is as to whether or not the insured paid any premium on the policy sued on herein which would keep the policy alive."

The language quoted by counsel from the Jackson case as supporting this view of reinstatement in fact pertains to whether there was a waiver by the company of the forfeiture and whether the company thereby was estopped, due to its...