Brunt v. Occidental Life Ins. of Cal.

• Decision Date: 10 December 1963
• Citation: 35 Cal.Rptr. 492,223 Cal.App.2d 179
• Parties: William Sidney BRUNT, Plaintiff and Respondent, v. OCCIDENTAL LIFE INSURANCE OF CALIFORNIA, a Corporation, Defendant and Appellant. Civ. 27322.
• Court: California Court of Appeals Court of Appeals

Page 492

35 Cal.Rptr. 492

223 Cal.App.2d 179

William Sidney BRUNT, Plaintiff and Respondent, v. OCCIDENTAL LIFE INSURANCE OF CALIFORNIA, a Corporation, Defendant and Appellant.

Civ. 27322.

District Court of Appeal, Second District, Division 1, California.

Dec. 10, 1963.

Rehearing Denied Jan. 6, 1964.

Gibson, Dunn & Crutcher, Frederic H. Sturdy and John H. Sharer, Los Angeles, for appellant.

No appearance for respondent.

LILLIE, Justice.

Plaintiff sought a declaratory decree that defendant be held liable under a sickness and accident insurance policy for which he applied on August 21, 1961. At that time he tendered the sum of $5.46 and was given a receipt therefor, made subject to certain conditions. Eight days later, before the policy was issued, he sustained a broken pelvis when he fell down a flight of steps. Judgment was for plaintiff after trial on a written stipulation of facts, and defendant has appealed. The single problem presented is whether the conditional receipt given to plaintiff created a contract of interim insurance pending acceptance of the application or approval of the risk.

Plaintiff has not filed a brief on appeal. His trial counsel, by letter, state that their client is an indigent and without funds to finance an appearance in this court; they further state that plaintiff's actual pecuniary interest in the outcome of the instant litigation is so small that he would never consider expending the sums required. Without wishing to censure counsel, sometimes the economics of the situation must yield to the truism that, '[I]t is as much the duty of the respondent to assist the court upon appeal as it is to properly present a case, in the first instance, in the court below' (Mosher v. Johnson, 51 Cal.App. 114, 116, 196 P. 84, 85); particularly is this true when respondent's counsel recognize (as here) that 'an issue of substantial public interest' is involved. With that observation, we pass to the merits.

The following facts were stipulated: On or about August 21, 1961, plaintiff applied to defendant for the policy in question. He tendered the amount equivalent to the first month's premium 'of such proposed policy, if as and when the same might be issued.' Defendant thereupon issued its written receipt for said payment, and plaintiff accepted the same.

The subject receipt reads as follows:

'Received from William Sidney Brunt, Applicant, the sum of $5.46 on account of the proposed insurance in accordance with the application bearing the same number as this receipt. This payment is made and accepted subject to the conditions printed on the reverse side hereof. This receipt is not valid unless signed by a licensed agent, nor unless the remittance, if tendered by check or draft, is honored on first presentation for payment.'

And on the reverse side:

'If the payment specified on the reverse side hereof is equal to the whole amount of the first premium on the policy applied for, and if the applicant and eligible members of the family, in the opinion of the Company's authorized officers in Los Angeles, were on the date of the payment insurable and acceptable as a standard risk under its regular underwriting practices and standards for the policy as applied for, the policy will be dated and made effective as of the date of the payment in accordance with its provisions; otherwise, there shall be no liability on the part of the Company except to return the payment to the applicant upon surrender of this receipt.'

The parties also stipulated to the following facts: Defendant does not claim any fraud or misrepresentation on plaintiff's part in his application; neither party claims any ambiguity in the terms of the subject receipt; plaintiff's accident, his subsequent claim and its denial by defendant were not material issues; subsequent to August 21, 1961, and prior to September 30, 1961, defendant's authorized officers in Los Angeles 'acting in good faith and in the regular and normal course of business were not able to arrive at the opinion that the applicant (plaintiff) was on the date of the tender of said $5.46 insurable and acceptable as a standard risk under defendant's regular underwriting practices and standards for the policy as applied for, and in fact the said officers of defendant in Los Angeles in the regular and normal course of business and in good faith during said period have arrived at just the opposite opinion'; prior to September 30, 1961, defendant notified plaintiff of the foregoing opinion, his application was accordingly declined and on September 19, 1961, defendant tendered back said $5.46 to the plaintiff.

The parties' respective contentions below were also stipulated: Plaintiff contends that defendant could not accept from plaintiff the sum tendered and thereafter, despite the terms and conditions of the receipt and notwithstanding the company's good faith provision as to insurability, reject his application and refuse to assume liability for the losses he assertedly sustained. Defendant, on the other hand, claims that it could and did properly accept the sum tendered pursuant and subject to the conditions set forth in the receipt; having found that plaintiff was not acceptable as a standard risk under its regular underwriting practices, defendant was not required to assume liability or issue the policy applied for.

The foregoing stipulated facts, including the parties' respective contentions, were adopted by the trial court in its findings. Therefrom conclusions of law were drawn that plaintiff's contentions were well taken, that defendant's contentions were not correct and that defendant is liable for losses sustained by the asserted accident eight days later with the same force and effect as though a policy as applied for earlier had been in effect on the date of the accident. It was also concluded that while defendant had the power to reject plaintiff's application (and thereafter refuse to issue a policy) and did properly exercise such power, such rejection could not be exercised so as to permit defendant to deny liability for any injury sustained prior to said rejection.

As mentioned earlier, there is a single problem presented on this appeal; but it has been observed by the annotator (2 A.L.R.2d 943, 960) that the state of the law on this single point is 'anarchical.' Concluding the same (and very exhaustive) annotation there is this editorial comment: 'It is the contention of the annotator that the existing conflict of authority is not in fact due to differences in legal theory but that it has a much more deeply rooted reason. It is submitted that the existing conflict actually is a reflection of differences of opinion entertained by the courts as to the extent to which social interest in the freedom of contract and in the security of transactions entered into should be permitted to be outweighed by the interest of society to protect, in a case where the parties to a contract have unequal bargaining power, the one party who, because of his inferior bargaining strength, must either accept what is offered or be deprived of the advantages of the relation, against unduly oppressive or excessive conditions forced upon him by the party superior in bargaining power.' (pp. 1019.) Cases reflecting the above divergent views are cited in Ransom v. Penn. Mut. Life Ins. Co., 43 Cal.2d 420, 274 P.2d 633, on which decision plaintiff relied below.

Defendant contends that there are certain factual differences in the Ransom case and, therefore, it is not controlling. It was there held that the language used in the application stated a condition subsequent rather than a condition precedent. ¹ In this connection, the court declared that 'had [the company] wished to make clear that its satisfaction [as to the applicant's insurability] was a condition precedent to a contract, it could easily have done so by using unequivocal terms.' (43 Cal.2d 420, 425, 274 P.2d 633, 636.)

It is first argued that the Ransom decision was based in part upon the fact that the language used was ambiguous, whereas in the instant case the parties 'have stipulated' (and the trial court found) that there was no ambiguity in the document. It is problematical whether the parties could validly so stipulate (83 C.J.S. Stipulations § 10, pp. 14-15). "When a particular legal conclusion follows from a given state of facts, no stipulation of counsel can prevent the court from so declaring it.' (Citations.)' (Duncan v. Garrett, ...