Drain v. United Services Life Ins. Co.

• Decision Date: 07 April 1987
• Docket Number: No. 863SC554,863SC554
• Citation: 85 N.C.App. 174,354 S.E.2d 269
• Parties: June Ellen DRAIN v. UNITED SERVICES LIFE INSURANCE COMPANY.
• Court: North Carolina Court of Appeals

Page 269

354 S.E.2d 269

85 N.C.App. 174

June Ellen DRAIN v. UNITED SERVICES LIFE INSURANCE COMPANY.

No. 863SC554.

Court of Appeals of North Carolina.

April 7, 1987.

Ward and Smith, P.A. by Kenneth R. Wooten, New Bern, for plaintiff-appellee.

Sumrell, Sugg & Carmichael by Rudolph A. Ashton, III and James R. Sugg, New Bern, for defendant-appellant.

ORR, Judge.

Plaintiff brought this action to recover, as beneficiary, upon a policy of life insurance issued by defendant United Services Life Insurance Company. The policy was issued on the life of Paul Drain, plaintiff's husband. Defendant denied liability, based upon a number of grounds which will be dealt with in subsequent parts of this opinion.

Initially defendant made a motion to dismiss the action for failure to state a claim for relief. The court denied defendant's motion and the action proceeded to a jury trial on the issues.

At trial defendant made a motion for a directed verdict at the close of plaintiff's evidence and at the close of all the evidence. These motions were denied. The jury returned a verdict in plaintiff's favor, finding that a contract had been formed and that plaintiff was entitled to recover $95,166.00 minus a $90.66 premium for insurance coverage for the month of May. In response to the jury's decision, defendant made a motion for judgment notwithstanding the verdict, and in the alternative a motion for a new trial. The court also denied these motions. Defendant appeals the denial of the above five motions. We find no error in the trial court's rulings.

The facts necessary to an understanding of this decision are incorporated in the opinion set forth below.

I.

Defendant first assigns as error the denial of its motion to dismiss the action for failure to state a claim for relief pursuant to N.C.G.S. § 1A-1, Rule 12(b)(6).

In Concrete Service Corp. v. Investors Group, Inc., 79 N.C.App. 678, 340 S.E.2d 755 (1986), this Court specifically addressed this question and held:

that where an unsuccessful motion to dismiss is grounded on an alleged insufficiency of the facts to state a claim for relief, and the case thereupon proceeds to judgment on the merits, the unsuccessful movant may not on an appeal from the final judgment seek review of the denial of the motion to dismiss.

79 N.C.App. at 682-83, 340 S.E.2d at 758-59.

Therefore, in conformity with our prior decision on this question, we overrule defendant's first assignment of error.

II.

Defendant's second and third assignments of error contend that the trial court improperly denied defendant's motions for a directed verdict and motion for judgment notwithstanding the verdict. In each motion defendant argued that the evidence established as a matter of law that there was no life insurance contract existing between defendant and Paul Drain.

A motion for judgment notwithstanding the verdict is essentially a renewal of an earlier motion for a directed verdict. Dickinson v. Pake, 284 N.C. 576, 201 S.E.2d 897 (1974). "Accordingly, if the motion for directed verdict could have been properly granted, then the subsequent motion for judgment notwithstanding the verdict should also be granted." Penley v. Penley, 314 N.C. 1, 10, 332 S.E.2d 51, 57 (1985). Also, a motion for a judgment notwithstanding the verdict may not address issues on appeal not raised in the motion for a directed verdict. Miller v. Motors, Inc., 40 N.C.App. 48, 251 S.E.2d 925, disc. rev. denied, 297 N.C. 301, 254 S.E.2d 917 (1979). For the above reasons, this Court will consider the three motions together in determining if the denial of each motion was an error.

In considering a motion for directed verdict or a motion for judgment notwithstanding the verdict,

the trial court must review all the evidence that supports the non-movant's claim as being true and that evidence must be considered in the light most favorable to the non-movant, giving to the non-movant the benefit of every reasonable inference that may legitimately be drawn from the evidence with contradictions, conflicts, and inconsistencies being resolved in the non-movant's favor.

Penley v. Penley, 314 N.C. at 11, 332 S.E.2d at 57. Accordingly, the Supreme Court has also held that a motion for judgment notwithstanding the verdict is cautiously and sparingly granted. Investment Properties v. Allen, 281 N.C. 174, 188 S.E.2d 441 (1972), rev'd on other grounds, 283 N.C. 277, 196 S.E.2d 262 (1973).

In the case sub judice, plaintiff testified at trial that she and her husband, Paul Drain, met with James Diffee, an agent for defendant, to discuss life insurance coverage on 28 April 1983. At this meeting Paul Drain, with Mr. Diffee's aid, filled out and submitted an application for life insurance with defendant. The policy applied for would provide death benefits of $95,166.00 upon Drain's death, payable to plaintiff, and coverage under the policy was to become effective at the later date of either approval of the application or 16 June 1983. Agent Diffee also gave Drain allotment cards, permitting premium payments to be deducted directly from Drain's paycheck. He did not collect any payment from Drain at this meeting.

The evidence at trial further disclosed that Drain's application for life insurance was approved by defendant on 5 May 1983. Later in May 1983, between the 20th and 25th, Agent Diffee met and spoke with Paul Drain several times. As a result of these discussions, the policy was amended and on 25 May 1983 Agent Diffee gave Drain additional forms to fill out including a second allotment card, containing Drain's new insurance policy number.

Shortly thereafter, the Drains received a letter dated 26 May 1983 from George M. Bell, Agent Diffee's supervisor and a vice president of defendant, which said:

Dear Paul and June:

Jim Diffee, your Field Representative, has informed us your family is now 100% insured with the United Services Life Companies.

We appreciate your business, and we welcome you to the large group of policyowners whose families are 100% insured with US. We believe the rapid growth of this group is a compliment to the service provided by our Field Representatives.

If you know any colleagues who are interested in life insurance, we hope you will recommend Jim to them.

Again, thank you for your confidence in US.

Agent Diffee received a copy of Drain's life insurance policy and the amendment to that policy from defendant the week of 6 June 1983. However, when Agent Diffee attempted to deliver the documents to Drain and collect the premium due, he was informed that Drain had died on or about 10 June 1983. Thereafter Agent Diffee, at plaintiff's request, visited the home of plaintiff's parents, where plaintiff was staying, and spoke with her father regarding Drain's life insurance policy with defendant. During this visit plaintiff's father showed Agent Diffee the 26 May 1983 letter received from Bell. Plaintiff testified that she overheard Agent Diffee tell her father, after he saw the letter, "that from this letter he felt his company had made a grave error."

At the time of this visit Agent Diffee had Drain's insurance policy and the amendment in his possession, but did not give these documents to plaintiff. Instead, Agent Diffee mailed the documents directly to his supervisor, Vice President Bell, pursuant to Bell's orders. After Bell transferred the documents to defendant's legal department for review, they were destroyed.

When original documents are destroyed, secondary evidence may be submitted to establish the documents' contents. State v. Baynes, 222 N.C. 425, 23 S.E.2d 344 (1942). Defendant submitted a reconstructed policy taken from microfilm records as secondary evidence of the contents of Drain's life insurance policy. However, defendant offered no records from which to reconstruct the contents of the amendment to the policy. As secondary evidence of the contents of the amendment, plaintiff offered the 26 May 1983 letter signed by Vice President Bell.

Based on the above evidence, plaintiff argued that the 26 May 1983 letter evinced that the amendment to the policy either backdated it to 26 May 1983, the date of the letter, or to 16 May 1983, a month earlier than the effective date of 16 June 1983 set forth in the original application. In the alternative, plaintiff contended, the letter reflected defendant's intent to waive the later effective date of 16 June 1983, specified on the policy application, and, instead, begin effective coverage on 5 May 1983, the date the application was approved by defendant.

In support of both contentions plaintiff introduced a provision of Drain's reconstructed insurance policy submitted by defendant, which held:

... a Vice-President ... of the Company has the power, on behalf of the Company, to change, modify, or waive any provisions of this Policy. Any changes, modifications, or waivers must be in writing.

In support of her argument that the amendment backdated the effective date of the policy, plaintiff presented the following evidence. First, the above mentioned provision gave Bell, as vice president, the authority to make such an amendment. Second, Agent Diffee testified that in some cases defendant would backdate the effective date of a life insurance policy, and then later collect insurance premiums to cover the earlier time period. Third, Agent Diffee acknowledged that he intended to collect the premiums for Drain's policy, when he delivered the amended policy to Drain. From this, plaintiff reasoned, the letter notifying the Drains that they were 100 percent covered was secondary evidence that Bell had authorized an amendment to change the effective date. Moreover, plaintiff noted, the letter itself, as a writing, would also qualify as an amendment changing the effective date of Drain's policy.

In support of plaintiff's alternative argument of waiver, plaintiff again relied on the above provision. This provision also authorized Bell to waive the later effective date listed in...