Fox v. Volunteer State Life Ins. Co.

• Decision Date: 14 March 1923
• Docket Number: 541.
• Citation: 116 S.E. 266,185 N.C. 121
• Parties: FOX v. VOLUNTEER STATE LIFE INS. CO.
• Court: North Carolina Supreme Court

116 S.E. 266

185 N.C. 121

FOX v. VOLUNTEER STATE LIFE INS. CO.

No. 541.

Supreme Court of North Carolina

March 14, 1923

Stacy J., dissenting.

Appeal from Superior Court, Madison County; Shaw, Judge.

Action by W. M. Fox, administrator of William Adie English, against the Volunteer State Life Insurance Company. Judgment of nonsuit, and plaintiff appeals. Reversed.

This was an action to recover the sum of $3,000 on account of the alleged wrongful and negligent failure of defendant's agent to make delivery of the policy of insurance issued by defendant to plaintiff in accordance with agreement between them. When the application was taken, it was stipulated that the premium would be paid on the delivery of the policy. The application was received in the home office of defendant in Chattanooga, Tenn., on June 7, 1921, and was duly approved and accepted, and on June 15, 1921, the policy was issued and sent to Charles Buckner, the local agent at Mars Hill, N. C for delivery to the plaintiff's intestate. The said Charles Buckner was soliciting agent for the defendant, and it was a part of his duty to deliver policies of insurance. It is admitted that plaintiff's intestate was in good health at the time he made application for insurance, and the evidence is undenied that such good health continued for about two weeks after the policy was received by the agent for delivery; that plaintiff's intestate first became ill on July 2, 1921, and developed typhoid fever, which caused his death on July 14, 1921. He was a strong healthy man and in good health up to July 1. He was engaged in hauling tan bark, and hauled the last load on July 3. The agent took the policy to the home of the plaintiff's intestate on July 6, 1921, and, finding that plaintiff's intestate was sick at that time, did not leave the policy, but promised to return with it later in the day. A tender of the premium was then made, and the delivery of the policy demanded. At that time the agent said:

"I ought to have delivered this policy some time ago. I have had this policy on hand something like two weeks or over."

The agent also stated that he met plaintiff's intestate after the policy was received for delivery, and that plaintiff's intestate told him that he had the money to pay the premium, and requested agent to make delivery of the policy, and that he neglected to make delivery because he waited for other policies and for a Mr. Hyder, who was to make the trip with him. The agent and plaintiff's intestate lived at and a few miles from Mars Hill respectively. At the time the defendant sent the policy to its agent for delivery to the plaintiff's intestate, the policy was inclosed in an envelope, on which was stamped:

"You are now a policy holder in the Volunteer State Life Insurance Company at Chattanooga, Tenn."

When the plaintiff rested his case the defendant moved for a nonsuit, which was allowed, and the plaintiff excepted and appealed.

Mark W. Brown, of Asheville, for appellant.

Martin, Rollins & Wright, of Asheville, for appellee.

CLARK C.J.

The policy of insurance in this case was issued in favor of the executor or administrator, the application was signed by plaintiff's intestate, and the plaintiff as his administrator was the proper party to bring the action. C. S. 159.

This is not an action upon the policy itself, which was not delivered, but upon the wrongful act or negligence of the defendant company, through its agent, to deliver the policy in accordance with the agreement entered into with the intestate.

It is true that if it had been stipulated in the application for this policy that the insurance applied for should not take effect until 60 days thereafter, and then only upon the applicant's continued health, the insurance company would have incurred no liability had the applicant died during the 60-day period. The difference between that case and the present is that here the company made an agreement with the intestate, and the failure to comply with that agreement by the negligence of the defendant company through its agent was the cause, as the plaintiff alleges, of his failure to receive the policy, and the loss accruing therefrom is a liability incurred by the negligence of the defendant.

When the condition upon which the contract of insurance was to take effect never occurred, of course no insurance is effected; but, when the negligence of the company to comply with the conditions specified in its contract for the delivery of the policy was the cause of the failure to deliver the same, the defendant company was liable for the loss sustained by the negligence of the agent of the defendant company. The defendant by such negligence breached the legal duty which he owed to the plaintiff's intestate, and for the damage sustained thereby an action in tort may be maintained.

The testimony is that the defendant adopted the custom in carrying on its business of accepting applications, and issuing applications therein for delivery by its agent, stipulating in the application that the premium should be paid on delivery of the policy, and that the policy would be in force and premiums collected therein as and from the date thereof. The defendant therefore cannot escape liability when there is uncontradicted evidence that, but for the unreasonable delay of its agent in making delivery of the policy to plaintiff's intestate, the policy would have been delivered while the plaintiff's intestate was in good health. The application for the policy was received at the home office in Chattanooga on June 7, 1921, was duly approved and accepted by the defendant, who on June 15 sent the policy so dated to its local agent at Mars Hill, N. C., for delivery to the plaintiff's intestate.

It has been repeatedly held that an insurance company is chargeable with the negligence of its agent for failing for an unreasonable time to forward the application and medical report for acceptance or rejection. Duffie v. Life Association, 160 Iowa, 19, 139 N.W. 1087, 46 L. R. A. (N. S.) 25. There is a full discussion and collection of the cases relating to unreasonable delay in acting upon applications for insurance in Bradley v. Federal Life Ins. Co., 295 Ill. 381, 129 N.E. 171, 15 A. L. R. 1021, and in the notes thereto. In this case there was no negligence by any unreasonable delay in forwarding the application nor in acting upon it, but the application was accepted and the policy was issued and signed on June 15, and promptly forwarded to the defendant's delivering agent in an envelope, stating on the back that the applicant was "now a policy holder in the Volunteer State Life Insurance Company," the defendant in this action.

This policy in the ordinary course of mail should have come to the hands of the defendant's delivering agent on the next day, June 16. He lived not far from the insured, who met him a few days after the receipt of the policy, and the agent told him that he had the policy for delivery. The assured told him he was ready to pay the premium, and asked the agent to make delivery, which the agent promised to do. The assured remained in good health until July 2, 15 days thereafter, when he was stricken with typhoid fever, and the agent made no effort to deliver until July 6, when he declined to deliver because at that time the assured had been taken ill. Had the policy, when placed in the mail on June 15, been directed to the insured, this would have been a delivery in law. Lynch v. Johnson, 171 N.C. 611, 89 S.E. 61. The fact that it was sent addressed to the defendant's agent made the agent a trustee for the delivery to the insured, and it was negligence on the part of the agent not to deliver it in reasonable time, and this negligence was the negligence of the company.

If the defendant's agent wrongfully failed to deliver the policy within a reasonably short time after its receipt, during which time the plaintiff's intestate was in good health, and ready, able, and willing to pay the premium on delivery as stipulated, and, plaintiff's intestate having thereafter become ill, the defendant could not withhold the delivery so as to release it from responsibility. Trust Co. v. Ins. Co., 173 N.C. 563, 92 S.E. 706.

The defendant had a form of receipt attached to its application for advance payment of premium, and it was stipulated therein that the insurance was effective from the date of the approval of the application from the defendant's medical director. The agent elected to waive the advance payment on the premium, and stated that the premium was to be paid on delivery of the policy. The defendant accepted the application, and issued its policy with knowledge of the waiver and stipulation. That is, it agreed that the insurance was to be effective from the date of the approval of the application by its medical director, but that the premium need not be paid until the policy was delivered.

In Paul v. Ins. Co., 183 N.C. 159, 110 S.E. 847, it was held:

"The time limited by a contract of life insurance for the payment of premiums to avoid a forfeiture is for the benefit of the insurer [the company], which it may waive by its acts and conduct."

In Elam v. Realty Co., 182 N.C. 602, 109 S.E. 633 (18 A. L. R. 1210) this court said:

"The action is not one against the insurance company in which plaintiff is seeking to hold it liable for an obligation not contained in the written policy, but plaintiff sues the agent and broker for negligent failure to perform a duty he had undertaken and assumed as agent, by which plaintiff has suffered the loss complained of, and in our opinion the authorities cited are not apposite to the question presented on the record. It is further insisted for defendant that no cause of action is disclosed because

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