General Fidelity Life Ins. Co. v. Bank of Callao

• Decision Date: 29 November 1965
• Citation: 145 S.E.2d 212,206 Va. 582
• Parties: GENERAL FIDELITY LIFE INSURANCE COMPANY v. The BANK OF CALLAO, etc., et al.
• Court: Virginia Supreme Court

Page 212

145 S.E.2d 212

206 Va. 582

GENERAL FIDELITY LIFE INSURANCE COMPANY v. The BANK OF CALLAO, etc., et al.

Supreme Court of Appeals of Virginia.

Nov. 29, 1965.

Paul M. Shuford, Richmond (Wallerstein, Goode, Adamson & Dobbins, Richmond, on the brief), for plaintiff in error.

George Mason, Jr., Colonial Beach (Thomas A. Williams, Richmond, Dabney Overton, Warsaw, on the brief), for defendants in error.

Before EGGLESTON, C. J., and SPRATLEY, BUCHANAN, SNEAD, I'ANSON, CARRICO and GORDON, JJ.

BUCHANAN, Justice.

This action was brought by the administrator of the estate of Herbert J. Garner, deceased, against The Bank of Callao, herein called the Bank, branch of the Bank of Westmoreland, Incorporated, and General Fidelity Life Insurance Company, herein referred to as Fidelity, on a renewal note made by Garner to the Bank for $1500, dated January 12, 1963, payable six months after date. Garner died on April 7, 1963. Plaintiff alleged that Fidelity was obligated to pay the amount of the note to the Bank under a policy of credit life insurance issued by Fidelity on the life of Garner.

The Bank filed an answer and grounds of defense in which it denied the allegation of the motion for judgment that it was Fidelity's agent in the issuance of the policy, but admitted that a policy was issued by Fidelity which if paid would discharge the note. The Bank also filed a counterclaim against the plaintiff administrator for the amount of the note, and a cross-claim against Fidelity on its insurance policy.

By consent the court tried the case without a jury and after hearing the evidence, and for reasons stated in a written opinion, granted to the Bank a judgment against Fidelity for $1500 on the Bank's cross-claim, and a judgment for $1500 against the plaintiff administrator on the Bank's counterclaim. We granted to Fidelity a writ of error to the judgment against it.

Fidelity alleges that a number of errors were committed in the trial, but states in its brief that these were largely procedural matters and that it desires a decision on the merits of the case. This leads to the main question of whether Fidelity is required by its credit life insurance policy on the life of the decedent Garner to pay to the Bank his $1500 note of January 12, 1963. A secondary question is on the refusal of the court to admit in evidence some correspondence between Fidelity and the Bank's cashier.

The $1500 note in question was a renewal of a $2500 note made by Garner to the Bank in 1961, on which $1000 was paid a year later, followed by two additional renewals and the final renewal on January 12, 1963.

On June 27, 1960, pursuant to a written application of that date made by the Bank by its cashier, Fidelity issued to the Bank its group policy by which it insured the lives of 'certain eligible Debtors' of the Bank and agreed, subject to the terms of the policy, upon the death of the insured debtor, to pay to the Bank the amount of insurance then in force on his life to apply on his indebtedness to the Bank. ¹

At the date of the execution of the $1500 renewal note, January 12, 1963, the Bank executed and delivered to Garner the 'Statement of Insurance' required by the statute as evidence of the fact that this note was covered by insurance in Fidelity. Plaintiff's motion for judgment alleged that the original $2500 note as well as the other renewals had been similarly insured.

After the death of Garner, Fidelity refused to pay the $1500 note to the Bank on the ground that the amount of this note was in excess of the limit of its liability under the terms and conditions of its group policy. It asserted that this limit was $5000 to any one debtor.

At the time of the issuance of the insurance on the $1500 renewal note the Bank held another note on Garner for $5500, on which insurance had been issued on December 24, 1962. With respect to this note Fidelity wrote the Bank on February 13, 1963, that it could not insure its full amount 'as our policy permits maximum coverage of $5,000.00 on any applicant.' The letter requested that the insurance on this note be reduced to $5000 and this was done. After Garner's death Fidelity paid this $5000 to the Bank and it now contends that this is the limit of its liability to the Bank on Garner's indebtedness.

There is no evidence to indicate that Garner ever saw or knew anything about the terms and conditions of the group policy. The evidence is conflicting as to the extent of the Bank's knowledge of its provisions. Mrs. Nettie C. Farmer, who was and had been since 1942 the cashier and manager of the Bank, testified as to the origin and history of the insurance as follows:

William F. Penn, vice-president and director of Fidelity, and in charge of selling its insurance, and whom Mrs. Farmer knew personally, was the only representative of Fidelity with whom Mrs. Farmer ever had any contact. He visited the Bank and stated to her that he would like 'us' to write credit insurance in his company and they agreed. She had no recollection of ever seeing the group policy until she wrote to Fidelity and asked for a copy after Garner's death. Penn told Mrs. Farmer that she could write this insurance up to $7500.

When the insurance was written on a debtor there was issued in triplicate a certificate or statement of the insurance, one copy of which was delivered to the debtor, as required by the law, and one to Fidelity, identifying the debtor, stating the date and amount of the loan, and that it was insured under the group policy. This was done on the Garner loans. At the end of each month a report was made to Fidelity as to the insurance written in that month and the amount of premium credited to Fidelity. Premiums on the insurance were paid by the debtors to Mrs. Farmer, who divided her share with other employees in the Bank who had obtained the insurance. Fidelity's share of the premiums was credited to its account on the basis of forty-five percent to it and fifty-five percent to Mrs. Farmer. No part of the premiums was paid to the Bank.

The president of the Bank of Westmoreland, Inc., of which the Bank of Callao was a branch, testified that prior to Garner's death he was not...