Great Am. Reserve Ins. Co. v. San Antonio Plumbing Supply Co.

• Decision Date: 21 April 1965
• Docket Number: No. A-10159,A-10159
• Citation: 391 S.W.2d 41
• Parties: GREAT AMERICAN RESERVE INSURANCE COMPANY, Petitioner, v. SAN ANTONIO PLUMBING SUPPLY COMPANY, Respondent.
• Court: Texas Supreme Court

Page 41

391 S.W.2d 41

GREAT AMERICAN RESERVE INSURANCE COMPANY, Petitioner, v. SAN ANTONIO PLUMBING SUPPLY COMPANY, Respondent.

No. A-10159.

Supreme Court of Texas.

April 21, 1965.

Rehearing Denied June 23, 1965.

Brundidge, Fountain, Elliott & Churchill, Dallas, for petitioner.

LeLaurin, Chamberlin, Guenther & Murry, Bettie J. Stock, San Antonio, with above firm, for respondent.

GREENHILL, Justice.

This is a suit by San Antonio Plumbing Supply Company, hereafter called SAPSCO, against Great American Reserve Insurance Company on a policy insuring the life of one of its officers, Sul Ross. Both parties filed motions for summary judgment. The trial court granted the motion of plaintiff, SAPSCO, and overruled that of defendant, Great American. Summary judgment was entered for the plaintiff. The Court of Civil Appeals reversed, holding that there was a disputed fact issue and that the trial court erred in granting the motion of SAPSCO. It also held that there was no error in overruling Great American's motion. The cause was remanded to the district court of a trial. 378 S.W.2d 141 (1964). Both parties applied to this Court for writ of error, and both applications were granted. SAPSCO complains of the reversal of its judgment, and Great American contends judgment should be rendered in its favor. We hold that there is no genuine issue as to any material fact and that Great American is entitled to judgment as a matter of law.

In November, 1961, Sul Ross, Martin Reinhard, and two others were officers of SAPSCO. They decided to take out 'keyman' insurance on their lives for the benefit of the company. All four men executed applications for life insurance which were furnished to them by Darrell Barnes as agent for Great American. Each application, which was made a part of the policies, contained the following language:

'That the policy hereby applied for shall not take effect unless the insured is alive at the time of its delivery to the insured provided that if this application is approved by the company and policy issued as applied for, and provided the first premium has been paid, the insurance * * * shall be effective from the date of this application * * * and, provided further, that in no event, shall the insurance * * * take effect unless the insured is in sound health at the time of making this application.' ¹

Ross's physical examination disclosed high blood pressure and excess sugar in his urine. Barnes, the insurance agent, sent the application and the results of the physical examination to Great American's home office at Dallas. From this information, the home office 'rated up' Ross's policy. Four separate policies were prepared in Dallas and sent to Barnes with instructions to have each insured sign a declaration of no change in health as an amendment to the applications. These declarations read as follows:

'* * * I hereby declare that since my statements to the Great American Reserve Insurance Company which formed a part of my application for insurance dated 12/5/61, I have not had nor have I needed any medical advice; that there has been no change in my physical condition * * *; that I have had no physical examination revealing any unfavorable physical condition and have received no adverse opinion as to my health or physical condition * * *.

'The foregoing declaration is an amendment to and is hereby made a part of my said application, and I hereby understand and agree that it is material to the risk and that the Company, believing it to be true, will rely and act upon it.

Witness

________

Signature of Applicant

'This form must be properly completed and executed on any policy under which the full initial premium was not paid with the application. In event of change in health or occupation, the POLICY must be returned to the Home Office with this declaration.'

Barns received the four policies from Dallas on January 19, 1962, but took no action that day. The next day, January 20, he discovered that Ross was in the hospital. He had had a brain stem hemorrhage and was unconscious. Barnes went to see his unit manager, Ken Wingfield, who advised him:

'Go out and get a check and if Mr. Ross is actually in the hospital, of course, you can't let him sign the affidavit because he is not in good health * * *. We have got to hold the policy for instructions after he does get well and then we can go through the underwriting over again. Definitely get a check on these other fellows if they will give it to you and get their declaration signed.'

Barnes went to SAPSCO's office and got its check for the total amount of premiums for all four policies. The officer who wrote the check signed a declaration of no change in his own health. The check had to be countersigned by Mr. Reinhard, the president, who was found at the hospital. He signed the check and a declaration as to his own health. There is some dispute as to when the third declaration was signed; but it was signed, and the three policies were later delivered. They are not in dispute. Ross, of course, did not sign a declaration; and he died the following day, January 21, 1962. Great American returned the premium on Ross's policy, never delivered the policy on Ross, and refused to pay the face value of the policy on Ross to SAPSCO.

The material fact question asserted in this case is whether SAPSCO knew that Great American had conditioned its offer to insure Sul Ross on his signing a declaration of no change in health. The Court of Civil Appeals said the issue of fact was whether the insurance agent Barnes accepted the check of SAPSCO conditioned upon the receipt of statement of no change in Ross's health. In order to decide whether there is a genuine issue as to this material fact we must carefully examine the evidence. For this reason, it is necessary to set out the relevant portions of the depositions presented on the motions for summary judgment.

Barnes, the agent, gave his version of what he told Reinhard, he president of SAPSCO, at the hospital:

'Q. What did you tell these people when you went to get them to sign the declaration * * *?

'* * * ²

'A. * * * this is an agreement that you are in good health and that your health has not changed since the day you applied for the insurance.

'q. Would you tell them why they had to sign that?

'A. Well, to accept the policy to say that they were in good health.

'Q. Did you tell them that it was necessary for them to make this certificate before this policy would go into effect?

'A. I might not have said that it was necessary for them to make the certificate.

'Q. Well, did you tell them, though, that this is necessary part of putting the insurance into force?

'A. Yes. Well, I would put it this way, I would say that this was needed to make the insurance valid and to bind it.

'Q. Now, you didn't tell them that the insurance was in force by reason of their payment of the premium on Sul Ross, did you?

'A. No, sir, I sure didn't. * * * Well, I told them that I didn't know the circumstances of how it would work out because I had never been in a situation like this before and that I would have to * * * have Mr. Ross to sign one of these forms.

'Q. In other words, did you make it clear to Mr. Reinhard that before the policy went into force on Sul Ross he would have to sign one of these?

'A. I tried to do so. * * * I don't remember the exact words I did tell them, but in essence I did stress that they did have to have one of these signed by Mr. Ross, we needed his signature. Of course, I was hoping * * * he'd get well the next day or next week * * *. I told them I didn't know exactly how the thing would work out, it would be up to the company. It was up to people far beyond me, it wasn't for me to decide. * * * I don't believe I told them that he was or that he wasn't (insured). * * * I told them that I had to have a signature on that.

'Q. Before the insurance would be in force?

'A. We didn't talk about that. I told them that I had to have each one of those signed.'

Ken Wingfield, the insurance company's unit manager, talked to Martin Reinhard by phone on the night of January 20. Wingfield's testimony was:

'Q. Did you express your regret that the policy on Sul Ross was not in effect?

'A. I sure did. As a matter of fact I said something that went almost like this, I said, 'Martin, I sure don't want to be the type of fellow that says I told you so or anything like that, but I sure do wish you would have seen fit to give us a check that day in the office.' Then, he said, 'Well, Mr. Ross is not dead yet.' And I said, 'No, and I hope he is not going to die, but he might become disabled and if your insurance was in force like it ought to be, we would have paid for it.' I said that paying for it doesn't mean anything because Mr. Ross has no way of signing the declaration that his health has not changed. He said, 'I know you are going to do what you can.' I said, 'I am sure, as far as we are all concerned, we want the insurance to be in force, but as far as I can see, we will have to leave that up to higher powers."

Mr. Reinhard could recall very little about his conversations with Barnes and Wingfield. His deposition reads:

'Q. They never told you, did they, that this policy was in force on Sul Ross' life?

'A. No, nor did they say that it wasn't.

'Q. They made no representation about when it would go into effect, did they?

'A. No. Again, only on my assumption that when we were told that he (Ross) was accepted (by passing the physical) I assumed that we were all covered.

'Q. * * * When you gave Darrell (Barnes) this check for $222.90 did you ask him if this put the insurance in force or did he make any statement in that regard?

'A. No, Darrell didn't make any statements to that effect. The fact that the company requested him to get the check, I assume that we were covered.

'Q. Did Darrell make any statement to you to the effect that he didn't know what the status of the matter was, that it would have to be up to the...