Jackson Nat. Life Ins. Co. v. Receconi

Decision Date24 February 1992
Docket NumberNo. 19498,19498
Citation1992 NMSC 19,113 N.M. 403,827 P.2d 118
PartiesJACKSON NATIONAL LIFE INSURANCE COMPANY, Plaintiff-Appellant and Cross-Appellee, v. Debrot RECECONI, Defendant-Appellee and Cross-Appellant, and Eugene W. Peirce, Jr., Defendant-Appellee.
CourtNew Mexico Supreme Court


Decision of this appeal turns primarily on whether an express condition precedent in an application for a life insurance policy was waived by the insurance company through its soliciting agent. The condition required that the health of the insured remain as represented in the insured's application, which it did not; and the agent, with knowledge of the insured's deteriorated health, requested the first premium payment and forwarded it to the company, which thereafter retained it for several months. We hold that on these facts the conduct of the agent was attributable to the company and that the company waived compliance with the condition.

Other issues presented on appeal are: whether the application was void because not signed by the insured or consented to in writing; whether alleged misrepresentations in the application rendered the policy voidable at the company's election; whether, if the company was liable on the policy, the agent was liable to indemnify the company; whether punitive damages were properly assessed against the company; and whether the insured's beneficiary was entitled to attorney's fees for the company's refusal to pay the policy proceeds. The trial court, after a bench trial, held in favor of the agent and the beneficiary on all issues but the last, awarding the beneficiary judgment for the face amount of the policy, plus prejudgment interest and punitive damages, but declining to award attorney's fees. We affirm in part, reverse in part, and remand for further proceedings.


Eugene W. Peirce, Jr. ("Peirce"), is an insurance agent licensed by the State of New Mexico. Debrot Receconi ("Mrs. Receconi") is the widow of Father Jon Simms Receconi ("Fr. Receconi"), an ordained minister who until his death on October 15, 1987, served as rector of an Episcopal church in Santa Fe. Peirce met the Receconis in the early 1970s and, between 1977 and 1987, sold life insurance to them on behalf of various life insurance companies. In early 1987, Peirce contacted the Receconis and recommended that they replace their life insurance policies with those of another company that could provide lower rates. Pursuant to this recommendation, the Receconis signed applications for life insurance on March 12, 1987, with Allied Insurance Company ("Allied").

Peirce submitted these applications to Allied; Allied in response requested that Fr. Receconi complete an alcohol questionnaire. Subsequently, on August 14, 1987, Peirce contacted the Receconis, told them he was dissatisfied with Allied, and recommended that they instead procure insurance with Jackson National Life Insurance Company ("Jackson").1 The next day, Peirce went to the Receconis' home and completed a Jackson application for Mrs. Receconi, which she signed, but did not prepare one for Fr. Receconi, who had gone to work. Peirce then met with Fr. Receconi at the latter's office. Peirce discussed Jackson with Fr. Receconi and advised him to obtain life insurance coverage through Jackson. Although Fr. Receconi agreed to do so, Peirce did not have any blank application forms with him, so Fr. Receconi could not fill out or sign an application at that time. However, Fr. Receconi authorized Peirce to do whatever was necessary to procure life insurance coverage from Jackson.

Peirce met with Fr. Receconi on that occasion for approximately thirty minutes. He observed Fr. Receconi to be in excellent health and saw no evidence that he had resumed smoking.2 Peirce asked Fr. Receconi only one health question at that time: whether he had experienced any major changes in his health since their March 12, 1987, meeting. Fr. Receconi answered that he had not.

Peirce did not fill out Fr. Receconi's application for life insurance with Jackson until September 15, 1987. On that date, Peirce directed his secretary to complete an application, using information from the Allied application and relying on Peirce's own observations of Fr. Receconi's health from the August 15 meeting. The application contained certain health-related questions, all of which were answered negatively, including questions as to whether the applicant had ever been treated for any respiratory or skin disorder and whether the applicant had smoked cigarettes within the past twelve months. The application also inquired about any existing life insurance and whether any application for such insurance had ever been canceled. The application also contained a "Declarations" section, which provided:

I understand that my statements and answers in this application must continue to be true as of the date I receive the policy. I understand that if my health or any of my answers or statements change prior to delivery of the policy, I must so inform the Company in writing.

Additionally, the application contained the following provisions:

It is agreed that * * * any policy issued on this application shall not take effect unless all of the following conditions are met: (a) the full first premium is paid, (b) the policy is delivered to the owner during the lifetime of the persons to be covered by such policy; (c) the health of all persons to be covered by the policy remains as represented in this application * * * * [N]o waiver or modification shall be binding upon the Company unless in writing and signed by its President or a Vice President.

After filling out Fr. Receconi's application, Peirce's secretary signed Fr. Receconi's name on it, at Peirce's direction. Peirce then submitted the application to Jackson and simultaneously canceled the Allied application. Before submitting the Jackson application, Peirce did not ask Fr. Receconi any of the questions it contained. In particular, Peirce did not ask Fr. Receconi whether his health had changed since August 15, 1987, did not review the requirements and conditions in the application and did not request Fr. Receconi to review the application before submitting it to Jackson.

The application, viewed as of September 15, 1987, contained certain misstatements and omissions. Specifically, it did not disclose Peirce's cancellation of the Allied application nor Fr. Receconi's then existing life insurance with another company. It did not disclose that Fr. Receconi had, according to the testimony of his wife, smoked "a few cigarettes" for two or three days before September 5. It made no mention of the viral pneumonia for which Fr. Receconi was treated beginning on September 6 and continuing on several occasions in early September. Finally, it did not disclose that he had been treated in June and July for skin disorders--a benign keratosis on his back and a slight rash around his mouth, for which he was given tetracycline, which in turn caused him to develop thrush.3 As Jackson later admitted, these skin disorders were not material and the company would have accepted Fr. Receconi's application had the information been disclosed.

Jackson received the application on September 22, 1987. On October 5, Jackson sent Peirce the life insurance policy with instructions to deliver it to Fr. Receconi upon collection of the premium. Peirce received the policy sometime between October 8 and October 14. The policy stated that its effective date was October 6. On that day, Peirce telephoned Mrs. Receconi and advised her that Jackson had approved Fr. Receconi's application. During that conversation, Mrs. Receconi informed Peirce that Fr. Receconi had been hospitalized for several days with viral pneumonia and that he was in intensive care. Peirce nevertheless requested payment of the premiums on her and Fr. Receconi's policies. Mrs. Receconi obligingly sent the payments to Peirce on October 8, and Peirce promptly forwarded them to Jackson.

Meanwhile, Fr. Receconi's health worsened, and he remained in the hospital until his death on October 15.4 Mrs. Receconi provided Peirce with updates on her husband's medical condition every other day from October 6 to October 15, but Peirce never informed Jackson of Fr. Receconi's change in health. Peirce never delivered the life insurance policy to Fr. Receconi.

Mrs. Receconi, as the beneficiary listed on Fr. Receconi's application, filed a claim for policy proceeds, which Jackson received on November 25, 1987. Jackson neither approved nor rejected the claim until March 18, 1988, when it sent Mrs. Receconi a letter denying coverage and returning the premium paid on October 6, 1987. Three days before sending this letter, Jackson brought the present action for declaratory relief against Mrs. Receconi and Peirce. Jackson sought a declaration that it was not liable under the policy on the following grounds: that no insurance contract was formed because of noncompliance with conditions precedent; that any insurance contract was rescinded because Fr. Receconi had materially misrepresented his health on the application; that Peirce had defrauded Jackson by accepting the premium without informing Jackson of Fr. Receconi's change in health; and that Peirce and the Receconis had conspired to defraud Jackson.5

Mrs. Receconi filed an answer generally denying Jackson's allegations and asserting a counterclaim for breach of contract. In her counterclaim she sought relief consisting of the face amount of the policy ($250,000), plus prejudgment interest, punitive damages, and attorney's fees. Peirce moved to dismiss the claims against him, and the district court granted his motion. This Court, however,...

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