Jones v. John Hancock Mutual Life Insurance Company

• Decision Date: 23 August 1968
• Docket Number: Civ. A. No. 5371.
• Citation: 289 F. Supp. 930
• Parties: Harriet Lois JONES, Plaintiff, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts corporation, Defendant.
• Court: U.S. District Court — Western District of Michigan

289 F. Supp. 930

Harriet Lois JONES, Plaintiff, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts corporation, Defendant.

Civ. A. No. 5371.

United States District Court W. D. Michigan, S. D.

August 23, 1968.

Hillman, Baxter & Hammond, Grand Rapids, Mich., for plaintiff. Douglas W. Hillman, Grand Rapids, Mich., of counsel.

Wheeler, Upham, Bryant & Uhl, Grand Rapids, Mich., for defendant. Gordon B. Wheeler, Grand Rapids, Mich., of counsel.

OPINION

FOX, District Judge.

On June 27, 1966, plaintiff, Harriet Lois Jones, commenced this action against defendant, John Hancock Mutual Life Insurance Company, to recover the proceeds of a life insurance contract entered into by herself, her husband, R. Edsel Jones, and defendant on or about December 30, 1965.

In May of 1968, a jury returned a verdict in favor of plaintiff. During the trial this court decided various legal issues which we believe merit further discussion and analysis.

The facts can be briefly summarized as follows:

Raymond Edsel Jones and Hugh W. Crouse, an agent of the John Hancock Mutual Life Insurance Company, met in 1963 while Mr. Jones, who lived in Grand Rapids, Michigan, was in Ohio on business.

Mr. Crouse operates under the name of "Crouse, Long and Associates" in Mansfield, Ohio, as a special agent of the William B. Hoyer Agency, of Columbus, Ohio. He is licensed to sell life insurance in both Ohio and California.

The Hoyer Agency is one of the oldest, most respected and successful John Hancock agencies in the country.

Mr. Crouse is an experienced life insurance salesman, having sold over a million dollars of insurance per year for most of the years he has been with the John Hancock Company.

After they became acquainted, Mr. Crouse and Mr. Jones periodically discussed Mr. Jones' life insurance needs. Mr. Jones purchased a policy of life insurance from Mr. Crouse some time during 1964, which was written by Mr. Crouse for the Franklin Life Insurance Company.

Mr. Crouse continued to discuss Mr. Jones' insurance requirements when they would see each other in Mansfield and elsewhere. Both were private airplane pilots and did a substantial amount of traveling.

Finally, in December, 1965, Mr. Crouse persuaded Mr. Jones to purchase additional life insurance from John Hancock Mutual Life Insurance Company. The type of policy or policies, and the total amount, within limits, was left up to Mr. Crouse.

Mr. Crouse concluded that an ordinary life policy (called a Signature 25) with a face value of $43,000, and an additional $43,000 in the event of accidental death, with provisions for an additional $860 per month payments for a decreasing term of twenty years, would be a proper policy for Mr. Jones.

The application for the insurance was prepared by Mr. Crouse in Mansfield. It designated Mrs. Jones as the owner and primary beneficiary, and Mr. Jones as the insured.

After the application was completed, Mr. Crouse arranged for Mr. Jones to be examined in Mansfield on December 8, 1965, by two doctors who worked regularly for the John Hancock Company. Both examinations revealed that Mr. Jones was a normal, healthy man.

Subsequently, at the invitation of Mr. Crouse, who had certain business interests in Los Angeles, Mr. and Mrs. Jones and their children flew to Los Angeles to spend the 1965 Christmas Holidays with him and his wife.

Mrs. Jones and their daughter went by commercial flight, while Mr. Jones and their three sons flew in his own plane as far as Texas. After being grounded there by foul weather, they proceeded to California via commercial airline.

While in California, the Joneses and Mr. Crouse met on approximately December 30, 1965, and completed the insurance application. Because Mr. Jones was a licensed pilot, a supplemental aviation application was required.

The supplemental aviation application dealt with the number of hours flown, both in total and by year, by Mr. Jones. Under the circumstances this information had to be estimated as Mr. Jones' log books in which actual hours were recorded were in his plane in Texas.

Nevertheless, Mr. Crouse decided to proceed on the basis of Mr. Jones' estimates and completed the application. Mr. Crouse explained to the Joneses that because of his flying hours, he might be charged an added premium of $2.50 per thousand. It is undisputed that Mr. Jones said that he would accept the policy with the added premium.

In order to complete the transaction, Mr. Crouse asked the Joneses to sign the application. This was done on the bottom of the application form, Part A. To satisfy defendant's regulation that the first month's premium be submitted with the application for insurance, Mr. Crouse persuaded the Joneses to sign in blank two cognovit notes and an assignment of the policy, which forms were supplied to Crouse by the Hoyer Agency. Mr. Jones was willing to write a check for the amount of the premium; however, Mr. Crouse told him that a note would be better than a check, since the exact premium could be accurately computed by the Hoyer Agency and the note then completed by them.

Below the signatures of the Joneses on Part A of the application form, a conditional receipt was attached. It read as follows:

NOTICE: APPLICABILITY OF THIS CONDITIONAL RECEIPT IS GOVERNED BY AGREEMENT B OF APPLICATION

CONDITIONAL RECEIPT FOR ADVANCE PAYMENT WITH APPLICATION FOR NEW INSURANCE

RECEIVED from _____________________________________________ the sum of $______ paid with application to the John Hancock Mutual Life Insurance Company bearing the same date and number as this Receipt. If this sum is at least one month's proportionate part of the premium according to the Company's published rates for the policy and premium interval selected in the application, and if the Company at its Home Office shall determine that each person proposed for insurance, including the proposed Insured, was, on the date of completion of the latest of all required Parts A and B and medical examinations pertaining to each such person, acceptable under the Company's rules for the premium class, amount and plan of insurance, and additional benefits, if any, applied for, the contract applied for shall take effect retroactively as of the date of the latest of all required parts of the application and medical examinations, or of such other date as may be requested in the application and accepted by the Company, notwithstanding any change in acceptability due to any disease contracted or injury sustained after the date of completion of all required parts of the application and medical examinations.

If said contract takes effect hereunder, any balance of the said premium may be paid while all persons proposed for insurance are living, and within 60 days hereafter. If the balance is not so paid, the contract shall continue only for such proportionate part of said premium interval as the amount paid under this Conditional Receipt bears to said premium.

The application shall be deemed to have been declined if it has not been approved by the Company within 60 days hereafter and the amount paid shall be returned upon surrender of this receipt. Any check tendered is received subject to collection only.

John Hancock Mutual Name of proposed Life Insurance Company Insured ______________________ Date ______ 19 ____ By ________________Agent Form 156-CR-63

Just above this "Conditional Receipt" the following appeared: "Receipt must not be detached unless Item 17 indicates payment has been made." Item 17 states: "What advance payment is made with this Part A? (If none, so state.) (See agreement B.)"

This conditional receipt was left blank in order to permit the Hoyer Agency to fill in the exact figures. Mr. Crouse then retained the receipt so that the amount of the premium could be inserted when it was finally determined.

After completing the transaction, Mr. Jones asked Mr. Crouse, "Am I covered?"—to which Mr. Crouse replied, "Yes, you are now technically covered."

Mr. Crouse then sent the application and other documents, including one of the cognovit notes which he had endorsed, to the Hoyer Agency in Columbus. After Mrs. Pursley of the Hoyer Agency New Business Department computed the premium and inserted the figure $1,134.45 in Box 17 of the application, the application was sent to the defendant in Boston. The conditional receipt was detached and retained in the Hoyer Agency file. Mrs. Pursley also inserted the sum of $1,134.45 on one of the cognovit notes which had been signed in blank by the Joneses and endorsed by Hugh W. Crouse.

The Joneses left California in January, 1966. Mrs. Jones and the children flew by commercial flight, and Mr. Jones, after returning to Texas by commercial flight, proceeded to Michigan in his own plane. He was killed when his plane crashed as it approached the Kent County Airport near Grand Rapids.

Defendant conducted a thorough investigation following Mr. Jones' death. On March 15, 1966, defendant concluded that no policy should issue because (1) no advance payment of the first premium had been made; (2) the conditional receipt was not dated or completed; (3) no chest X-ray or electrocardiogram had been conducted; and (4) Mr. Jones' estimates of his flying hours on his supplemental aviation application were inconsistent with the hours reported in his log books.

We treat these issues in the order set forth above.

I. Advance Payment.

The John Hancock Company is an expert in its field. Its varied and complex instruments and contract clauses are prepared by it alone. Because a layman is unversed in insurance provisions and practices, he may properly and justifiably place heavy reliance on the knowledge and good faith of the company, its representatives and agents.

The company and its representatives and agents, in turn, are under correspondingly heavy responsibility to him. His reasonable expectations in his dealings with an insurance company and its agents may not be frustrated. Members of the...