Jones v. John Hancock Mutual Life Insurance Company

• Decision Date: 06 October 1969
• Docket Number: No. 18991.,18991.
• Citation: 416 F.2d 829
• Parties: Harriet Lois JONES, Plaintiff-Appellee, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

416 F.2d 829 (1969)

Harriet Lois JONES, Plaintiff-Appellee, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Defendant-Appellant.

No. 18991.

United States Court of Appeals Sixth Circuit.

October 6, 1969.

Gordon B. Wheeler, Grand Rapids, Mich., Wheeler, Upham, Bryant & Uhl, Grand Rapids, Mich., on brief, for appellant.

Douglas W. Hillman, Grand Rapids, Mich., Hillman, Baxter & Hammond, by Robert N. Hammond, Grand Rapids, Mich., on brief, for appellee.

Before O'SULLIVAN, McCREE and COMBS, Circuit Judges.

COMBS, Circuit Judge.

The appellant, John Hancock Mutual Life Insurance Company, had before it an application for a policy of insurance on the life of Raymond Edsel Jones at the time he was killed in the crash of his private airplane. The company declined to issue the policy. Suit was brought on the policy by decedent's wife, Harriet Lois Jones. Following a jury trial, verdict was had for plaintiff in the amount of the policy, $269,211.50. Judgment was entered accordingly, and the insurance company appeals. The opinion of District Judge Noel Fox is reported at 289 F.Supp. 930.

Hugh W. Crouse, an independent insurance agent with offices in Mansfield, Ohio and Los Angeles, California, had solicited Jones to buy the policy. In his solicitations for the company, Crouse acted as special agent for the William B. Hoyer Agency of Columbus, Ohio, one of John Hancock's oldest and most successful general agencies. In December, 1965, Crouse persuaded Jones to purchase a life insurance policy with a face value of $43,000, an additional $43,000 in the event of accidental death, and additional payments to Mrs. Jones of $860 a month for a decreasing term of twenty years. The application was substantially completed in Mansfield, and Jones was given two physical examinations which he passed.

The Jones family, who lived in Grand Rapids, Michigan, accepted an invitation by Crouse to spend the Christmas holidays with him in Los Angeles. Mrs. Jones and a daughter went to California by commercial airline, but Jones and their three small sons undertook to make the trip in his private airplane. They were grounded in Texas by bad weather and completed the trip by commercial airline.

While in California, Jones' insurance application was completed, together with a supplemental aviation application required because he was a licensed pilot. The supplemental application required certain information on Jones' flying hours but, since his log books were with the plane in Texas, he estimated his actual flying time for the years 1964-1965. His estimate of this time was 410 hours whereas the log books later revealed that he had actually flown 545.9 hours. Crouse accepted the estimate, knowing it was not exact. He told Jones that an additional premium of $2.50 per $1,000 of coverage might be required, and Jones agreed to this.

After completing the initial and supplemental application, the Joneses signed two cognovit notes in blank and an assignment of the policy as collateral, using forms obtained from the Hoyer Agency. Although Jones expressed a willingness to pay the first premium by check, Crouse requested that he sign the cognovit notes in blank so that the Hoyer Agency could compute the exact premium and insert it in the note. Crouse had frequently employed the cognovit note procedure. According to Crouse, after these documents had been completed, Jones asked whether he was covered and Crouse told him that he was "technically covered."

Crouse endorsed one of the cognovit notes and, on December 30, 1965, the note was mailed to the Hoyer Agency along with the application, supplemental application, medical reports, and other accompanying documents. The conditional receipt was not filled out by Crouse and was mailed to the Hoyer Agency still attached to the application. Crouse testified that it was not customary to give the receipt to the applicant when payment was not made in cash, unless there was a specific request for it.

The documents were received by the Hoyer Agency on January 3, 1966. The premium was computed and inserted on the cognovit note, and a ten-month maturity date was placed on the note. The figure $1,134.45, the amount of the premium, was also inserted in the application as the amount of the advance payment. The conditional receipt was detached and retained by the Hoyer Agency. The application contained a notation that the receipt was not to be detached unless advance payment had been made. The application, supplemental application, and medical reports were forwarded to appellant's home office where they were received on January 5, 1966.

On January 7, 1966, Jones was killed when his airplane crashed as he was flying it from Texas back to Grand Rapids. The company learned of his death on January 11, and denied the application on March 15, 1966.

The company relies for reversal on these grounds:

(1) No advance payment of the premium was made and so there was no immediate coverage.

(2) Even if there was advance payment of the premium, no conditional receipt was issued; or, if there was a conditional receipt, its terms were not met in that the insured was not acceptable "for the premium class or amount and plan of insurance applied for" and the company\'s underwriting requirements were not met.

(3) The application and conditional receipt being unambiguous, the admission of oral testimony to vary their terms or to show an inconsistent oral contract was prejudicially erroneous.

(4) The court erred in ruling that Crouse, the company\'s agent, could be cross-examined as a managing agent under Rule 43(b), Federal Rules of Civil Procedure.

(5) The court erred in permitting plaintiff\'s counsel to refer several times to the illness of two of plaintiff\'s children.

We hold in regard to ground (1) that execution of the cognovit note under the circumstances here shown constituted advance payment of the premium. See the opinion of the District Judge.

Grounds (2) and (3) will be considered together. The conditional receipt reads in pertinent part:

"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

...