Liberty Nat. Life Ins. Co. v. Smith
| Decision Date | 24 March 1978 |
| Citation | 356 So.2d 646 |
| Parties | LIBERTY NATIONAL LIFE INSURANCE COMPANY v. Julia G. SMITH. 77-6. |
| Court | Alabama Supreme Court |
James S. Sledge, of Inzer, Suttle, Swann & Stivender, Gadsden, for appellant.
Howard B. Warren, of Simmons & Torbert, Gadsden, for appellee.
This appeal arises from a jury verdict in favor of Plaintiff-Appellee, Julia G. Smith, awarding her benefits under a life insurance policy allegedly obtained on the life of her husband. We reverse and remand.
Because our reversal is grounded solely on the error of the trial Court in granting Plaintiff's requested charge relating to the effective date of the policy (and thus a retrial is probable on the theory of misrepresentation), a detailed recital of the facts other than those essential to this narrow point would be inappropriate.
On February 18, 1976, Hardee W. Hester, an agent of Defendant-Appellant, Liberty National Life Insurance Company, solicited an offer to purchase life insurance from the Smiths. The coverage sought was a $20,000 whole life policy on Smith's husband. The application also requested an additional $20,000 accidental death provision on Mr. Smith and similar, additional $2,000 coverage on each of five juvenile dependents. The application contained a 60-day acceptance provision. Smith paid the initial premium under this policy and obtained a receipt containing conditional temporary insurance.
A condition for coverage under both the policy and the receipt was the good health of the proposed insured. Mr. Smith's medical examination indicated that he had an elevated blood pressure level. Because of this problem, Liberty National, in accordance with its underwriting standards, rejected Smith's application. Instead, it returned a policy providing $20,000 whole life coverage on Mr. Smith, but at an increased premium and without the accidental death provisions. This substitute policy was received by the branch office on March 10, but, before it could be delivered to Mr. Smith, and be accepted by him Smith died. This suit to recover benefits under the policy followed.
In her complaint, Smith raised three theories of recovery: (1) that Mr. Smith was insured under the terms of the policy; (2) that agents of Liberty National misrepresented that the policy had been approved, thus causing her not to seek coverage elsewhere; and (3) that Liberty National negligently or wantonly delayed issuance of the policy. Liberty National's Motion for Directed Verdict as to each count was denied, and the jury returned a general verdict for Smith for $20,000.
Liberty National contends the Court erred in denying the Motion for Directed Verdict. Furthermore, it argues that the following instruction, given at the Plaintiff's request, was erroneous:
"The Court charges you, ladies and gentlemen of the jury, if you are reasonably satisfied from the evidence that the permanent insurance policy in this case was mailed by the company from Birmingham, Alabama, on March 9th or the 10th, 1976, then this would be the effective date of the policy and would constitute delivery of the policy."
Liberty National contends this instruction was erroneous because the policy issued substantially differed from the coverage requested and, therefore, constituted a counter-offer not an acceptance. Therefore, the mere act of mailing the counter-offer to its district office did not create a contract.
It is well recognized that an application for insurance is a mere offer which does not ripen into a contract unless, and until, it is accepted by the insurance company. Life Insurance Company of Georgia v. Miller, 292 Ala. 525, 296 So.2d 900 (1974). If the company issues a policy materially different from that for which the application was made, it constitutes a rejection of the original offer and is a counter-offer which becomes a binding contract only when accepted by the original offerer. Barnes v. Atlantic & Pacific Life Insurance Company of...
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