Mann v. Policyholders' Nat. Life Ins. Co.

• Citation: 51 N.W.2d 853,78 N.D. 724
• Decision Date: 08 February 1952
• Docket Number: No. 7246,7246
• Parties: MANN v. POLICYHOLDERS' NAT. LIFE INS. CO.
• Court: United States State Supreme Court of North Dakota

Page 853

51 N.W.2d 853

78 N.D. 724

MANN v. POLICYHOLDERS' NAT. LIFE INS. CO.

No. 7246.

Supreme Court of North Dakota.

Feb. 8, 1952.

Syllabus by the Court.

1. The business of life insurance is affected with the public interest and subject to legislative regulation designed to protect the public.

2. An insurance corporation desiring to do business in this state must first apply for and receive a certificate of authority which subjects such corporation to the rules and regulations laid down by the state for the conduct of such business in the state.

3. A life insurance company that has solicited and received a completed application for life insurance and collected the first premium thereon is under a legal duty to take prompt action on the application. If it fails in that duty it becomes liable in tort for damages. Such requirement is not unreasonable and does not impair the right of contract.

4. A party making a motion in the District Court for a judgment notwithstanding the verdict or for a new trial must set forth in his motion the grounds on which he relies. If insufficiency of the evidence is one of those grounds, he must include specifications of such insufficienty. Upon an appeal from the order denying such a motion only the grounds so specified will be considered in the appellate court.

5. Before a motion for judgment notwithstanding the verdict can be granted the evidence must show that the party making such motion moved for a directed verdict at the conclusion of the taking of the testimony in the trial court and was entitled thereto as a matter of law.

6. A motion for a new trial on the ground of insufficiency of the evidence invokes the legal discretion of the trial court to be exercised in the interests of justice. On an appeal from an order denying the motion for a new trial the primary question before the appellate court is whether the district abused his discretion.

7. When a trial court writes out his instructions and gives them to counsel in time for their examination before delivery thereof he may require them to designate any parts thereof that they deem objectionable and if no parts are so designated all exceptions thereto are waived.

8. A physician in making medical examination of an appellant for insurance and in reporting the results thereof to the insurer is the agent of the insurer and his errors and negligence, in that connection, are the errors and negligence of the insurer.

9. Evidence in the instant case examined and it is held that the defendant was not entitled to a judgment notwithstanding the verdict; that the district court did not abuse his discretion in denying the motion for a new trial and that no grounds exist for a reversal of the judgment.

Robert Vogel, Garrison, Danforth & Danforth, Sioux Falls, S. D., for appellant.

Murray & Murray, Bismarck, for respondent.

GRIMSON, Judge.

On April 4, 1949, Lewis J. Mann made application to the Policyholders' National Life Insurance Company, a foreign life insurance corporation with headquarters at Sioux Falls, South Dakota, duly licensed to do business in North Dakota, for a policy of life insurance in the amount of $2,500. The application was taken by its general agent who gave Mann a receipt for the first premium. Mann designated his wife, Marjory R. Mann, this plaintiff, as beneficiary. He was given a physical examination on April 14, 1949, by the doctor designated by the insurance company. The doctor testified he found Mann in good physical condition. Some errors, however, crept into the report of that medical examiner. Such report was not received at the home office of the company until May 2, 1949. It was not returned to the doctor but some attempt was then made by the employees of the company to get a correction of the errors or a further medical examination. Whether because of the manner in which defendant's agents tried to do that or because of Mann's own negligence in regard thereto such errors were never corrected nor any further medical examination had. Mann was never notified of the acceptance or rejection of his application. No policy was ever issued. Four months after the date of the application and of the receipt, on July 4, 1949, Mann died. On Oct. 16, 1949, this plaintiff demanded delivery of the policy or refund of the first premium as provided by the receipt. This defendant acknowledged receipt of the letter but neither issued the policy nor returned the premium.

On Feb. 7, 1950, this action was commenced. The complaint alleges both a failure by the defendant to carry out a contract for insurance and the failure of the defendant through its carelessness and negligence to carry out its duty to act on the application within a reasonable time, and demands damages in the sum of $2,500, the amount of the insurance applied for.

The answer of the defendant admits receiving the application of Lewis J. Mann, and his death, but alleges that from the medical examiner's report it appeared that the applicant was not insurable without further medical examination of which the applicant was notified; that he refused, neglected and declined to furnish any supplemental medical examination; that under the terms of the application itself the defendant incurred no liability under the circumstances. The answer further alleges that the applicant never paid the first premium and that if any receipt was issued said receipt was conditional, providing that no liability should attach until the policy was issued and if no policy issued the premium would be returned.

The case was tried entirely on the theory of negligence. In submitting the case to the jury the court said: 'The gist of this action is alleged negligence on the part of the defendant in failing to act upon such application of insurance. * * *'

The case was submitted to the jury after a motion for a directed verdict on the ground of the insufficiency of the evidence had been denied. The jury found for the plaintiff for $2,500 and interest.

After the entry of judgment defendant made a motion for a judgment notwithstanding the verdict or in the alternative for a new trial. That motion was denied and judgment entered. This appeal is from the judgment and the order denying the defendant's motion for judgment notwithstanding the verdict or for a new trial.

We will first consider the defendant's claims that to permit a recovery on the theory of negligence under the circumstances of this case denies the defendant the right to contract and is contrary to the constitutions of the State of North Dakota and of the United States.

The insurance business is affected with a public interest. It affects the lives and well being of the people. Because thereof the state, under its police power has the right to prescribe conditions under which it can be carried on and regulate the conduct of such business within the state. 44 C.J.S., Insurance, Secs. 55, 56, p. 518. 'The business of insurance is subject to legislative regulation in the interest of the public.' Wamberg v. National Union Fire Insurance Co., 46 N.D. 369, 372, 179 N.W. 666, 667. 'The state has the 'right * * * to regulate the conduct by corporations, domestic and foreign, of insurance as a business affected with public interest." Bekken v. Equitable Life Assurance Society, 70 N.D. 122, 293 N.W. 200, 210. 'The legislature may prescribe the rules and regulations with respect to that business (life insurance) designed to protect the public.' Mutual Life Insurance Co. v. State, 71 N.D. 78, 87, 298 N.W. 773, 777, 138 A.L.R. 1115.

Our legislature has done that by the enactment of an insurance code, Title 26 NDRC 1943. Before an insurance company can do business in this state it has to secure from the Commissioner of Insurance a certificate of authority. It must obtain a license from the Commissioner for every soliciting agent and such agent must be a legal resident of the state. Standard forms of policy are prescribed. The conduct of insurance business generally is regulated by statute.

In Bekken v. Equitable Life Assurance Society, supra, this court, in a very thorough and able opinion written by Judge Christianson, considered this whole matter of insurance, the nature thereof, the relationship of the insured to the insurer and the right of the state to regulate the business for the protection of the insured. Many cases from other courts are there cited and examined. In that case this court approved and followed a long line of decisions, ably analyzed, which hold: 'That an insurance company that has solicited and received a completed application for insurance is under a legal duty to take prompt action on the application, and give prompt notice to the applicant of its action; and that consequently such insurance company is liable in tort for negligent delay in acting upon the application, and notifying the applicant in case the application is rejected.' While other courts have held to the contrary, that principle was adopted and is controlling in this state. It is supported by much authority. In addition to the cases cited in the Bekken case the following are amongst the cases so holding: Metropolitan Life Ins. Co. v. Brady, 95 Ind.App. 564, 174 N.E. 99; Live Stock Insurance Co. v. Stickler, 64 Ind.App. 191, 115 N.E. 691, 694; Walker v. Farmers Insurance Co., 51 Iowa 679, 2 N.W. 583; Security Ins. Co. v. Cameron, 85 Okl. 171, 205 P. 151, 27 A.L.R. 444; Childers v. New York Life Ins. Co., 117 Okl. 7, 245 P. 59; Brown v. Missouri State Life Ins. Co., 124 Okl. 155, 254 P. 7.

In Duffie v. Bankers' Life Association, 160 Iowa 19, 139 N.W. 1087, 1089, 46 L.R.A.,N.S., 25, the Court said: 'But it is said that a certificate or policy of insurance is simply a contract like any other, as between individuals, and that there is no such thing as negligence of a party in the matter of delay in entering into a contract. This view overlooks the fact that the defendant holds and is acting under a franchise from the state. The...