Markel v. Travelers Ins. Co.
| Decision Date | 24 February 1975 |
| Docket Number | No. 74--1211,74--1211 |
| Citation | 510 F.2d 1202 |
| Parties | Owen W. MARKEL, Executor of the Estates of Raymond E. King and Yvonne King, Deceased, Plaintiff-Appellee, v. The TRAVELERS INSURANCE COMPANY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Lawrence McDonough, Wichita, Kan. (Leonard A. Levand, and Jochems, Sargent & Blaes, Wichita, Kan., on the brief), for plaintiff-appellee.
John T. Conlee, Wichita, Kan. (Donald R. Newkirk, and Fleeson, Gooing, Coulson & Kitch, Whicita, Kan., of counsel, on the brief), for defendant-appellant.
Before LEWIS, Chief Judge, and BREITENSTEIN and McWILLIAMS, Circuit Judges.
This is a contract action brought by the executor of the estate of a deceased insured against an insurance company to recover the death benefits provided by a special travel accident policy. Jurisdiction is based on diversity of citizenship. The insurance company defended on two grounds: (1) There was no valid renewal of the policy in question; and (2) assuming that the policy was effectively renewed, the policy had been cancelled prior to the death of the insured.
The trial court, sitting without a jury, found that the policy had been renewed, and that cancellation, though initiated, had not been completed prior to the death of the insured. Accordingly, the trial court entered judgment in favor of the executor and against the insurance company for the face amount of the policy, namely $60,000. The insurance company now appeals. The facts as developed upon trial are in our view all important, and hence will be summarized in some detail. The root of the present problem arises from the intransigent nature of computers and the time lag which resulted therefrom.
In January 1962, Despard & Company, Inc., an insurance broker and a general agent for Travelers Insurance Company, made arrangements with American Express to make travel accident insurance coverage available to holders of American Express credit cards. Under the arrangement the cardholder could purchase a Travelex Special policy from Travelers through American Express with the yearly premium payments billed on his American Express charge account. Pursuant to such arrangement, early in 1962 American Express notified its cardholders of the availability of such insurance, and in response thereto Raymond E. King, an American Express cardholder, made application. Thereafter, on June 11, 1962, King was issued a Travelex Special policy in the face amount of $60,000 insuring against various accidental injuries and loss of life while traveling. The policy was for a term of one year and provided that it could be renewed by payment of the annual premium, subject to the consent of Travelers. King renewed his policy annually through June 11, 1969, the latter renewal placing into effect a policy expiring on June 11, 1970. The present controversy concerns the events occurring immediately before and after the June 11, 1970, renewal date.
The agreement between Travelers and American Express provided that all applications and payments of premiums would be channeled by American Express through Despard to Travelers. The agreement further provided that American Express would give Travelers advance written notice of the date of, and the reason for, any discontinuance by American Express of its responsibility for payment to Travelers of the permium due on any policy. Notwithstanding this provision, American Express never did contact an insured prior to the renewal date to determine if the insured desired to renew. Consistent with such practice, American Express did not contact King prior to June 11, 1970, to ascertain whether King wanted to renew his policy with Travelers.
The renewal procedure in the instant case was initiated by Travelers on or about May 1, 1970, when it notified Despard of a number of policies which would be coming up for renewal in June 1970, including the policy issued King. It was not until June 30, 1970, however, that Despard billed American Express for the premiums due on policies expiring in June 1970. Despard did this by preparing and forwarding to American Express a 'record of charge' card on each premium due, including that due on the King policy. When this 'record of charge' card was received by American Express, the premium charges and other information contained therein were fed into its computer and the cardholders then received the 'record of charge' as notice the premium had been billed for another year. The evidence disclosed that the actual billing of a cardholder for a renewal premium charge occurred anytime from one week in advance of the anniversary date of the policy to as much as thirty to forty days after the anniversary date, depending upon the cardholder's place in the billing cycle of the American Express computer.
American Express first sent King a monthly statement showing a charge of $63 for renewal of the Travelers policy on July 24, 1970. On July 27, 1970, American Express paid Despard's earlier billing, which included the premium due on the King policy, although American Express itself had at that time received no remittance from King. American Express, incidentally, deducted a 15% 'service charge' from all premium payments thus remitted to Despard. On August 3, 1970, Despard made a remittance to Travelers, which included the premium due on the King policy. Despard itself deducted 5% of the total premium before remitting to Travelers as its commission. At this point in time, then, Travelers had received the premium due on the King policy even though King had not himself paid American Express the charge made on his account for the renewal premium, and had actually given no indication as to whether he in fact desired to renew the policy for another year.
On August 13, 1970, American Express received back King's account statement with the notation: 'Do not renew, R. E. King.' This was forwarded by American Express to Despard, who received it on September 8, 1970. That same day Despard prepared a credit for the amount of the $63 previously paid by American Express and sent such to American Express to apply to King's account. Despard also returned King's notation not to renew to American Express, and the latter eventually forwarded it to Travelers. In the meantime, American Express in its August billing continued to bill King for the $63 representing the renewal premium on the policy. King did not pay this billing. American Express in its September billing again charged King for the $63. This was not paid either.
On October 2, 1970, King and his wife, who was the beneficiary under the policy, were killed in an airplane crash in the Colorado mountains. On October 7, 1970, American Express sent King a statement stamped 'final notice,' which statement included the $63 charge for the renewal premium, and warned King as follows:
On the same day, October 7, 1970, American Express also prepared and sent a better to King concerning his account which contained the following statement:
'According to our files, your payment of $111.21 covering the balance due on your account as of October 2, 1970, is now more than two months overdue, despite several reminders from us.'
On October 9, 1970, the King Construction Company, Inc., with which King had been associated, issued its check to American Express...
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