McAvoy Vitrified Brick Co. v. North Am. Life Assur. Co.

• Decision Date: 16 March 1959
• Parties: McAVOY VITRIFIED BRICK COMPANY v. NORTH AMERICAN LIFE ASSURANCE COMPANY, Appellant.
• Court: Pennsylvania Supreme Court

149 A.2d 42

395 Pa. 75

McAVOY VITRIFIED BRICK COMPANY v. NORTH AMERICAN LIFE ASSURANCE COMPANY, Appellant.

Supreme Court of Pennsylvania.

March 16, 1959.

Owen B. Rhoads, Whilliam H. Lowery, Barnes, Dechert Price, Myers & Rhoads, Philadelphia, for appellant.

J B. H. Carter, Francis E. Shields, Francis H. Scheetz, Pepper Bodine, Frick, Scheetz & Hamilton, Philadelphia, for appellee.

Before CHARLES ALVIN JONES, C. J., and BELL, MUSMANNO, BENJAMIN R. JONES, COHEN, and McBRIDE, JJ.

JONES, Chief Justice.

This appeal is from a judgment in favor of the plaintiff company in the sum of $243,202.31, entered by the court below in an action of assumpsit based on an alleged contract of interim insurance on the life of Thomas B. McAvoy. The plaintiff company of which Mr. McAvoy was president was the designated beneficiary in his application to the defendant company for insurance. McAvoy submitted to the required physical examination and was approved by the defendant's medical examiner for the insurance applied for. Following the medical examiner's examination and approval of the applicant, the insurance company's authorized agent accepted McAvoy's payment in full of the first year's premium on the contemplated policy and delivered to him a 'deposit receipt' and an 'interim assurance certificate'. Six days after his examination and approval by the insurance company's medical examiner, McAvoy died and, following his death, the company rejected the application for the assigned reason that, under the company's practice, the applicant was not an insurable risk for the amount of insurance requested.

The case was tried to Judge Waters of the court below without a jury pursuant to agreement of the parties to the record. The trial judge held that the 'deposit receipt' and the 'interim assurance certificate' constituted integration of a contract of insurance between McAvoy and the defendant company for the period between the agent's delivery of the interim assurance certificate and the ultimate decision of the defendant company at its home office whether to issue the policy applied for or reject the application. Judgment for the plaintiff beneficiary was entered accordingly. The defendant filed exceptions to the judgment so entered, contending that, on the basis of the record and testimony, the trial judge should have found in favor of the defendant company and, in the alternative, that the defendant is entitled to a new trial because of alleged errors in the trial judge's rulings on the admission of evidence.

In passing upon these exceptions, the court en banc said in limine that it was not disposed to view seriously the latter of the above stated contentions, saying in that connection: 'There has never at any time been any substantial dispute of fact. The case was presented as one involving questions of law that would be determinative of the issues and hence was one appropriately submitted to the court sitting without a jury. * * * None of the alleged irregularities during the trial of this case is of sufficient significance to affect the result. The facts were fully and fairly presented and it remains only to apply the law applicable in the circumstances.' The foregoing conclusions were well warranted by the record; and nothing more need be said on that score.

We are fully persuaded of the correctness of the judgment entered below. Any further opinion by us in support thereof could at best be no more than a paraphrase of what was so well expressed by Judge Waters for the court below or, else, a work of supererogation. We therefore affirm on the following excerpts from the opinion of Judge Waters:

'McAvoy Vitrified Brick Company, dedesiring to expand its operations, sought to borrow $400,000 from Girard Trust Corn Exchange Bank. As an incident of this transaction, the bank requested that the company obtain insurance on the lives of the McAvoy brothers, Thomas B. Jr. and John C., respectively president and vice-president of the McAvoy Vitrified Brick Company, in the amount of $200,000 each. Through Messrs. Johnson & Higgins, insurance brokers, the McAvoys inquired of a number of life insurance companies regarding a plan of reducing term insurance to be coordinated with the amortization of the contemplated loan. Among these companies was the defendant, which, through its Philadelphia branch manager, submitted schedules of commuted values of reducing term poclies of insurance. The McAvoys decided to apply for insurance with the defendant, and arrangements were made for them to undergo a physical examination by two physicians selected by the defendant. This examination took place on June 28, 1955. After the examination, on the same day, the brothers were informed by the defendant's branch manager that Thomas, the elder brother, was physically acceptable at the standard premium rate but that the physicians had found John's blood pressure too high for him to be so acceptable. Thomas B. McAvoy, Jr., thereupon, on June 28, 1955, filled out and delivered to the defendant's branch manager an application, on the defendant's printed form, for the desired policy of insurance, and handed to the branch manager a check payable to the defendant in the amount of $2,966.75, representing the full first year's premium on the policy requested. The application designated the plaintiff company as beneficiary and was for a policy which would provide for the payment, in the event of the insured's death during the term, of $1,455 monthly for a period of fifteen years, the commuted value of which was calculated at $211,266. The branch manager of the defendant then signed and delivered to Thomas B. McAvoy, Jr. a 'deposit receipt' and an 'interim assurance certificate.' These two documents will have to be considered in detail, because they, with the application, constitute the integration of the contract between the parties if any contract existed.

'Thomas B. McAvoy, Jr. suffered a coronary thrombosis on July 3, 1955, and died the same day. Obviously, no policy had been issued at that time. As a matter of fact, the application was on the desk of the defendant's underwriting officer in Toronto for consideration on the very day when the word of McAvoy's death was received.

'The plaintiff contends that by the application, deposit receipt, and interim assurance certificate the parties entered into a contract of temporary insurance which was effective immediately and which would continue to exist until the defendant either issued a policy or declined to accept the risk during the life of the insured. The defendant, on the other hand, while conceding that the exchange of the application and premium payment for the deposit receipt and interim assurance certificate created a contractual relationship, urges that the defendant's liability under the contract was subject to a condition precedent, the defendant's determination that Thomas B. McAvoy, Jr. was an insurable risk under the defendant's practice. The problem is not a new one. A substantial volume of litigation has come before the courts arising out of situations in which one who has applied for life insurance and paid a premium has died or suffered a change of physical condition before the issuance of the policy. We are all familiar with the usual practice of insurance agents to accept initial premium payments with applications for the issuance of policies which cannot, in the very nature of the business, be made available until some time later. The policy itself, when issued, embodies the contract. But in the meantime, between the initial payment of premium and the issuance of the policy, what is the contractual relationship, if any? It is not possible to generalize; the courts have found the answer in each case in the wording of the receipt given for the premium payment, where the language clearly discloses the intention of the parties, and where the courts have found ambiguity in the language they have usually reached a construction against the insurance company which drafted the receipt.

'A receipt for a premium payment which recites that the applicant shall be covered by insurance if and when the company shall issue a policy on the plan applied for, or if and when a policy shall be delivered, admits of only one interpretation: the application is an offer to contract, and no contract comes into being until the insurance company manifests its acceptance of the offer. A like result would be accomplished by a receipt stating clearly that no insurance shall be in effect until the time of the application's approval by the home office of the company. The doubtful cases arise where a receipt is given stating that the insurance shall be in effect from the date of the premium payment, or the date of the application, or the date of the medical examination, provided, as in some instances, the application shall be approved and accepted at the home office, or, as in others, the home office shall be satisfied that, at the time of the payment, application, or examination, the applicant was an insurable risk. Thus in an informative comment in 44 Yale L.J. 1223 the author refers to receipts which state that (1) any insurance effected shall by reason of the payment of the premium at the time of the application be in force from the date of the medical examination provided the application shall be approved and accepted as applied for at the home office, and receipts which state that (2) the insurance shall be effective as of the date of the medical examination if the company shall be satisfied that on that date the applicant was an insurable risk and that the application was otherwise acceptable under the company's regulations for the amount the plan of the policy applied for.

'In this case we have more than a receipt...