McGhee v. Paramount Life Ins. Co.

• Decision Date: 07 July 1980
• Parties: Susie McGHEE v. PARAMOUNT LIFE INSURANCE COMPANY. 78-651.
• Court: Alabama Supreme Court

Page 969

385 So.2d 969

Susie McGHEE v. PARAMOUNT LIFE INSURANCE COMPANY.

78-651.

Supreme Court of Alabama.

July 7, 1980.

Richard A. Lawrence of Fuller & Lawrence, Montgomery, for appellant.

Charles M. Crook of Smith, Bowman, Thagard, Crook & Culpepper, Montgomery, for appellee.

ALMON, Justice.

This case involves a dispute over whether an insurance company is bound by its agent's alleged oral statements which contradict insurance application provisions. From an order granting defendant's motion for summary judgment, plaintiff appeals.

On or about November 13, 1975, Miss Lois Garnett, an agent of Paramount Life Insurance Company, visited the plaintiff, Susie McGhee, to discuss insurance coverage. Garnett had previously talked with Mrs. McGhee's husband concerning insurance. The McGhees were interested in obtaining a cancer insurance policy. Garnett offered to sell them a policy which also contained an accidental death provision. It would pay fifteen thousand dollars on the accidental death of either McGhee. Mrs. McGhee signed her husband's name to the insurance application and gave Garnett a check for $9.50 as first payment on the policy.

In her deposition, Mrs. McGhee states that Garnett told her that there would be a waiting period for cancer coverage but that the accidental death portion of the policy would be effective immediately. However, both the application she signed and the receipt she received contain provisions to the contrary. The application states:

I hereby certify that I understand that the insurance applied for herein becomes effective upon the policy issue date and The receipt reads as follows:

not on the date of application. I further certify that I understand that the premium is due on the policy issue date and thereafter as indicated below. I hereby further certify that the above is true and correct to the best of my knowledge.

RECEIPT

Received from the sum of $9.50 as the premium for under a proposed policy to be issued on the basis of an application to Paramount Life Insurance Company of Little Rock, Arkansas, subject to the terms and conditions of said application and any policy issued by the Company on the basis thereof. It is agreed that should the application not be approved by the Company, the applicant shall accept a return of the above premium upon surrender of the receipt to the Company.

Mrs. McGhee also testified that she did not read the application prior to her signing it, nor did she read the receipt.

Mrs. McGhee's husband died the next day from accidental causes. She asserts that shortly after his death, a Mrs. Charles Griggs visited her, representing himself as supervisor and district manager of Paramount Life Insurance Company. She claims he told her that Paramount taught its agents that the accidental death portion of the policy became effective upon receipt by the agent of the premium.

Paramount refused to pay Mrs. McGhee and returned her check of $9.50.

Suit was brought by Mrs. McGhee claiming that the accidental death portion of the policy was in effect at the time of her husband's death which would entitle her to the policy amount. Paramount moved for summary judgment, contending that it had not acted upon the McGhee insurance application and that no policy of insurance had been issued on her husband's life. A copy of the insurance application and receipt given Mrs. McGhee were attached to the motion. In opposition to this motion, the deposition and affidavit of Mrs. McGhee and the affidavit of Myrtle Reeves were submitted to the court.

From an order granting Paramount's motion for summary judgment, McGhee appeals.

Generally, in the absence of stipulations to the contrary, the insurance risk commences with the completion of the insurance contract, whether that be effected by approval of the application, payment of the first premium or the delivery of the policy. Mutual Savings Life Ins. Co. v. Osborne, 245 Ala. 15, 15 So.2d 173 (1943); National Life & Accident Ins. Co., 220 Ala. 314, 124 So. 886 (1929).

In considering what effect an application for insurance would have insofar as the completion of the insurance contract is concerned, this Court has stated in Cherokee Life Ins. Co. v. Brannum, 203 Ala. 145, 82 So. 175 (1919), that:

An application for insurance is a mere proposal on the part of the applicant. When the insurer signifies acceptance of it to the "proposer," the minds of the parties meet and the contract is made. (Citations omitted.) The acceptance must be signified by some act or acts agreed upon by the parties, or from which the law raises the presumption of acceptance. (Citations omitted.)

203 Ala. at 148. See also, Liberty Nat. Life Ins. Co. v. Smith, 356 So.2d 646 (Ala.1978); Life Ins. Co. of Georgia v. Miller, 292 Ala. 525, 296 So.2d 900 (1974).

The terms contained in both the application and receipt are clear and unambiguous. The application states that the policy does not become effective until the policy issue date. The receipt states that the issuance of the proposed policy depends upon approval of the application by Paramount. As the premium was paid with the application, this payment was subject to the conditions stated in the receipt, which refer to and adopt the conditions stated in the application, and the insurance thus becomes effective only when these conditions have been fulfilled. See Ivie v. International Life Ins. Co., 217 Ala. 559, 117 So. 176 (1928).

McGhee contends that summary judgment was nevertheless inappropriate because there still exists a genuine issue...