Metts v. Central Standard Life Ins. Co. of Ill., 16798

• Decision Date: 21 June 1956
• Docket Number: No. 16798,16798
• Citation: 298 P.2d 621,142 Cal.App.2d 445
• Court: California Court of Appeals Court of Appeals
• Parties: Howard L. METTS, Plaintiff and Respondent, v. CENTRAL STANDARD LIFE INSURANCE COMPANY OF ILLINOIS, Defendant and Appellant.

Page 621

298 P.2d 621

142 Cal.App.2d 445

Howard L. METTS, Plaintiff and Respondent, v. CENTRAL STANDARD LIFE INSURANCE COMPANY OF ILLINOIS, Defendant and Appellant.

No. 16798.

District Court of Appeal, First District, Division 1, California.

June 21, 1956.

Hearing Denied Aug. 16, 1956.

Hardin, Fletcher, Cook & Hayes, Oakland, Lewis P. May, Oakland, of counsel, for appellant.

Schofield & Hannegan, Louis F. Schofield, Oakland, for respondent.

BRAY, Justice.

Defendant appeals from a judgment granting plaintiff $5,000 for refusal to perform an insurance contract insuring plaintiff and his family against poliomyelitis.

Question Presented.

Did a contract of insurance arise? (a) Was the application an offer of immediate insurance coverage? (b) If so, did plaintiff meet its terms?

Facts.

On October 18, 1951, plaintiff Howard L. Metts was appointed by defendant Central Standard Life Insurance Company as an agent to sell polio insurance policies. Defendant furnished Metts with application forms. On November 8, 1951, plaintiff mailed an application in behalf of one Hutchison and his family to the company for polio insurance. When Hutchinson's policy was received it showed November 8, 1951, the same date as the application, as the effective date.

On May 15, 1952, plaintiff filled out and mailed two applications, together with his personal check for the premiums on both, to the company. One of these applications was for himself and family, the other for a neighbor and family. On his application plaintiff failed to answer the question: 'Have you or any members of your family had polio (Poliomyelitis) within the last 90 days? (Answer Yes or No).' Plaintiff testified that his failure to answer this question was 'just an oversight on my part,' and that no member of his family had had polio within 90 days of the application. The applications were received by the company May 23rd. The neighbor's policy was sent to plaintiff for delivery but no policy for plaintiff or his family was ever written. The company returned plaintiff's application (when does not appear).

Before plaintiff mailed his application, a child in his neighborhood had contracted polio. On May 18, 1952, plaintiff's 16 1/2-month-old son began running a fever. He was taken to the hospital and examined that evening. The diagnosis was acute tonsilitis. The doctor felt that there was no sign of polio. On May 21, 1952, the diagnosis was, for the first time, polio.

Plaintiff notified the company on May 28, 1952, that his son had polio.

On June 13, 1952, the company answered, denying coverage because of the failure to answer the question and because 'in any event' the policy would have been dated subsequent to May 21st. The company wrote plaintiff again on July 24, 1952, asking for a reply, and refunding his premium by check, which plaintiff cashed. Plaintiff replied to this letter.

Plaintiff filed a complaint for damages on June 12, 1953. At the trial, plaintiff testified that he received no instructions from the company to the effect that he had authority as an agent to bind the company. And he presumed that an agent had no authority to bind the company unless given such authority by the company. He stated that the words 'no waiting period,' which were on the application, meant to him that any person who made an application was insured as of that date. He also said he knew that the company, not the agents, issued the policies.

Plaintiff had received no instructions from the company as to when its policies were to take effect.

The court found that the company agreed to insure plaintiff and his family as of May 15, 1952; that plaintiff's son thereafter contracted polio and that plaintiff incurred expenses for the treatment of the son in the sum of $5,000; that plaintiff had performed all the conditions of the agreement and that plaintiff's failure to answer the key question on the application was an oversight and that defendant thereby suffered no prejudice because the answer would have been 'no.'

The application form, on its reverse side, stated: 'Infantile Paralysis. Immediate First Day Coverage Automatically Covers Entire Family.' 'No Waiting Period.' 'Pays from First Day that poliomyelitis manifests itself and thereafter, as provided * * *.'

Plaintiff contends that the application form itself was an offer to contract which was accepted by him; that the above mentioned wording on the back of the form caused him to believe that when he mailed the completed form and premium payment the contract was then in effect and that he was immediately covered.

Defendant contends that there was no representation that the policy would take effect as of the date of the application, and that the application was an offer by the insured not accepted until policy issued. Defendant further contends that as the application states 'Please issue to me your Special Polio (Infantile Paralysis) Insurance Policy based upon the statements I am giving you herein' (emphasis added) and the question concerning whether any member of the family had polio within the last 90 days was unanswered, there could be no contract. Inasmuch as the court found (and the finding is supported by the evidence) that the answer to the question would truthfully have been in the negative, the real question in the case becomes when, if the question had been so answered, the policy would take effect.

Plaintiff testified that on the date of the application he knew that a little girl living across the street from plaintiff's family had polio. When asked if that was not the reason for his signing the polio application he said, 'Any time a person is in danger * * * I would have taken out insurance regardless, but that would prompt a person to take out insurance.' We see no violation of plaintiff's duty as an agent of the company to call this fact to the company's attention, nor in plaintiff's failure to notify the company when his son first became ill, inasmuch as his condition was diagnosed as tonsilitis. If the policy took effect on completing the application, what happened to the son thereafter (the evidence showing he was hale and hearty on that day) could not affect the policy.

1. Was There a Contract of Insurance?

(a) Effect of the Application.

Whether a contract of insurance arose upon plaintiff's signing the application depends (a) upon whether the language of the application form constituted an offer by defendant to insure immediately upon its being signed and posted, and (b) if so, whether plaintiff met the terms of the offer.

In determining the effect of the language of the application form the established rules for the construction of insurance policies must be borne in mind.

'Because contracts of insurance are not the result of negotiation and are generally drawn by the insurer, any uncertainties or ambiguities therein are resolved most strongly in favor of the insured. Mah See v. North American Acc. Ins. Co., 190 Cal. 421, 213 P. 42, 26 A.L.R. 123; 14 Cal.Jur. 443-445. Where there is no ambiguity, however, courts will indulge in no forced construction against the insurer, and the insurance policy, like any other contract, is to be interpreted according to the intention of the parties as expressed in the instrument in the light of the circumstances surrounding its execution [citations].' Blackburn v. Home Life Ins. Co., 19 Cal.2d 226, 229, 120 P.2d 31, 32.

'Where two interpretations equally fair may be made, that which affords the greatest measure of protection to the assured will prevail.' Fageol T. & C. Co. v. Pacific Indemnity Co., 18 Cal.2d 731, 747, 117 P.2d 661, 669.

Our first task is to determine, then, whether there is any uncertainty or ambiguity in the language of the application form. The face of the application form contains merely a request for the issuance of the 'Special Polio Insurance Policy,' data concerning the applicant and his family and the question mentioned above as being unanswered. The only language important here is that above quoted appearing on the reverse side: 'Immediate First Day Coverage Automatically Covers Entire Family.' (Emphasis added.) The use of the words 'immediate' and 'automatically' in these phrases is difficult to explain as having any meaning other than that the coverage commences from the date of the application. At least, a reasonable conclusion is, that...