Northwestern Mut. Life Ins. Co. v. Neafus

• Decision Date: 28 November 1911
• Citation: 140 S.W. 1026,145 Ky. 563
• Parties: NORTHWESTERN MUT. LIFE INS. CO. v. NEAFUS.
• Court: Kentucky Court of Appeals

140 S.W. 1026

145 Ky. 563

NORTHWESTERN MUT. LIFE INS. CO. v. NEAFUS.

Court of Appeals of Kentucky.

November 28, 1911

Appeal from Circuit Court, Jefferson County, Common Pleas Branch Second Division.

Action by Linnie B. Neafus against the Northwestern Mutual Life Insurance Company. From a judgment for plaintiff, defendant appeals. Reversed.

Tyler Barnett, for appellant.

Bullitt Ryan & Hemphill, for appellee.

CARROLL. J.

On the 23d of July, 1908, T. J. Neafus applied to the appellant for a policy of life insurance in the sum of $1,000, payable to his wife, the appellee. The application was made upon a printed form, in which it was provided that: "I agree that if the amount of the premium on the insurance herein applied for is not paid when this application is made, no contract of insurance shall be deemed made, and no liability on the part of said company shall arise until the policy shall be issued and delivered to me, nor until the first premium shall be actually paid while I am in good health; but that if the amount of said premium is paid at the date of making this application, the receipt for the advanced payment of premium given me if on the form now attached hereto shall determine the conditions upon which and the time when the insurance applied for is to take effect."

The first premium was $27.71, and for this amount Neafus, at the time he made the application, executed to L. L. Anderson agent of the company, his note, due October 12, 1908. Thereupon Anderson issued to Neafus the following receipt "An application for a one thousand dollar policy having been made by T. J. Neafus to the Northwestern Mutual Life Insurance Company, there has been collected the sum of $27.71 to be considered the first annual premium on said policy; provided, the application is approved by the company at its home office; and, in that event, the insurance as applied for will be in force from the date of the medical examination; if the application is not so approved, the sum collected will be returned."

On the same day, Neafus was examined by Dr. Woody, the medical examiner for the company, and as a part of the medical examination answered a number of questions propounded to him. Neafus died suddenly on September 5, 1908, and before either the application or the medical report had been forwarded to the company. The company declined to pay the insurance, upon the ground that no medical examination had been made, and for the further reason that the application was not accepted during the life of the applicant, and would not have been accepted at any time before this suit was brought to recover it.

It appears from the uncontradicted evidence introduced upon the trial that the medical examination of Neafus disclosed that he was not an acceptable risk, and that at the end of the examination, when this condition was made known, Dr. Woody suggested that Neafus submit to another examination, telling him that he would hold the report of his examination, and if it appeared that the symptoms he then found, and which induced him to believe and report that Neafus was not a proper subject for insurance had disappeared, he would make another and more favorable report and forward it to the company. To this arrangement, Neafus agreed, and Dr. Woody took to his office the report of the examination, and retained it until after the death of Neafus; and Anderson, the agent who was present when the medical examination took place, also retained the application, intending to forward it to the company with the medical report of Dr. Woody, thereafter to be made. It further appears from Dr. Woody's evidence that, after waiting several days for Neafus to appear and receive another examination, he called up his residence and urged the wife of Neafus, with whom he talked over the telephone, to insist on Mr. Neafus coming to his office, so that he might make another examination, and that she promised each time he called up that his request would be complied with by her husband. Mr. Neafus, however, does not agree with Dr. Woody as to these telephone conversations. She testifies that Dr. Woody told her he would like to give Mr. Neafus another and better examination, and that she replied: "Well, I will tell him what you said; but I think it is best to put it in, as he has had one examination." That about a week after this, and within ten days after July 23d, she had another conversation with Dr. Woody over the telephone, in which he insisted, as he did in the first, that Mr. Neafus come to his office for another examination, and she again said to him (speaking for her husband, who was present), "Send in the examination you have made just like it is," to which Dr. Woody replied, "Well, I'll do that." And she then said, "Now, you just turn it in, and let the company be responsible," and he said "he would." No other conversation was had in reference to the matter until after Mr. Neafus died. It is also shown that if the examination and medical report had been promptly forwarded that the company would have rejected the application.

With the evidence in this condition, the trial judge was of the opinion that, after the medical examination was made, the applicant was insured until the company acted upon his application by accepting or rejecting it, and instructed the jury to return a verdict in favor of the appellee, which was done. From the judgment entered on this verdict, the company prosecutes this appeal, and insists that the jury should have been directed to return a verdict for it.

The receipt given to Neafus is the foundation of the action, and, if its terms are to control, the trial judge was in error; but, if the receipt is subject to the construction placed upon it by the lower court, then the direction to return a verdict against the company was correct. But, before taking up the proper construction of the receipt given by Anderson to Neafus, the question arises, Was a medical examination, within the meaning of the receipt, made? Evidently the medical examination contemplated by the receipt is a final examination, or an examination that the applicant desires to submit to the company as a part of his application. We think there can be no doubt about the proposition that when a report of a medical examination is retained by the medical examiner, under an arrangement or agreement with the applicant that it shall not be forwarded to the company until another examination is made, that it is not an examination within the meaning of the receipt. The medical examination intended by the language of the receipt means a medical examination, made by an agent of the company, to be forwarded to it, not a medical examination to be retained by the examiner, at the request of or under an agreement or arrangement with the applicant. In no view of the case that we can conceive of would the insurance under the terms of the receipt be in force from the date of a medical examination, the report of which it was agreed by the applicant should not be forwarder to the company for its approval or rejection. And so, except for the conversations had between Dr. Woody and Mrs. Neafus, the jury should have been instructed to return a verdict in favor of the company, upon the ground that no medical examination, within the meaning of the receipt, had ever been made. But Neafus, of course, had the right to withdraw his consent to the arrangement that Dr. Woody should retain the medical report until another examination was made, and the right to decline to submit to another examination, and to stand on the one already made; and if his wife, acting for him, informed Dr. Woody that he declined to submit to another examination, and directed that the medical report already made should be forwarded to the company, the company would be liable if Dr. Woody afterwards failed to promptly forward his report, unless it be that in no event is the company to be held responsible, unless and until it shall have approved or accepted the application. After Dr. Woody was directed to forward the report, he held it as the agent of the company. It is bound by his acts in respect to it, and chargeable with any consequences that may have resulted from his failure to promptly forward it. In other words, if the company was under a duty to promptly act on the application and notify Neafus of his rejection, it cannot shield itself from responsibility by the fact that the application and medical report had not been received by it, and therefore it could not act. The possession of the application and medical report by its agents had the same effect as if they were in the possession of the company at its home office. Looking at the matter from this standpoint, we will treat the medical examination as made on the day that Dr. Woody was directed to forward it, which we will say was August 5th. It may also be assumed that if the report of the examination had been forwarded on August 5th that it would in the ordinary course of business have reached the home office of the company, and have been rejected by it, and Neafus notified of this fact in ten days thereafter, or on August 15th, 20 days before his death.

The question to be considered upon this state of facts is, Was Neafus insured from August 5th, the date we have assumed that the medical examination was completed? It is said that he was, for two reasons: First, because, under the terms of the receipt, he was insured from the date of the medical examination until it was acted upon--that is, accepted or rejected by the company; and, second, because, by its delay in failing to take such action after the medical examination was received by it, the law in behalf of the applicant raises the presumption that the company had accepted...