Old Southern Life Ins. Co. v. McConnell

• Decision Date: 12 June 1974
• Citation: 52 Ala.App. 589,296 So.2d 183
• Parties: OLD SOUTHERN LIFE INSURANCE CO. v. Annie Laura McCONNELL. Civ. 184.
• Court: Alabama Court of Civil Appeals

Page 183

296 So.2d 183

52 Ala.App. 589

OLD SOUTHERN LIFE INSURANCE CO. v. Annie Laura McCONNELL.

Civ. 184.

Court of Civil Appeals of Alabama.

June 12, 1974.

Patterson & Rinehart, Montgomery, for appellant.

Walker, Hill, Gullage, Adams & Umbach, Opelika, for appellee.

WRIGHT, Presiding Judge.

This is an appeal from verdict and judgment in the amount of $5000 in an action for misrepresentation or fraud.

The action arose out of an application for a policy of life insurance upon the life of plaintiff's husband with plaintiff to be the designated beneficiary thereof.

The count of the complaint which went to the jury generally averred as follows:

That plaintiff's husband applied for a policy of insurance upon his life with the defendant; that with the application be paid a three month premium; that said application was made on April 13, 1971 and plaintiff's husband died on August 13, 1971; that plaintiff's husband submitted to medical examination as required and until his death demanded issuance of the policy; that the policy was never issued, but that defendant represented to plaintiff and her husband that the insurance was in effect and he was covered; that such representation was made to induce the husband not to withdraw the application and secure other insurance; that plaintiff and her husband did rely on the representation and upon the death of the husband plaintiff was damaged in that coverage was denied by defendant.

It is conceded by counsel that there has not been previously before the appellate courts of this state a similar case, that is, a suit for fraud or misrepresentation brought by an applicant for life insurance against the insurance company for falsely representing coverage pending the issuance of the policy. Our research has discovered no such prior case in this state. Neither have we found a case of reasonably similar nature in the appellate reports of any other state, except in the case of Cavallo v. Metropolitan Life Insurance Co. reported in 47 Misc.2d 247, 262 N.Y.S.2d 618.

There have been many cases involving action upon oral contracts of insurance arising from representation of agents of insurance companies as to coverage pending the issuance of a policy. 44 C.J.S. Insurance § 250. Such oral contracts have been recognized in this state. Cherokee Life Ins. Co. v. Brannum, 203 Ala. 145, 82 So. 175; United Ins. Co. of America v. Headrick, 275 Ala. 594, 157 So.2d 19. However, as apparent, such cases have been founded upon the laws of contract and not the law of tort. In this case, as originally instituted, the complaint contained two counts upon a contract of insurance. Neither of such counts alleged a contract of insurance arising from oral representation. Both counts were withdrawn by plaintiff.

The maxim that 'out of the facts the law of the case arises' is particularly applicable in this case. We therefore, as briefly as possible, recite the tendencies of the evidence.

On April 13, 1971, appellant, Old Southern Life Insurance Company of Montgomery had recently acquired the services of one McKinstry as agent in Lee County, Alabama. The contract between appellant and McKinstry was headed 'Producer's Life General Agents Contract.' However, the body of the contract granted only authority to solicit applications for life insurance, collect first premiums and pay them over to the company. The agency was specifically limited by the provision that it 'has no authority to alter, modify, waiver or change any of the terms, rates or conditions of any of the company's policies or contracts.'

McKinstry was the son-in-law of plaintiff and her husband when he, on April 13, 1971, solicited and obtained an application from the husband for a policy of ordinary life insurance in the amount of $5000. The testimony was undisputed that McKinstry, after dinner with his in-laws, the McConnells at their home, filled out the application while sitting at the dining table. Each question and part of the application was read by him to the plaintiff and the applicant. They answered the questions and plaintiff paid a premium for three months in the amount of $54.50.

Question #10 of the application included an affirmation of agreement that the insurance applied for shall not be effective until the policy has actually been issued. The receipt for the premium was torn from the bottom of the application and signed by McKinstry. It included the following, 'If for any reason the application is not approved and policy issued, this payment is to be refunded. No liability is created or assumed by the company, except for refund of this payment, until the policy applied for has been issued.'

Due to applicant's age of 52, a medical examination was required. This was completed and forwarded to the appellant on May 22, 1971. A retail credit report was obtained on April 27, 1971. A supplemental report on May 6.

It was a rule of the appellant that it insured only amounts up to $2500. Additional coverage was obtained through reinsurance agreements with other companies. A request for re-insurance was forwarded to Life & Casualty Insurance Company of Tennessee of May 4, 1971. The medical report and specimen was forwarded to the re-insuror when received by appellant. On May 28, 1971, the re-insuror telegraphed that it would re-insure applicant only at a rate of $5.00 per thousand per year higher than the standard rate for which the applicant had paid.

McKinstry was informed of the reinsuror's decision by Johnson, the underwriter for appellant. McKinstry informed plaintiff and applicant. They rejected the higher rate and requested that other effort be made by appellant to secure re-insurance at the standard rate.

Appellant requested re-insurance from Wabash Life Insurance Company on June 1, 1971. By telephone on the same date, Wabash indicated possible standard rate coverage upon report grom the attending physician, Dr. Lazenby, who had performed surgery on applicant in 1968. Request for such report was made by appellant. Dr. Lazenby never responded, though follow up requests were made by letter and telephone. On July 8, 1971, Wabash closed its file for lack of report but indicated it could reopen if requested.

At some time during the period from date of application, applicant and plaintiff inquired of McKinstry when the policy would issue. McKinstry stated he went to Johnson, the underwriter, at the home office of appellant in Montgomery and inquired of progress. He stated Johnson told him not to worry that McConnell was covered. He then told applicant and plaintiff that he had talked to people in the home office and not to worry they were covered. By his testimony he did not disclose to plaintiff the person with whom he talked.

Underwriter Johnson denied that he made such statement to McKinstry. He further stated that he had no authority to issue any policy for the amount of $5000, except $2500 thereof was re-insured, and the rules for rate and insurability had been satisfied. He also stated he had informed McKinstry that he could issue the policy at the higher rate, but McKinstry had informed him that such rate was not acceptable to the applicant and to try for the standard rate with other re-insurors.

Plaintiff stated she had been informed by McKinstry of the higher rate and issuance of a policy at such rate was declined.

On August 13, 1971, applicant died after emergency surgery. Premium was refunded by appellant on August 16, 1971. It was refused. Claim for benefits was refused by appellant. Suit followed.

Appellant in brief does not pursue its assignment of error 1. Therefore such assignment is waived. Supreme Court Rule 9.

Assignment of error 2 challenges the sufficiency of the evidence to establish the material averments of the complaint. It is appellant's contention that the proof failed in two material respects (a) justifiable reliance upon a false representation and (b) proof of damages.

Appellant states that plaintiff's case must stand or fall upon the scope of McKinstry's agency and the right of plaintiff to rely upon representation of McKinstry that there was 'coverage' though the application for the insurance and the receipt for the first premium stated that there would be no insurance until a policy was issued. Appellant, though stating in Brief that plaintiff abandoned all attempts to establish the existence of a contract of insurance, either written or oral, between it and plaintiff's husband, offers much of its argument based upon propositions of law applicable to a...