Palmer v. Mutual Life Insurance Company of New York

Decision Date31 March 1971
Docket NumberCiv. No. 11-114.
Citation324 F. Supp. 254
PartiesArthur R. PALMER, Plaintiff, v. The MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, Defendant.
CourtU.S. District Court — District of Maine

Carl O. Bradford, Freeport, Me., for plaintiff.

Loyall F. Sewall, Portland, Me., for defendant.

MEMORANDUM OF OPINION AND ORDER OF THE COURT

GIGNOUX, District Judge.

This is an action to recover the proceeds of a life insurance policy alleged to have been issued by defendant, The Mutual Life Insurance Company of New York (MONY) on the life of Arthur R. Palmer, Jr. The parties have submitted the case to the Court on an agreed stipulation of facts.

On October 1, 1969, Arthur R. Palmer, Jr. executed an application to MONY for a $10,000 life insurance policy. With his application, Palmer included a check payable to MONY in the amount of $13.61 in payment of the first premium. Palmer delivered the application and check to Paul J. Herer, MONY's field underwriter at Bangor, Maine. Herer, in return, delivered to Palmer a "Conditional Receipt." The application signed by Palmer specified that:

Except as otherwise provided in any conditional receipt issued, any policy issued shall take effect upon its delivery and payment of the first premium during the lifetime of each person to be insured.

The conditional receipt acknowledged receipt of the first premium "on a proposed * * * insurance policy under which (Arthur R. Palmer, Jr.) is to be the Insured." It further provided:

No insurance will become effective under this Conditional Receipt except as provided in the Conditions of Agreement on the reverse side hereof * * *.

The relevant part of the Conditions of Agreement on the reverse side of the receipt is the following:

A. If insurable—For Policy As Applied For

If, after such investigations and medical examinations as MONY may require, each person to be insured is found to have qualified, under MONY's rules, as an acceptable insurable risk on the App-Exam Date1 for the policy exactly as applied for, the policy shall be effective from such date.

The application and the check were forwarded to MONY's Falmouth, Maine office, which in turn forwarded them to MONY's home office, where they arrived on October 8, 1969.

On October 16, 1969, a policy of life insurance was prepared by MONY's home office pursuant to the application and forwarded to the Falmouth office, arriving on October 20, 1969. The policy was accompanied by an Underwriting Action Bulletin, which stated that the policy was approved subject to receipt of a satisfactory inspection report and that the policy was to be held by the Falmouth office until instructed by the home office to deliver it to Palmer.

On October 16, 1969, the home office received an inspection report which disclosed that Palmer was not a student at the University of Maine as stated on his application. The home office requested the Falmouth office to verify the accuracy of the report. On November 7, 1969, Herer informed the home office that Palmer had been suspended from the University because of a poor academic record in the 1969 spring semester, but that he had been accepted for readmittance beginning in January, 1970. Herer also advised the home office that Palmer was living at his fraternity house in the interim and had worked for a while on a construction job, but was presently unemployed.

On November 17, 1969, the home office forwarded to the Falmouth office the notification that Palmer's application was suspended pending his actual attendance at the University, and that the previously issued policy was to be destroyed. Pursuant to this notification, the policy was destroyed on November 20, 1969. The notification stated that Palmer might resubmit his application when he was actually attending the University. On November 18, 1969, the Falmouth office notified Herer of the suspension and instructed him to refund the $13.61 initial premium to Palmer and to notify him of the rejection of the application.

Arthur R. Palmer, Jr. died on November 25, 1969 from gunshot wounds without ever receiving notice of MONY's action. Arthur R. Palmer, Sr. was notified of the Company's action on December 1, 1969 and was tendered the $13.61 refund, but he rejected the tender and returned the $13.61 to Herer. He now brings the instant action asserting that the policy was in effect as interim insurance on the date of his son's death because of the payment of the first premium and the delivery of the conditional receipt.

The parties agree that the issue presented for determination by this Court is whether the conditional receipt issued by Herer after payment of the first premium of $13.61 by Arthur R. Palmer, Jr. created a contract of temporary insurance, effective as of the application date, which could be terminated only by notification to the proposed insured prior to his death of the rejection of his application, or whether the conditional receipt created a contract of insurance to become effective as of the application date only after defendant had made a good faith determination that Palmer was an acceptable insurable risk. For the reasons to be stated, the Court holds that the conditional receipt did not create a contract of temporary insurance and that therefore the coverage of the proposed policy was not in effect on the date of Palmer's death.

It is well established that the meaning of insurance contracts is to be determined by the same principles of law as are applicable to other contracts. While ambiguous language is always construed against the insurer which drafted the document, a court may not rewrite the contract when the language employed is free of doubt. Scheinman v. Phoenix Mutual Life Ins. Co., 409 F. 2d 999, 1001 (7th Cir. 1969); Taylor v. New York Life Ins. Co., 324 F.2d 768, 771 (10th Cir. 1963); Mofrad v. New York Life Ins. Co., 206 F.2d 491, 493 (10th Cir. 1953); Novellino v. Life Ins. Co. of North America, 216 A.2d 420, 422 (Del. 1966).

There is no ambiguity or uncertainty in the language of the application and conditional receipt here in question. The application, which was signed by Palmer, states in explicit language that the policy shall take effect only upon its delivery during the lifetime of the proposed insured, except as otherwise provided in the conditional receipt. The face of the receipt is entitled "CONDITIONAL RECEIPT." It expressly provides that no insurance will become effective except as provided in the Conditions of Agreement on the reverse side thereof. The Conditions of Agreement on the back of the receipt state in clear and unequivocal terms that no insurance is effective until the proposed insured is found to have qualified, under MONY's rules,...

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7 cases
  • Heideman v. Northwestern Nat. Life Ins. Co., C0-95-2206
    • United States
    • Minnesota Court of Appeals
    • April 30, 1996
    ...provided by conditional receipt); Grandpre, 261 N.W.2d at 806 (interpreting effect of conditional receipt); Palmer v. Mutual Life Ins. Co., 324 F.Supp. 254 (D.Me.1971) (analyzing provisions of conditional receipt); Simpson v. Prudential Ins. Co. of Am., 227 Md. 393, 177 A.2d 417 (1962); Ado......
  • In re Doughty, Bankruptcy No. 95-10654. Adv. No. 96-1014.
    • United States
    • United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Maine
    • April 23, 1996
    ...516 (1st Cir.1995) (interpreting insurance policy by applying Maine contract law and rules of construction); Palmer v. Mutual Life Ins. Co., 324 F.Supp. 254, 256-57 (D.Me.1971) (general rules of construction apply to insurance Maine courts construe insurance contracts strictly against the i......
  • Golden Rule Ins. Co. v. Atallah
    • United States
    • U.S. Court of Appeals — First Circuit
    • November 8, 1994
    ... ... 45 F.3d 512 ... GOLDEN RULE INSURANCE COMPANY, Plaintiff, Appellant, ... Catherine ... to perform the ordinary tasks of everyday life. She failed to pay bills, and her utility and ... the language employed is free of doubt." Palmer ... Page 517 ... v. Mutual Life Ins. Co., 324 ... ...
  • New Life Brokerage Services v. Cal-Surance Assocs.
    • United States
    • U.S. District Court — District of Maine
    • September 16, 2002
    ...516 (1st Cir.1995) ("a court may not rewrite the contract when the language employed is free of doubt.") (citing Palmer v. Mut. Life Ins. Co., 324 F.Supp. 254, 257 (D.Me. 1971)). Where there is no ambiguity in exclusionary language, coverage is determined in accordance with the plain meanin......
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