Pfiester v. The Missouri State Life Insurance Company

• Decision Date: 10 June 1911
• Docket Number: 17,116
• Citation: 116 P. 245,85 Kan. 97
• Parties: ADAM PFIESTER, Appellee, v. THE MISSOURI STATE LIFE INSURANCE COMPANY, Appellant
• Court: Kansas Supreme Court

116 P. 245

85 Kan. 97

ADAM PFIESTER, Appellee, v. THE MISSOURI STATE LIFE INSURANCE COMPANY, Appellant

No. 17,116

Supreme Court of Kansas

June 10, 1911

Decided January, 1911.

Appeal from Harvey district court.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. LIFE INSURANCE--Solicitor Is Agent of Company, Not of Assured. An agent for a life insurance company whose authority is limited to negotiating for, taking and transmitting applications for the approval or rejection of the company is the agent of the company and not of a person whom he solicits to take insurance, and for those purposes he has all the power the company itself possesses.

2. LIFE INSURANCE--Company Bound by Agreements of Agent. Agreements made between such an agent and a person whom he solicits to take insurance as to what the application shall contain are in legal effect made with the company and bind it as to the contents of the application.

3. LIFE INSURANCE--Duty of Agent to Properly Prepare Application--Company Bound by Acts of Agent. It is the duty of such an agent to prepare the application of a person solicited to insure so that it will accurately and truthfully state the result of the negotiations, and the agent's failure to do so is in legal effect the fault of the company.

4. LIFE INSURANCE--Knowledge of Agent Knowledge of Company. If such an agent fail to write into the application an agreement which he has made with the applicant respecting the terms of the insurance desired his knowledge of the agreement is in legal effect the knowledge of the company.

5. LIFE INSURANCE--Acceptance and Retention of Initial Premium--Issuance of Policy--Binding Contract. If in the case stated in paragraph 4 the company accept and approve the application, receive and retain the initial premium and issue the policy, a binding contract of insurance is effected according to the agreement.

6. LIFE INSURANCE--Reformation of Policy--Parol Evidence--Varying Terms of Contract. In the case just stated the company can not, in an action brought for the purpose, successfully oppose the right of the insured, or of the beneficiary after the death of the insured, to have the contract reformed according to the agreement, notwithstanding a provision in the application that statements not in writing shall not bind the company, and notwithstanding a provision in the application that the contract formed by the application and policy taken together can be varied only by the president or secretary of the company in writing.

7. LIFE INSURANCE--Failure of Insured to Examine Application and Policy. Not Negligence. An applicant for insurance without knowledge to the contrary may assume that the agent has prepared the application according to agreement and that the company has written the policy according to the application and he is not negligent in failing to examine such instruments for errors and omissions.

James C. Jones, Charles Blood Smith, and Samuel Barnum, for the appellant; Jones, Jones, Hocker & Davis, and John C Nicholson, of counsel.

Cyrus S. Bowman, and Harry C. Bowman, for the appellee.

OPINION

BURCH, J.:

The defendant issued a policy of insurance on the life of Jacob Pfiester, payable to the plaintiff, Adam Pfiester. The application was taken on June 14, 1907, by an agent whose written authority was limited to negotiating for applications, transmitting applications to the defendant for approval or rejection and collecting the initial premium. The application was signed by the insured and asked that the policy be dated May 5. It provided that no statements or answers made to or received by any person or to the company should be binding on the company unless such statements or answers were reduced to writing and made a part of the application. It also provided that the application and policy when issued should constitute the entire contract, which could be varied only by the president or secretary of the company in writing. It further provided as follows:

"That the insurance hereby applied for shall not take effect unless the premium is paid and the policy delivered to and accepted by me during my lifetime and good health, and that then the first insurance or policy year shall end on the first anniversary of the date of this application, or, in any event, on such date as may be fixed by the company in the policy."

The premium for the first policy year was paid when the application was taken. The policy which was issued was dated June 26, 1907. It fixed the first policy year as ending on May 4, 1908, and provided that it would be continued in force on the payment of the annual premium on the 4th day of May in each year, with a grace period of thirty days after the due date. When the application was taken it was agreed between the defendant's agent and the insured that annual premiums should be paid on June 14, the anniversary of the application, with a grace period of thirty days following the due date. Through the agent's oversight or fault the agreement was not inserted in the application or otherwise submitted to the defendant. The premium for 1908 was paid on June 12. The insured died on June 19, and the policy was found among his effects. The defendant denied liability because the premium for 1908 was not paid within thirty days after May 4. The beneficiary as plaintiff brought an action to reform the policy according to the agreement and to recover upon the policy as reformed.

The plaintiff gave the following account of the negotiations with the defendant's agent:

"He went ahead then and told us about what a good company it was and all, and led us up to the present time and told us about the standing of the company that he represented and tried to persuade my brother to take out insurance. . . . He told about the company and then wanted to insure, and then my brother said that he could not take this policy out, and he asked me if I would not take it out for my brother, and we went ahead and talked and I says to him, I am not in any shape to take this out, unless you make this policy go I can pay it after harvest'; and he said 'All right, we can fix it.' The says, 'The company allows thirty days'; that was June 14; he says, 'They allow thirty days on their policy.' 'Well,' I says, 'if you can fix it like that, if I pay you for this policy it will be due June 14, a year? 'Yes,' he said, 'would be due June 14th a year.'"

Under these circumstances the insurance was taken. The agent explained why the policy was dated back as follows:

"The first discussion of insurance Jacob Pfiester gave his age as thirty years, and in the course of our discussion of the insurance I of course asked him the month of his birth, and finding out the month of his birth, I saw he had passed the six-months dividing line, so-called by insurance agents; I explained to him then that we could make a request to the company to date back the policy to May 5, and give him the rate at thirty, his last birthday; and therefore that would give him a lower rate and would mature the policy that much earlier at the end of twenty years."

The agent further testified that it was customary to date policies back thirty or sixty days.

Judgment was rendered for the plaintiff and the defendant appeals.

The contention of the defendant is that the evidence of the plaintiff relating to the date upon which premiums were to become due was incompetent because it tended to contradict the written contract. The first purpose which the plaintiff sought to accomplish was the reformation of the contract. Insurance contracts are the subject of reformation the same as any other kind, and in all suits for reformation the true contract may be established by parol evidence whenever it is the result of oral negotiations. These principles are elementary. The defendant argues further, however, that since its agent's authority was limited to the taking and transmitting of applications he could not make a binding contract that premiums should fall due on June 14, that no application requesting that premiums fall due on that date was ever submitted to or approved by the defendant, and consequently that the judgment of the court in effect makes a contract instead of reforms one.

There are two principal lines of decisions on the subject indicated, with a third inclining now toward one and now toward the other. According to one view the applicant and the insurer are treated as if the negotiations were of ordinary bargain and sale in a field where both stand on the same footing. The applicant frames and signs, upon his own judgment and at his own risk, an order or request for an article called a policy. This order is taken and transmitted by an intermediary...