Puritan Life Ins. Co. v. Guess, 3807

• Decision Date: 20 July 1979
• Docket Number: No. 3807,3807
• Citation: 598 P.2d 900
• Parties: PURITAN LIFE INSURANCE COMPANY, Appellant, v. Carolyn S. GUESS, Appellee.
• Court: Alaska Supreme Court

Page 900

598 P.2d 900

PURITAN LIFE INSURANCE COMPANY, Appellant, v. Carolyn S. GUESS, Appellee.

No. 3807.

Supreme Court of Alaska.

July 20, 1979.

Kenneth P. Jacobus, Hughes, Thorsness, Gantz, Powell & Brundin, Anchorage, for appellant.

Phillip J. Eide; Ely, Guess & Rudd, Anchorage, for appellee.

OPINION

Before RABINOWITZ, C. J., CONNOR and MATTHEWS, JJ., DIMOND, Senior Justice, and CARLSON, Superior Court Judge.

DIMOND, Senior Justice.

Puritan Life Insurance Company, through its agent William Barnes, had solicited Eugene Guess to purchase an additional life insurance policy during the years 1974 and 1975. Barnes eventually was successful, and on March 10, 1975, Guess met with Barnes and agreed to purchase a $100,000 life insurance policy. Guess signed an application for the insurance and gave Barnes authority to pick up what Barnes referred to as a "deposit" from the bookkeeper of Guess's law firm. The bookkeeper was not available at the time, so Barnes left a reply envelope with another person in the bookkeeper's office. Barnes' instructions were to place a $100 check in the envelope when permission was received from the bookkeeper. The envelope with the $100 check was received by Barnes on March 12, 1975, and on that day, Barnes then mailed to Guess what is referred to in this opinion as a "conditional receipt."

When Barnes met with Guess on March 10, he asked the latter if he could get examined because a medical examination would be required. Guess told Barnes that it would be impossible to take an examination that day because he was leaving for Juneau in the afternoon. While in Juneau, on March 13, 1975, Guess died of a ruptured congenital berry aneurysm.

Puritan refused payment of the proceeds of the life insurance policy. Eugene Guess's widow, Carolyn Guess, brought this action to recover such proceeds. Both parties moved for summary judgment, and the superior court granted judgment in favor of Carolyn Guess. Puritan has appealed.

The controversy between the parties centers largely on an instrument entitled "The Conditional Receipt," which was signed by Barnes and mailed to Guess's Anchorage law office on March 12, the day before Guess died in Juneau. This instrument provides in pertinent part as follows:

THE CONDITIONAL RECEIPT

NO. 1561

This receipt must be detached and delivered to Applicant when payment is made; otherwise it must not be detached.

IN NO EVENT SHALL ANY INSURANCE BE EFFECTIVE FOR ANY PERIOD UNLESS THE PROPOSED INSURED(S) WAS (WERE) INSURABLE AND ACCEPTABLE AS PROVIDED BELOW

Received $ 100 on account of the first premium on the proposed insurance of $ 100,000 on the Life (lives) of Eugene Guess (including family members, if any) hereinafter called the proposed insured(s) for which an application bearing the above number is made this day to Puritan Life Insurance Company. This payment is made and accepted subject to the following conditions:

Insurance under the terms of the policy applied for and subject to the limits specified below shall take effect as of the date of the application or the policy date requested in the application, whichever shall be the later, or the last of any medical examinations or tests required under the rules and practices of Puritan Life or the date of this payment, whichever shall be the later, provided on that date the proposed insured(s) in the opinion of Puritan Life's authorized officers at its Home Office was (were) insurable and acceptable under the rules and practices of Puritan Life as a standard risk for the policy in the amount, on the plan and otherwise exactly as applied for, and provided further that the last of any such medical examinations or tests is completed within 60 days after the date of this receipt; otherwise, there shall be no liability on the part of Puritan Life except to return this payment in the form of Puritan Life's check upon surrender of this receipt.

Dated at Anchorage, Alaska on March 10 19 75 /s/ William A. Barnes , Agent or Broker.

Puritan contends that these provisions of the conditional receipt make it clear that no insurance would be in effect until Guess had completed a medical examination and Puritan, thereafter, had decided, on the basis of the results of the medical examination, that Guess was insurable and acceptable as a standard risk. The conclusion from this argument is that since Guess died before taking a medical examination, no insurance was in effect at the time of his death, and therefore Puritan had no obligation to pay any insurance proceeds to Guess's beneficiary, his wife Carolyn Guess.

Puritan's construction of the conditional receipt would require it to be read as specifying four effective dates, each of which would be an alternative to the others, namely: (1) the date of the application, (2) the policy date requested in the application, (3) the date of the last required medical examination, or (4) the date of the payment on account of the first premium which, in the amount of $100, was made the day before Guess died. And since the foregoing is followed by the language "provided on That date (emphasis added) the proposed insured in the opinion of Puritan . . . was insurable and acceptable . . . as a standard risk for the policy . . . applied for," insurance coverage would relate back to the latest of the four possible dates, if the applicant is insurable on that day. This means, according to Puritan, that the latest of the four alternative dates was the date of the last required medical examination, and since the examination never took place, the insurance did not become effective.

We believe the matter cannot be disposed of so easily. A reading of the conditional receipt indicates not four dates, each of which is an alternative of the other, but rather two sets of dates in each of which there are two alternative dates. Using a numbering system to make this more readily apparent, the conditional receipt provides that insurance shall take effect (1) as of the date of the application or the policy date requested in the application, whichever shall be the later, or (2) as of the last required medical examination or the date of payment on account of the first premium, whichever shall be the later. The receipt does not use the word "latest" as indicating one of four possible alternative dates. Rather, it uses the adverb "later," the comparative of "late," which grammatically is to be used in each of the two instances to refer only to two alternative dates, and not to four. Using correct English, one may not refer to the "later" of four alternative dates, nor to the "latest" of the two.

Under this construction of the receipt, it is not clear as to what the proviso refers to. The language is that "provided on That date the proposed insured . . . was insurable and acceptable." (Emphasis added.) But this proviso follows immediately after the second of the two sets of alternative dates, and thus could be construed as relating only to the latter of the two. Consequently, the words "that date" possibly refer only to the later of the last two alternatives, I. e., the date of the last required medical examination or the date of the first premium payment of $100.

We have analyzed the language of the conditional receipt in a somewhat painstaking manner in order to ascertain precisely what this instrument means. The meaning is far from clear. Conceivably, the conditional receipt could be read as contemplating that the insurance would take effect, without regard as to the time of the occurrence of the events involved, in either of two instances: (1) the date of the application, since there was no policy date requested in the application, or (2) the date of the last required medical examination, followed by Puritan's approval of the risk, since Guess did not take a medical examination before he died. As to (2), the alternative to that, I. e., the date of the payment on account of the premium, had already taken place, and could not, therefore, be the "later" of these two alternative dates. In this case under (1), the effective date of the insurance reasonably could be the date of the application, since there was no policy date requested in the application that Guess signed. But under (2), the insurance would not have taken effect at all, because no medical examination had taken place before Guess died.

What we have here is a contract which is ambiguous. The general rule is that "ambiguities in the meaning of insurance contracts are to be resolved against the drafters of the language, the insurers." ¹ Applying that rule to this case, we believe that a fair interpretation of the conditional receipt and a reasonable accommodation of the apparent conflict between the two clauses under the circumstances we have related is this: that on the date the application was signed by Guess, temporary insurance became effective, subject to the right of Puritan to terminate the insurance if Puritan, following a medical examination of Guess, had found him to be an unacceptable risk. As Judge Learned Hand stated in Gaunt v. John Hancock Mutual Life Insurance Co., 160 F.2d 599, 602 (2d Cir. 1947), "(I)nsurers who seek to impose upon words of common speech an esoteric significance intelligible only to their craft, must bear the burden of any resulting confusion."

Even if there were no ambiguity, other factors would lead us to the same result. Our general approach to the interpretation of insurance contracts has been summarized in the case of Stordahl v. Government Employees Insurance Co., 564 P.2d 63 (Alaska 1977). In that case, we stated:

The purpose of contract interpretation is to ascertain and effectuate the reasonable expectations of the parties. We have noted, however, that interpretation of insurance contracts is controlled by somewhat different standards. This is due, in part, to the inequality in bargaining power and to the fact that certainty is required to ascertain rates. An insurance policy may be...