Rasmussen v. Prudential Ins. Co.
| Decision Date | 21 July 1967 |
| Docket Number | No. 40293,40293 |
| Citation | 152 N.W.2d 359,277 Minn. 266 |
| Parties | Thelma RASMUSSEN, Admrx. of the Estate of Raymond Rasmussen, Deceased, Respondent, v. The PRUDENTIAL INSURANCE COMPANY, Appellant. |
| Court | Minnesota Supreme Court |
Syllabus by the Court
There is no legal duty on the part of an insurance company to accept or reject an application for insurance or submit a counterproposal; hence, mere delay on the part of its soliciting agent in forwarding a counterproposal to an insurance applicant does not give rise to an action ex delicto.
Neville, Johnson & Thompson, Minneapolis, for appellant.
Winzenburg & Halloran, Jackson, for respondent.
Appeal from a judgment of the district court.
On November 17, 1964, Raymond Rasmussen applied for a contract of insurance with defendant, The Prudential Insurance Company of America, following a previous discussion in April of that year with Mr. David Anthony, the local Prudential agent in Fairmont. The particular policy Rasmussen applied for consisted of $6,000 term insurance; $2,000 full life insurance; waiver of premium in event of disability; payment for loss of eyesight or limbs; and extended insurance to the extent of cash value. It required a premium of $16.46 per month, which amount was paid to the agent when the application was taken.
It was understood by Mr. and Mrs. Rasmussen that the policy of insurance would not become effective until Mr. Rasmussen had completed the required physical examination 1 and the policy was approved by the home office. They were also informed by defendant's agent that it would take approximately 30 days before the application could be approved and a policy actually issued.
The home office of defendant, after considering the information contained in the application, the physician's report, and an inspection report, rejected the application. However, defendant prepared a proposed policy of insurance, which differed from the policy applied for in that there was no waiver of premium in event of disability, no payment for loss of eyesight or limbs, no extended insurance to the extent of cash value. The monthly premium was to be $23.18 instead of $16.46.
The proposed policy and a form for amending the original application were mailed to defendant's agent in Fairmont. He testified that he received the proposed policy and form either Wednesday, December 16, or Thursday, December 17, 1964, but for other reasons made no attempt to contact either Mr. or Mrs. Rasmussen between those dates and December 28; that on Sunday, December 20, he went to Waseca, where his father died that day; that he returned to his home in Fairmont Thursday, December 24, on Christmas Eve. On Monday, December 28, he went to the Rasmussen home to present the proposed policy to the applicant. He then learned of Mr. Rasmussen's decease that same morning.
It was not contended at trial that either the policy applied for or the proposed policy was in effect at the time of Mr. Rasmussen's death. The case was submitted to the jury on the sole question of whether the defendant's agent was negligent in not delivering the proposed policy sooner. The judge instructed that he had The court explained that negligence is the want of due care, the failure to exercise such care as a person of ordinary prudence usually exercises under similar circumstances; that what constitutes want of care depends on the circumstances of each case and that care must be commensurate with the situation known to the defendant through its agent or what he could reasonably have been expected to know.
At the conclusion of plaintiff's case, defendant moved for a directed verdict, which motion was denied. Defendant renewed the motion upon the completion of all the testimony, and it was again denied. The jury returned a verdict in favor of plaintiff for $8,000. Defendant thereafter moved for judgment notwithstanding the verdict and that motion was also denied. Defendant claims error in the denial of all its motions. The legal issues it raises on appeal are (1) whether there is a cause of action ex delicto in favor of an insurance applicant against an insurer for failure to promptly present a counterproposal; and (2) whether the injury to plaintiff for failure to deliver a counterproposal can be measured by the amount of the rejected policy or of the proposed policy.
The parties agree that they did not enter into a contract for insurance; that Mr. Rasmussen's application was only an offer made to defendant which was rejected; and that the proposed policy, prepared by defendant and differing in four material respects from the one applied for, was a counteroffer which was not presented for the applicant's acceptance or rejection. Defendant contends that, having the right to refuse the initial offer, it also had the right to refuse to make a counteroffer, and had no legal duty to make it upon rejection of the initial offer. It further contends that there was no legal duty on its part to conform to a certain standard of conduct in submitting a counterproposal.
Prosser, Torts (3 ed.) § 53, states that a duty in negligence cases may be defined as an 'obligation, to which the law will give recognition and effect, to conform to a particular standard of conduct toward another.' Actionable negligence is a failure to discharge a legal duty to the one injured. Lacking duty, there can be no negligence. Woodring v. Pastoret, 221 Minn. 50, 21 N.W.2d 97. In an earlier Minnesota case defining actionable negligence in the same manner as it was defined in Woodring, Mr. Justice Mitchell said:
'* * * Even if a defendant owes a duty to some one else, but does not owe it to the person injured, no action will lie.' Akers v. Chicago, St. P.M. & O. Ry. Co., 58 Minn. 540, 544, 60 N.W. 669, 670.
It is elementary that one has a right to enter into contractual relations with another or to refuse to do so. Harding v. Ohio Cas. Ins. Co., 230 Minn. 327, 41 N.W.2d 818. We have held that the conception of legal relations between an applicant for insurance and an insurance company is essentially and fundamentally the same as between parties negotiating other contracts, and, as such, is purely contractual, Hockemeyer v. Pooler, 268 Minn. 551, 130 N.W.2d 367; 2 that, subject to the statutory law of the state, a policy of insurance is within the application of general principles of the law of contracts, Bobich v. Oja, 258 Minn. 287, 104 N.W.2d 19; and that an application for life insurance is only a proposal and like any other offer does not become a contract until accepted, Olson v. American Central Life Ins. Co., 172 Minn. 511, 216 N.W. 225.
Defendant cites as controlling Schliep v. Commercial Cas. Ins. Co., 191 Minn. 479, 254 N.W. 618, and Tjepkes v. State Farmers Mutual Ins. Co., 193 Minn. 505, 259 N.W. 2, in which we held that an insurer does not have a duty to give prompt notice of its rejection of an application for insurance. We agree that these cases are determinative of this case.
In Schliep the action was one ex delicto in which plaintiff claimed that defendant insurance company and its agent negligently failed to act within a reasonable time on his application for an accident and health policy. The application was made December 18, 1931, and on that day the agent sent the application to the defendant company. After some correspondence between the agent and the company with respect to the nature of the applicant's duties and other information, the company wrote its agent on ...
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