Rempel v. Nationwide Life Ins. Co., Inc.
| Decision Date | 28 February 1977 |
| Parties | Dolores I. REMPEL, Appellee, v. NATIONWIDE LIFE INSURANCE COMPANY, INC. and Reid W. McGibbeny, Appellants. |
| Court | Pennsylvania Supreme Court |
Argued March 13, 1975.
Charles H. Alpern, Weis & Weis, Pittsburgh, for appellants.
M J. Seymour, Pittsburgh, for appellee.
Before JONES, C.J., and EAGEN, O'BRIEN, POMEROY, NIX, and MANDERINO, JJ.
In April 1961, appellee's husband, Harry Rempel, purchased a thirty-year mortgage protection policy from appellant, Nationwide Life Insurance Company, Inc., through Nationwide's agent, appellant, Reid W. McGibbeny. The policy was designed to pay to the beneficiary, appellee, Dolores I. Rempel, an amount approximately equal to the outstanding mortgage balance, if any, on the Rempel home when the insured, appellee's husband, Harry Rempel, died. In July, 1961, appellee Rempel, upon instructions from her husband, again contacted McGibbeny and asked whether Nationwide could match a policy offered by a competing insurance company that would provide the same mortgage protection plus an additional $5,000 of life insurance, for only a few dollars a month in increased cost. McGibbeny, after consulting Nationwide, told the Rempels that a $5,000 whole life policy with a twenty-year family income rider would provide the protection sought for only a few dollars per month more than the cost of the original policy.
After a discussion in the Rempel home, an application form was signed by the insured Harry Rempel, in the presence of appellee and McGibbeny. Subsequently, a new policy was issued by Nationwide and sent to McGibbeny. McGibbeny personally delivered the policy to the Rempels but did not discuss or explain the policy to them. A premium of $16.75 per month was paid until the insured's death in 1970. At that time, appellee called McGibbeny, who went to her residence and told her she had a 'good policy' that would pay her approximately $16,000. Since the outstanding mortgage was $11,100 at the time of Mr. Rempel's death, the $16,000 figure matched Mrs. Rempel's expectation of receiving $5,000 in addition to having the mortgage balance paid off. A few days later, however, McGibbeny telephoned appellee and advised her that the policy would pay only a lump sum of $10,430.
Appellee filed an action in trespass against McGibbeny and Nationwide to recover the amount of the mortgage $11,100, and an additional $5,000. In the trespass action appellee contended that Nationwide's agent, McGibbeny, had either negligently or fraudulently misrepresented that the insurance coverage applied for and the policy received would provide for the payment of any outstanding mortgage balance on the Rempel home, if any, at the time of the insured's death, plus an additional $5,000 of life insurance. The trial court, with the consent of appellants and appellee, directed a verdict in favor of appellee for $10,430, the amount which Nationwide admitted owing, plus interest of 6% Per annum. The trial court denied appellants' motion that the jury be instructed to return a verdict in their favor on the remaining portion of appellee's claim, but did withdraw the issue of fraudulent misrepresentation from the jury. Only the issue of negligent misrepresentation was submitted for the jury's consideration. The jury found in favor of appellee in the sum of $5,670 plus 6% Interest per annum. Appellants' motion for judgment not withstanding the verdict was subsequently denied and judgment was entered on the verdict. Rempel v. Nationwide Life Insurance Co., Inc., 227 Pa.Super. 87, 323 A.2d 193 (1974). We granted appellants' petition for allowance of appeal, hence this appeal followed.
Appellants first contend that the trial court erred in 'not granting (their) motion for binding instructions' arguing that appellee failed to establish a case of negligent misrepresentation.
The elements of the tort of negligent misrepresentations are stated in Section 552 of Restatement of Torts:
'One who in the course of his business or profession supplied information for the guidance of others in their business transactions is subject to liability for harm caused to them by their reliance upon the information if
(a) he fails to exercise that care and competence in obtaining and communicating the information which its recipient is justified in expecting, and
(b) the harm is suffered
(i) by the person or one of the class of persons for whose guidance the information was supplied, and
(ii) because of his justifiable reliance upon it in a transaction in which it was intended to influence his conduct or in a transaction substantially identical therewith.'
Appellants argue that binding instructions in their favor should have been given to the jury because McGibbeny made no misrepresentations to the Rempels, and even if he did, reliance by the Rempels on the misrepresentations was not justified. As to whether McGibbeny made any misrepresentations, the evidence was conflicting. McGibbeny testified that he did not misrepresent the contents of the application or the policy. Appellee Rempel, however, testified that McGibbeny stated that the coverage provided by the policy would pay off the mortgage balance plus pay an additional $5,000. Because of this conflict, a jury issue was presented. Under these circumstances, binding instructions, based on a claimed lack of evidence of misrepresentation, would have been improper. In a jury trial, the resolution of a factual dispute must be made by the jury--not the trial judge.
Appellants also contend that binding instructions should have been given because the evidence did not establish that the Rempels Justifiably relied on the negligent misrepresentation of appellant McGibbeny. There can be no question that the evidence established that for over ten years the Rempels Relied on the representations of McGibbeny that the second policy contained the same mortgage protection coverage as the first policy, plus an additional $5,000 of insurance. Appellee Rempel testified that the policy was never read by her or her husband and its terms were not explained by McGibbeny when the policy was delivered. The only issue presented is whether the jury could have properly concluded from the evidence that the reliance by the Rempels was Justifiable.
The issue of the justification of the Rempels' reliance cannot be considered in a vacuum. Neither this Court nor a jury can consider the issue without considering the relationship of the parties involved and the nature of the transaction. Consumers, such as the Rempels, view an insurance agent such as McGibbeny, as one possessing expertise in a complicated subject. It is therefore not unreasonable for consumers to rely on the representations of the expert rather than on the contents of the insurance policy itself. Indeed, the procedure established by Nationwide is one which leaves the consumer little choice but to rely on the representations of the expert--the insurance agent. The insurance application signed by the insured states that the application is an offer which must be accepted by the company, yet the application does not contain in detail the exact terms of the offer being made. Rather, a 'specialized language' is used which will have no meaning to the consumer except the meaning attributed to the words by the representations of the agent. In this case the offer made said:
'In consideration of reissuing my policy on the whole life plan of insurance for the face amount of $5,000 which the twenty year family income rider, effective April 5, 1961, the following statements are made by me . . .'
No other statements appeared in the offer to explain what was meant by this 'specialized language.' The Rempels, of necessity, relied on McGibbeny's 'translation' of the meaning of the offer. This is the only document which the insured was required to sign; the consumer's signature is not required on the policy. In fact, it is received weeks, or perhaps longer, after the signing of the application. The significant decision by the consumer is not made when the policy is received. The receipt of the policy is the acceptance of the offer previously made. It is at the time that the offer is being made by the consumer--when the application is being signed--that the consumer is making the decision to 'buy' or 'not to buy' the insurance. By the time the written policy is received, it has lost its importance to the insured. Keeton, Insurance Law Rights at Variance with Policy Provisions, 83 Har.L.Rev. 961, 968 (1970). It is not unreasonable, therefore, for a purchaser of insurance to 'pass' when the time comes to read the policy.
When the Rempels received the policy at issue here, they were not required by Nationwide to sign the policy, and the policy was not explained to them by McGibbeny. Moreover, there is nothing on the face of the policy which would have alerted them that the policy did not contain the coverage expected as a result of the application made with McGibbeny's explanation of what the offer meant. In fact, nothing in the main portion of the policy in this case indicated that the coverage was anything other than what had been applied for. Only by examining a rider attached to the policy, and making mathematical computations could one ascertain the extent of the coverage provided.
The idea that people do not read or are under no duty to read a written insurance policy is not novel. Dowling v. Merchants Ins. Co., 168 Pa. 234, 239--40, 31 A. 1087, 1087 (1895), in discussing the insured's acceptance of the policy as written, states:
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