Southwestern Life Ins. Co. v. Middle Georgia Neurological Specialists

• Decision Date: 19 May 1992
• Docket Number: No. S92Q0202,S92Q0202
• Citation: Southwestern Life Ins. Co. v. Middle Georgia Neurological Specialists, 416 S.E.2d 496, 262 Ga. 273 (Ga. 1992)
• Parties: SOUTHWESTERN LIFE v. MIDDLE GEORGIA NEUROLOGICAL SPECIALISTS, et al.
• Court: Georgia Supreme Court

Page 496

416 S.E.2d 496

262 Ga. 273

SOUTHWESTERN LIFE v.MIDDLE GEORGIA NEUROLOGICAL SPECIALISTS, et al.

No. S92Q0202.

Supreme Court of Georgia.

May 19, 1992.

Reconsideration Denied June 12, 1992.

Richard H. Sinkfield, Linda O. Vinson, Rogers & Hardin, Catherine M. Bennett, Atlanta, for Southwestern Life Ins. Co.

Charles M. Cork, III, W. Carl Reynolds, Reynolds & McArthur, Macon, David E. Hudson, Hull, Towill, Norman & Barrett(amicus), Augusta, Roger W. Dunaway, Dunaway & Wallace, Thomson, for Middle Georgia Neurological Specialists.

CLARKE, Chief Justice.

This case came to this court as a certified question from the United States Court of Appeals for the Eleventh Circuit.SeeMiddle Georgia Neurological v. Southwestern Life, 946 F.2d 776(11th Cir.1991).The facts can be summarized as follows:

Dr. Perry Cohn made applications for two life insurance policies with Southwestern Life Insurance Company in November, 1987.The applications contained the following clause:

If an Agreement with Respect to Advance Premium Prepayment has not been issued [and none was], the policy will be effective when it is delivered to and accepted by the Applicant only if (a) the first premium has been paid, and (b) all answers recorded in this application represent without material change complete and true answers to the same questions as if they were asked at the time of the delivery of the policy applied for ... (emphasis supplied).

Dr. Cohn underwent a physical examination in December, 1987, but the blood samples taken were not acceptable to the insurance company.In March, 1988 a satisfactory blood sample was taken and Dr. Cohn's insurance agent, Stanley Rosen, informed Dr. Cohn that the policies had been approved by underwriting.He directed Dr. Cohn to send the first monthly premium to the company.On March 28, Dr. Cohn sent a check for $10,000.The policies were issued on March 30 and were received by Rosen on April 6.The policies stated "The policy date is the effective date for all coverage provided in the original application."The policy date was listed as March 28.The policies were accompanied by a letter to Rosen that authorized him to deliver the policies if the "Applicant" confirms that all of the information on his original application was still true and correct.

Rosen tried to deliver the policies, but found out that Dr. Cohn was on vacation.Dr. Cohn suffered a heart attack while still on vacation.He died on April 8, 1988.An autopsy revealed that he had a previous heart attack at least six weeks before the one that killed him.There was no evidence to indicate whether Dr. Cohn knew that he had an earlier heart attack.The beneficiaries of the policies obtained the policies from Rosen and filed suit to recover policy proceeds.The United States District Court ruled that the policies were effective on the date of Dr. Cohn's death.The District Court also held that the insurance company was not required to pay interest from the date of the insured's death.Each party appealed.The Eleventh Circuit certified the following questions to this court:

(1) Under the facts of this case, when the insurance policy application established the policy's delivery to and acceptance by the applicant as a condition precedent to the formation of the insurance contract, but the issued policy specified a date certain on which coverage was said to be effective and from which future premium payments were to be calculated, is the failure of actual delivery of the policy of insurance fatal to contract formation so as to render coverage ineffective?

(2) When the insured dies within twelve months of issuance of the policy of insurance, or ¹ insurance proceeds are paid within twelve months of the insured's death, does OCGA § 33-25-10 excuse the payment of prejudgment interest, or should prejudgment interest be determined pursuant to OCGA § 7-4-15 in that circumstance?

1.The question posed assumes (as the insurance company argues) that the language in the applications that defines when the "policy will be effective" necessarily defines conditions precedent to contract formation.We begin our analysis by rejecting this assumption.The provision in the applications states conditions precedent to liability, not conditions precedent to contract formation.See generally, J. Calamari & J. Perillo, Contracts, Ch. 9(1970).As the insurance company itself points out in its brief, "It is common practice for parties, upon forming a contract, to provide that the contract will have an 'as of date'--an 'effective date' earlier than the date on which the agreement was actually reached"(emphasis added).We note also that parties to a contract of insurance may select a future date or validating event as the "effective date" of the policy.See, e.g., re serve Loan Life Insurance Co. v. Phillips, 156 Ga. 372, 119...