Spychalski v. MFA Life Ins. Co.

• Decision Date: 30 June 1981
• Docket Number: No. WD,WD
• Parties: John SPYCHALSKI, Appellant, v. MFA LIFE INSURANCE COMPANY, Respondent. 31901.
• Court: Missouri Court of Appeals

Page 388

620 S.W.2d 388

John SPYCHALSKI, Appellant, v. MFA LIFE INSURANCE COMPANY, Respondent.

No. WD 31901.

Missouri Court of Appeals, Western District.

June 30, 1981.

William M. Austin, Kansas City, for appellant.

Thomas A. Sweeny, John E. Turner, Popham, Conway, Sweeny, Fremont & Bundschu, P.C., Kansas City, for respondent.

Before KENNEDY, P.J., and SHANGLER and SOMERVILLE, JJ.

SHANGLER, Judge.

The plaintiff John Spychalski brought a petition in two counts against the defendant MFA Life Insurance Company on the theory that two policies of insurance issued by MFA, by the intention of contract, constituted wife Diane Spychalski the insured and himself the beneficiary. The face of each policy designated the plaintiff John Spychalski as Insured. The plaintiff contends that the policy designation notwithstanding, the application and other evidences of the contract transaction disclose the true intention that the policies should issue with the husband and wife each as an insured and each as the beneficiary of the other. The plaintiff presented evidence and at the conclusion of that proof the court sustained a "motion for directed verdict" (more correctly, a motion for judgment, in a trial to the bench) on the ground that:

(t)he court can find no agreement by the defendant to insure the life of plaintiff's spouse ... While ambiguities are to be construed against the company, to provide coverage in this case would accomplish a rewriting of the policy.

The plaintiff John Spychalski appeals.

The two policies in contention issued separately under separate designations.

Policy L-71342 issued on January 17, 1973, in the face amount of $10,000 for an annual premium of $238. The "Policy Applied For" entry on the application (item 17) shows: "Golden Family Face Amount $10,000." The cover sheet on the policy describes the coverage: "MFA Golden Family Policy." The "Beneficiary" entry on the application (item 24) designates wife Diane the primary beneficiary and children Scott and Cynthia the contingent beneficiaries. A formal term of that policy renders the Insured beneficiary of 40% of the face amount upon proof of the death of the spouse of the Insured. Another formal term Accidental Death Benefit Provision benefits the beneficiary for the accidental death of the Insured in an amount equal to the face of the policy.

Policy L-91470 issued on June 13, 1974, in the face amount of $65,000 for an annual premium of.$1,269. The "Policy Applied For" entry on the application (item 17) shows: "Whole Life Face Amount $65,000." The cover on the policy describes the coverage: "Whole Life Policy." The "Beneficiary" entry on the application (item 24) designates wife Diane the primary beneficiary and children Scott and Cynthia the contingent beneficiaries. A formal term of that policy renders the beneficiary entitled to the face amount of the policy upon death of the Insured. Another formal term Accidental Death Benefit pays the beneficiary for the accidental death of the Insured before age 70 in an amount equal to the face of the policy for the recited additional annual premium of $54.60.

The wife Diane committed suicide on September 6, 1977, under conditions according to petition allegation which constituted an accidental death within the sense of the two policies and of the law of Missouri. On that date each policy provided for payment to the beneficiary of an indemnity equal to the face amount of the policy upon the accidental death of the Insured. Thus, the accidental death coverage under Policy L-71342 was $20,000 and the accidental death coverage under Policy L-91470 was $130,000. The husband Spychalski gave timely notice and proof of death to the insurer MFA. The insurer paid to the husband the sum of $4,000 under the Policy L-71342 agreement to pay to the "appropriate beneficiary, as defined in the policy":

"(B) 40% of the Face Amount upon receipt of due proof of the death of the Insured's spouse.... ¹

The husband contends that each policy covered not only his life but also the life of wife Diane, and so claims as her beneficiary under each policy. Thus, the husband contends for the accidental death indemnity payable under each policy as well as the face amount. ² The husband seeks additional sums as penalty and attorney fee for vexatious refusal to pay under the statute (§ 375.420). The insurer MFA contends, simply, that husband John alone by clear designation was an Insured under each policy and that the $4,000 benefit paid him under the distinctive Golden Family Policy was all the entitlement due.

The court received evidence on the petition. The husband John described the circumstances which induced the purchase of Policy L-91470 ($65,000 face value) from MFA agent Barber by both husband John and wife Diane and their expectations of coverage. In gist, they had made purchases of insurance coverages from Barber and MFA on other occasions, which included a life policy for $10,000 (Golden Family Policy L-71342). The husband was about to leave employment with the Goodrich Company and "the life insurance I had on her and myself with them. So, we were going to buy more life insurance, what we could afford, called (Barber), he came out."

Q. What did you tell Ed Barber you wanted?

A. My wife and I had talked about getting more insurance since I was leaving the company that I had been working for and wouldn't have additional life insurance any longer on us, so Mr. Barber came out to the house and we wanted to talk to him about a plan or some type of insurance that would cover us if something happened to either one of us. We didn't know what we could afford, and this is the policy that he suggested and we bought this policy from him.

That's the insurance policy that my wife and I purchased from MFA Insurance Company in 1974 for $65,000.

Q. Now, did you ask for $65,000 worth of insurance before that was issued?

A. No, not exactly, I didn't ask for the amount. We didn't know what we could afford. It was a lot of money and that's what we wound up buying from Mr. Barber.

Q. So you asked for as much insurance as you could afford?

A. Yes, sir.

The application was completed by agent Barber after the husband and wife gave answers to his questions. The husband, alone, signed the form after only a glance:

Q. Did you look at it when you got when you signed it?

A. Just glanced at it and signed it.

Q. Did you see that the blank for whether or not your wife was to be covered in the $65,000 policy was marked "Yes"?

A. I didn't look at it at that time, no, sir.

Q. Did you at any other time?

A. When I came to see you. When I looked at it before that, after they denied the claim.

The husband testified also that the policy was delivered through the mail. He read neither the policy nor the application after receipt; nor, for that matter, had he read the first policy (L-71342, $10,000 face value) purchased from MFA. He merely looked at the face of each policy, visible in any event through the clear cellophane window of the leather container in which each came.

The evidence of the transaction was received over objection of the insurer that the conversations between the putative insureds and agent Barber antecedent to the issuance of the policy merged into that written document, and that the plain terms of the contract of insurance show the husband as an insured, not a beneficiary, and that such an unambiguous term was not subject to explanation or variation by parol evidence. The court allowed the testimony, however, to show the full insurance policy transaction. The court determined that the evidence of the transaction by the plaintiff proved no agreement by MFA to insure the life of wife Diane:

The insurance in the $65,000 policy No. L-91470 was on John Spychalski. The insurance on the $10,000 policy No. 71342 was on the life of John Spychalski with a 40% benefit provided in the event of the death of the insured's wife. While ambiguities are to be construed against the company, to provide coverage in this case would accomplish a rewriting of the policy.

Thus, entry of judgment for the insurer at the conclusion of the evidence of the plaintiff rests on the ground that the designation of Insured in each policy was clearly and unambiguously husband John only.

Each litigant on appeal contends for the unambiguous effect of the insurance policy Insured designation to sustain position under Count I of the petition. The husband argues that by operation of law the application for insurance affixed to the issued policy (L-91470 for $65,000) was integrated into that document, and that the entries on the application in the hand of agent Barber taken at clear intendment show a purpose to designate wife Diane as an Insured. ³ The insurer MFA argues, as before, that the policy is unambiguous, that the policy designates husband John only as the Insured, and if the application entry somehow tends to suggest an intention to insure wife Diane, nevertheless, the husband is bound by the policy as issued after retention for an unreasonable time without cavil. MFA argues also, that whatever the role of extrinsic evidence, the testimony of the plaintiff was not competent to vary a written term of agreement.

The application became an integer of the contract of insurance both by the terms of Policy L-91470 and by the effect of law. Howard v. Aetna Life Ins. Co., 350 Mo. 17, 164 S.W.2d 360, 366(1-4) (1942). Those integrated terms, therefore, are the subject matter of the Count I litigation. The insurer and insured-putative beneficiary pose the ambiguous nonambiguous-dichotomy as the basis to gain or defeat recovery. Thus they propose, alternatively, the contra proferentem or plain language maxims and other conventions for the construction of negotiated contracts as the means to determine the rights of the parties to an insurance policy. Our law distinguishes, rather, between a contract consented to by negotiation and a contract assented to by...