Strand v. Bankers Life Ins. Company
| Decision Date | 25 March 1927 |
| Docket Number | 24636 |
| Parties | OSCAR STRAND, ADMINISTRATOR, APPELLANT, v. BANKERS LIFE INSURANCE COMPANY, APPELLEE |
| Court | Nebraska Supreme Court |
APPEAL from the district court for Polk county: GEORGE F. CORCORAN JUDGE. Affirmed.
AFFIRMED.
Elmer E. Ross, for appellant.
Peterson & Devoe, contra.
Heard before GOSS, C. J., ROSE, GOOD, THOMPSON and EBERLY, JJ.
This is an action against a life insurance company to recover $ 1,000 in damages for negligence in preparing, examining and approving an application for life insurance in the sum of $ 1,000, after receiving an annual premium, and in failing to issue and deliver a policy. Melvin A. Strand of Shelby Nebraska, was the applicant. He died without procuring the insurance. As administrator of his estate, his father, Oscar Strand, is plaintiff. The Bankers Life Insurance Company is defendant. Its home office is in Lincoln, Nebraska. In an answer, defendant demurred to the petition, pleaded a return of the premium and denied the negligence charged by plaintiff. A trial of the issues resulted in a peremptory instruction in favor of defendant. Upon the jury's verdict thus directed the action was dismissed. Plaintiff has appealed.
Did the trial court err in directing a verdict against plaintiff? In a blank form furnished by defendant, Melvin A. Strand applied for a 20-payment life insurance policy for $ 1,000, naming his father, Oscar Strand, as beneficiary. The application was procured by W. L. Mosgrove, soliciting agent, and was written by A. I. Scott, agent at Shelby. The medical examination of applicant, after a delay on his part, was conducted by Dr. L. Myers, examining physician at that place. It was the duty of Myers to ask questions as they appeared in a printed form drafted by defendant and to insert therein the answers of the applicant. An answer to one of the questions however, was never inserted in the medical report. That question was: "Have you ever had inflammatory rheumatism?" The applicant signed both the application for insurance and the report of the medical examination, and they were forwarded to and received at the home office of defendant without delay. The first annual premium was $ 29.02 and it was promptly paid to and accepted conditionally by Mosgrove, who issued and delivered a receipt of which the following is a copy:
The question unanswered in the report of the medical examination resulted in further inquiry by defendant and in consequent delay. In the meantime the applicant went to a hospital, submitted to an operation for appendicitis, and died. The negotiating parties did not enter into a contract of insurance and the policy was never delivered, though the applicant was insurable when examined. The premium was returned to Oscar Strand, father of the applicant. From the undisputed facts there is a logical inference that the policy would have been issued and delivered except for the omission and delay mentioned. The record presents this difficult question: Was there actionable negligence in the failure of defendant to perform a duty owing to applicant?
For the sake of brevity the chronology of events in 1923 is indicated thus: November 23, application drawn and signed, premium paid and the conditional receipt issued; November 24, application received at home office of defendant; November 29, Mosgrove instructed by defendant to urge prompt examination of applicant; November 30, applicant reminded that a report of his medical examination had not been received; December 6, medical examination; December 7, report of medical examination received at home office; December 10, Myers directed by letter from defendant to procure the answer omitted from the report of the medical examination; December 17, additional demand by defendant on Myers for the omitted answer; December 21, Scott inquired about the fate of the application; December 22, illness of applicant; December 23, applicant taken to hospital and operation for appendicitis performed; December 24, Scott advised by mail that the application was held up at the home office "pending the completion of the medical report," and he was directed to see Myers and urge him to complete it; December 28, Myers, without further questioning of applicant, wrote in a separate document the answer "none" to the question, "Have you ever had inflammatory rheumatism?" December 26, applicant died; December 27, application approved; December 28, undelivered policy prepared.
Plaintiff did not attempt to plead a cause of action for insurance, but confined his remedy to damages for negligence. An action based on negligent failure of a life insurance company to act promptly on an application for insurance after a conditional payment of the premium is comparatively new in the law of insurance. There is a diversity of opinion on the subject. In National Union Fire Ins. Co. v. School District, 122 Ark. 179, 182 S.W. 547, L. R. A. 1916D, 238, the opinion contains the following:
"The better reason and the decided weight of authority supports the doctrine that mere delay in passing upon an application for insurance cannot be construed as accepting such application and consenting to be bound for the insurance sought by it, nor can a cause of action for negligence be grounded upon such delay."
Inter-State Business Men's Ass'n v. Nichols, 143 Ark. 369, 220 S.W. 477, seems to be a case of like import. Judge Cornish took the same view in Meyer v. Central States Life Ins. Co., 103 Neb. 640, 644, 173 N.W. 578.
On the contrary, a right of action for negligence in failing to act promptly on an application for insurance has been recognized by some of the courts of last resort. Wilken v. Capital Fire Ins. Co., 99 Neb. 828, 157 N.W. 1021; Duffie v. Bankers' Life Ass'n, 160 Iowa 19, 139 N.W. 1087; Johnson v. Farmers' Ins. Co., 184 Iowa 630, 168 N.W. 264; Boyer v. State Farmers' Mutual Hail Ins. Co, 86 Kan. 442, 121 P. 329. Cases on both sides of the question are discussed by the supreme court of Illinois in an opinion reported and annotated in 15 A. L. R. 1021, under the title of Bradley v. Federal Life Ins. Co. The case is reported also in 295 Ill. 381.
The view that there is a remedy based on negligence seems to be founded on reason and justice. The receipt in the present case shows on its face that the insurance company, without assuming any insurance risk, accepted conditionally the first annual premium. The transaction makes the insurance company applicant's trustee for the return of the premium if the application is rejected and for the unconditional acceptance of the premium if the application is approved and the policy delivered. In connection with the application the receipt implies time for a proper investigation of the risk under consideration. Good faith and fairness of both parties are required in negotiations for insurance. The retaining of the money of the applicant beyond a reasonable time would deprive him of its possession and use during the delay. The use of money or interest thereon is a valuable right. Negligent or inexcusable delay on the part of a trustee is a wrong, if it deprives the beneficiary...
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Strand v. Bankers' Life Ins. Co. of Lincoln
...115 Neb. 357213 N.W. 349STRANDv.BANKERS' LIFE INS. CO. OF LINCOLN.No. 24636.Supreme Court of Nebraska.March 25, Syllabus by the Court. A life insurance company that exacts in advance a premium from an applicant without assuming any obligation for insurance prior to the issuance and delivery......