United Founders Life Ins. Co. v. Carey

• Decision Date: 05 April 1961
• Docket Number: No. 10832,10832
• Citation: 347 S.W.2d 295
• Parties: UNITED FOUNDERS LIFE INSURANCE CO., Appellant, v. Glynda Bruce CAREY et vir, Appellees.
• Court: Texas Court of Appeals

Page 295

347 S.W.2d 295

UNITED FOUNDERS LIFE INSURANCE CO., Appellant, v. Glynda Bruce CAREY et vir, Appellees.

No. 10832.

Court of Civil Appeals of Texas, Austin.

April 5, 1961.

Rehearing Denied May 17, 1961.

Second Motion for Rehearing Denied June 7, 1961.

Upton, Upton, Baker & Griffis, W. A. Griffis, Jr., Craig Porter, San Angelo, for appellant.

Snodgrass, Smith & Rose, Frank W. Rose, Jr., San Angelo, for appellee.

HUGHES, Justice.

This suit in upon and in connection with an alleged contract of life insurance between appellant, United Founders Life Insurance Company, and the insured, Billy Gene Bruce, for the benefit of appellee, Glynda Bruce Carey, the surviving but remarried wife of insured.

Trial to a jury resulted in a judgment for appellee for the principal sum of $25,000, the amount of the alleged insurance.

On July 27, 1958, the insured who was then an insurance salesman for the appellant Insurance Company applied to it, in writing, for life insurance on himself for $25,000, naming his wife, appellee, as his beneficiary. This application contained the following provisions:

'It is agreed that: (1) The Company shall incur no liability under this application until it has been received and approved, a policy has been issued and delivered, and the full first premium specified in the policy has been actually paid to and accepted by the Company while health, habits and occupation of the proposed insured remain as described in this application in which case the policy shall be deemed to have taken effect as of the date on which the policy was signed. However, if the full first premium specified in the application on the policy applied for is paid on the date of this application and the receipt bearing the same serial number as this application is issued to the applicant, then the liability of the Company shall be as stated in the receipt.'

The premium mentioned was paid by the insured and appellant issued a receipt therefor containing these provisions:

'Received * * * the sum of * * * for the full first premium specified in the application for insurance in the United Founders Life Insurance Company which bears the same date and serial numbers as this receipt. The insurance under the policy for which application is made shall effective on date of this receipt or the date of completion of the medical examination (if required) whichever is the later date, if in the opinion of the authorized Officers of the Company at it Home Office in Oklahoma City, Oklahoma, the Proposed Insured is insurable and acceptable for insurance under its rules and practices on the plan of insurance, for the amount of insurance and at the premium rate set in the application, exclusive of any amendments in the space for 'Home Office Additions or Correction.' However if the Proposed Insured dies prior to the Company's actual issuance and delivery of the policy applied for, the total liability of the Company under this receipt and other insurance in force in this Company shall not exceed $50,000. If the Company declines to issue a policy or issues a policy other than the policy for which application is made, the Company shall incur no liability hereunder, except to return by its check the above payment upon surrender of this receipt. This receipt shall be void if given for check of draft which is not honored on presentation.'

Based on the application for insurance made by insured, the receipt issued him by appellant and the evidence, the Court submitted the following issue to the jury, which answered it as indicated:

'Do you find from a preponderance of the evidence that prior to Billy Gene Bruce's death in the opinion of the proper official of United Founders Life Insurance Company Billy Gene Bruce was insurable and acceptable for insurance under its rules and practices on the plan of insurance, for the amount of insurance, and at the premium rate set in his application for life insurance?

'Answer yes or no.

'Answer: Yes.'

Appellant's first four points are to the effect that there was either no evidence or there was insufficient evidence to sustain the answer given by the jury to this issue.

We will dispose of these points by making one statement, and since we are of the opinion that the points relating to the insufficiency of the evidence are not well taken, we will state the substance of and consider all the evidence bearing on these points and the issue to which they relate. This ruling will effectively dispose of the no evidence points without special or separate treatment.

In May of June of 1958, Mr. Bruce, the insured, began employment as an agent of apellant Insurance Company for the purpose of selling life insurance. His immediate supervisor, the general agent in San Angelo for appellant company, was Mr. Gerald Stewart. As such agent and salesman, Mr. Bruce attended a company school in Oklahoma City shortly after the beginning of his employment to familiarize himself with life insurance and the sale of life insurance, and with the rules and practices of his own company. One of these practices with which Mr. Bruce became familiar at this school and through his own selling efforts was that of the necessity and requirement by appellant for 'reinsurance' in every case where application was made to appellant for insurance in excess of $5,000. By such procedure, when an application for insurance in excess of $5,000 was received by appellant, it secured through its agent on the application a medical examiner's report and a credit or inspection report and submitted these items, together with the application and an application for reinsurance, to its reinsurer, Republic National Life Insurance Company, for the latter's underwriting action, its consideration and for either approval or rejection of the aplication for reinsurance.

In making submissions to its reinsurer, Republic, appellant used a certain printed form made up of three sheets of white papers, alternatively separated by sheets of carbon paper, all joined together at the top by a perforated band or tab. The make-up of this form was such that if the form was inserted into typewriter and words of letters typed upon the first page, the action of the carbon paper between the sheets of the form was such as to print the same words or letters upon the second and third pages of the form. The make-up of the form was such as to have printing upon each of the sheets, but with the printed words differing in some instances from the first sheet to the second or third sheets. Thus, the result of a word or letter being typed adjacent to the printed language of the first page of the form, through the action of the carbon paper, made the same word or letter appear adjacent to other and different printed language on the second and third pages of the form.

The actual procedure between appellant and Republic was for the appellant's underwriting department to submit the first page of the form, headed 'Application for Reinsurance to: Republic National Life Insurance Company, Dallas, Texas' to Republic, along with the insurance application, the applicant's credit report and his statement from the medical examiner. In this manner, in reinsurance cases, appellant used the medical and underwriting departments of Republic to pass upon the insurability of the applicant under consideration, since Republic would assume the insurance risk for the amount above the initial $5,000 in the event of the approval of the application by appellant and Republic and the issuance of the policy.

Appellant submitted the application, the credit report and the medical examiner's report of Bruce to Republic on September 5, 1958. At such time it also partially completed the three-sheet, carbon-paper form and submitted the first page of the form to Republic, retaining pages 2 and 3 in its file. The second and third pages were headed 'Formal Cession of Reinsurance to Republic National Life Insurance.' The second ond and third pages were never submitted to Republic, nor did they ever leave the files of appellant's underwriting department. Bruce's application and medical report were never submitted to appellant's own medical director, since the application was considered as a reinsurance matter, being for insurance in excess of $5,000.

On September 8, 1958, Republic wired appellant's underwriting department that the application of Mr. Bruce was approved as a standard risk subject to 'statement any doctor consulted within past five years regarding nervous disorder.'

An inter-office memorandum of September 9, 1958, shows that Helen Smith, Chief Underwriter of appellant, advised appellant's General Agent, Gerald Stewart, that, regarding the insured, 'It will be necessary that we have a statement from any doctor you have consulted during the past five years regarding nervous disorder before we can complete the processing of your application for life insurance.'

A report, in response to this memorandum, was made by Dr. Valton Sessums September 29, 1958, and was received by appellant October 1, 1958.

On October 4, 1958, the insured wired appellant inquiring about the delay in the issuance of the insurance policy for which he had applied.

On October 6, 1958, appellant's Chief Underwriter advised its General Agent that the report from Dr. Sessums had been received and forwarded to its reinsurance company on October 1, and that she had on October 6, received a wire from the reinsurer requesting a review of electrocardiograms made by Dr. Sessums, and that a loan of them by Dr. Sessums had been requested.

On October 2, 1958, the insured left the employ of appellant.

On October 16, 1958, appellant's under-writer, by an inter-office memorandum to the insured, requested a follow-up on the last request made to Dr. Sessums.

On October 18, 1958, the insured was critically injured in an automobile accident, dying from such injuries on October 23, 1958.

On this date, appellant, not knowing of the accident to Mr....