United Founders Life Ins. Co. v. Carey

• Decision Date: 28 November 1962
• Docket Number: No. A-8519,A-8519
• Citation: 363 S.W.2d 236
• Parties: UNITED FOUNDERS LIFE INSURANCE COMPANY, Petitioner, v. Glynda Bruce CAREY et vir, Respondents.
• Court: Texas Supreme Court

Page 236

363 S.W.2d 236

UNITED FOUNDERS LIFE INSURANCE COMPANY, Petitioner, v. Glynda Bruce CAREY et vir, Respondents.

No. A-8519.

Supreme Court of Texas.

Nov. 28, 1962.

Rehearing Denied Jan. 16, 1963.

Upton, Upton, Baker & Griffis, San Angelo, for United Founders Life ins. co.

Snodgrass, Smith & Rose, San Angelo, for Carey and husband.

HAMILTON, Justice.

This is a suit upon an alleged contract of life insurance, based upon an application to United Founders Life Insurance Company for life insurance and a 'binding receipt' issued by such company, as distinguished from a suit upon a life insurance policy. The applicant, Billy Gene Bruce, died before any insurance policy was issued. Trial was to a jury and on the jury's verdict judgment was entered for respondent Glynda Bruce Carey, the surviving but remarried wife of the deceased applicant. The Court of Civil Appeals has affirmed that judgment. 347 S.W.2d 295.

On July 27, 1958, the applicant, Billy Gene Bruce, who was then an insurance salesman for the petitioner insurance company, applied to it in writing for life insurance on himself as a standard risk for $25,000, naming his wife, the respondent here, as his beneficiary. This application provided that the company would incur no liability until the application had been received, approved, and a policy issued and delivered while applicant was in good health, but had the further proviso, 'However, if the full first premium specified in the application on the policy applied for is paid on the date of this application and 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 applicant and petitioner issued a receipt therefor containing this provision:

'* * * The insurance under the policy for which application is made shall be 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 its 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.' * * *'

The trial 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.'

The petitioner complains that there was no evidence to support the answer given by the jury to this issue. On this point we reverse the judgments of the Court of Civil Appeals and the trial court, but in the interest of justice we remand the cause for a new trial. Rule 505, Texas Rules of Civil Procedure.

In May or June of 1958 Mr. Bruce, the applicant, began employment as an agent of petitioner insurance company for the purpose of selling life insurance. His immediate supervisor, the general agent in San Angelo for petitioner company, was Mr. Gerald Stewart. As such agent and salesman Mr. Bruce attended the 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. These practice, with which Mr. Bruce became familiar at this school and through his own selling efforts, included the necessity and requirement by petitioner for 'reinsurance' in every case where application was made to petitioner for insurance in excess of $5,000. By such procedure when an application for insurance in excess of $5,000 was received by petitioner, the company secured through its agent a medical examiner's report and a credit or inspection report. Petitioner company submitted these items, together with the application, and its own application for reinsurance, to its reinsurer, Republic National Life Insurance Company, for the latter's underwriting action, its consideration, and for either approval or refusal of the application for reinsurance. In every application for more than $5,000 it was the practice of petitioner to always rely on its reinsurer, Republic National Life Insurance Company, to pass upon the insurability and acceptability of the applicant before any determination was made by petitioner. In forming its opinion petitioner invariably followed the recommendation of Republic on such matters.

As was the usual procedure, petitioner submitted the application, the credit report and the medical examiner's report of Bruce to Republic on September 5, 1958. Bruce's application and medical report were never submitted to petitioner's medical director, because the coverage requested exceeded $5,000 and the application was considered as a reinsurance matter.

On September 8, 1958, Republic wired petitioner's underwriting department that the application of Mr. Bruce was approved as a standard risk subject to 'statement of any doctor consulted within past five years regarding nervous disorder.' An interoffice memorandum of September 9, 1958, advised petitioner'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 this application for life insurance.' A report in response to this memorandum was made by Dr. Valton Sessums on September 29, 1958, and was received by petitioner on October 1, 1958. This report, among other facts, revealed that the doctor had viewed electrocardiograms of Bruce which showed his heart condition to be normal.

On October 6, 1958, petitioner'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 the electrocardiograms made by Dr. Sessums, and that a loan of them from Dr. Sessums had been requested.

On October 16 petitioner's underwriter by interoffice memorandum to Bruce requested a follow-up on the last request made to Dr. Sessums. On October 18 Bruce was critically injured in an automobile accident, and died from such injuries on October 23.

On October 21 Dr. Sessums wrote to petitioner, advising it that the electrocardiograms were not made in his office, but were made by two physicians in Odessa, Texas, and a physician from Ballinger, Texas. This letter was received by petitioner on the date that Bruce died.

By letter dated November 18, 1958, from William D. Curlee, assistant secretary and treasurer of United Founders Life Insurance Company, to respondent, liability was denied, the letter saying in part:

'The policy applied for was not issued and never became effective because, upon medical grounds, it was determined that Mr. Bruce was not insurable and acceptable under the company's rules and practices on the plan of insurance for the amount and at the premium rate set in the application.'

On the question of whether or not an opinion had been formed as to the insurability or acceptability of Billy Gene Bruce at the time of his death, we have the testimony of Mrs. Helen Smith, chief underwriter and only officer authorized to pass upon the question of insurability and acceptability of an applicant, and also of Mr. Brunswick, the secretary of the reinsurance department of Republic National Life Insurance Company, the officer who passed on reinsurance matters for that company. The testimony of Mrs. Helen Smith in regard to that matter is as follows:

'Q. Is the only reason you are denying this claim is because you never did accept it?

'A. This application on Billy Gene Bruce had never been completed. It had never been accepted or rejected. It was still in a pending status. We were still trying to secure the information.

'Q. Did you pursue any further the the attempts to secure the EKGS (electrocardiograms) after Mr. Bruce was killed?

'A. Not after I knew Mr. Bruce was deceased.

'Q. Is that your answer, you never did have any opinion at all, never formulated any opinion at all?

'A. I hadn't completed making an opinion. We were still trying to secure information.

'Q. You actually stopped, though, when he died?

'A. Yes, I did.'

Mr. Brunswick's testimony is as follows:

'A. * * * We were waiting, we felt that in a review of the previous history, what we did know about the case, in order to make a fair appraisal we would need the electrocardiograms to be reviewed by our physicians, and at that point we were not sure how we would rate that case.

'Q. Now then assuming that the E K G's would have come back--

'A. Uh, huh.

'Q. -and your medical staff would have reviewed them, and they would have found it to be within normal limits, then that would have meant a standard risk?

'A. It is possible.

'Q. It is probable, isn't it?

'A. It is possible; it is probable.

'Q. My question is, has Republic National made any attempt themselves, other than the one request to United Founders to obtain the E K G's subsequent to Mr. Bruce's death?

'A. No.'

We think this evidence shows not only that the proper officer of the petitioner company had no formed any opinion as to the insurability and acceptability of Billy Gene Bruce before his death, but that up until that time they were diligently investigating his medical history in a good faith attempt to reach an opinion. We likewise are of the opinion that there is no evidence that any opinion was...