Vargas v. Pacific Nat. Life Assur. Co.

• Decision Date: 20 May 1968
• Docket Number: No. 8487,8487
• Citation: 79 N.M. 152,441 P.2d 50,1968 NMSC 83
• Parties: Vangie VARGAS, Plaintiff-Appellant, v. PACIFIC NATIONAL LIFE ASSURANCE COMPANY and E. Jaramillo, Defendants-Appellees.
• Court: New Mexico Supreme Court

Page 50

441 P.2d 50

79 N.M. 152

Vangie VARGAS, Plaintiff-Appellant, v. PACIFIC NATIONAL LIFE ASSURANCE COMPANY and E. Jaramillo,

Defendants-Appellees.

No. 8487.

Supreme Court of New Mexico.

May 20, 1968.

Dolan & Clear and Robert H. McBride, Albuquerque, for appellant

Rodey, Dickason, Sloan, Akin & Robb and John P. Eastham, Albuquerque, for appellees.

OPINION

MOISE, Justice.

We are here called upon to determine the legal effect of a 'conditional premium receipt' issued to an applicant for life insurance which provides that under certain conditions the insurance shall be in effect from the date of application. The problem is one which has been many times before the courts of this country, see Annot., 2 A.L.R.2d 943 (1948), but we have never been called upon to consider it.

The facts in the instant case are not in dispute. They disclose that on October 18, 1965, E. Jaramillo (a defendant-appellee, hereinafter referred to as 'agent'), an agent of defendant-appellee insurance company (hereinafter referred to as the 'company'), visited Agapito E. Vargas, the applicant, and his wife, the plaintiff-appellant, in their home soliciting the sale of a mortgage life insurance policy offered by appellee company. At that time the applicant made application for such a policy by signing an application form duly filled out, and paying to the agent $20.85 for which a 'conditional premium receipt' was made out and read by the agent to the applicant with the explanation that no medical examination was required and that if the application was approved and the applicant found to be acceptable under the company's rules and regulations the insurance would be in effect and provide coverage from and after October 18, 1965. The application contained the following language:

'(1) Except as provided in the Conditional Premium Receipt, the Company shall incur no liability under this application until it has been received and approved, a policy issued and delivered, and the full initial premium has been paid to and accepted by the Company while the health and occupation of the Proposed Insured and any person proposed for coverage remains as described in the application.'

The conditional receipt read as follows on the front:

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

The court found, and, although challenged, there is no proof to the contrary, that no misrepresentations of any kind were made by the agent.

On October 21, 1965, the company requested certain information concerning the applicant from the Retail Credit Company. On October 23, 1965, the applicant died, apparently of carbon monoxide poisoning, and the company was advised of this fact on October 29, 1965. On November 2, 1965, the company ordered a death claim report from Retail Credit Company, and sent death claim forms to their general agent. The company caused Retail Credit Company to complete its investigation concerning underwriting information sought in connection with the application. This information was completed on December 13, 1965, whereupon the underwriting department determined that because of applicant's drinking habits as disclosed by the report, he was not acceptable under the company's rules and regulations for the policy applied for. The court found this determination was made in good faith in accordance with appellee's rules and regulations, and was not influenced by the fact the applicant had died. On December 14, 1965, appellant was notified of the company's decision and the $20.85 payment was returned to her.

The court concluded that there had been no misrepresentation of fact by the agent; that the receipt was not ambiguous; and that no insurance was in force, from which it followed that plaintiff was not entitled to any recovery. This appeal is from the judgment entered pursuant to these determinations.

The only question which we are called upon to answer concerns the legal effect of the receipt copied above. Our attention has been directed to the various arguments that have been advanced in numerous cases, both in support of the binding effect of conditional or 'binding receipts,' and in derogation of the same. As has been explained by many courts, the decisions cannot be reconciled, and in our view many of them cannot be supported by reason. It would seem that differing results have been reached according to the variation in the receipts used, and that a variety of reasoning has been adopted by courts to support their conclusions. The net result is that any particular case is valuable as authority to support a conclusion in a later case only on a comparative or theoretical basis. We have already noted the differences to be found in the result reached in the cases. The varying reasoning has been the subject of many articles by legal writers over the years. See Fortunato, Conditional Receipts: Should the Uninsurable have Insurance, Vol. 1, No. 3, The Forum of the A.B.A. Section of Insurance, Negligence and Compensation Law (April, 1966); Crowe, Conditional Receipts--Life, Accident and Health Insurance, 1965 Proceedings of A.B.A. Section of Insurance, Negligence and Compensation Law, at 52; comment, 7 Stanford L.Rev. 292 (1955); comment, 63 Yale L.J. 523 (1954); 15 U. of Chicago L.Rev. 379 (1948); 60 Harvard L.Rev. 1164 (1947); comment, Life Insurance Binding Receipts, 33 Ill.L.Rev. 180 (1938); comment, 44 Yale L.J., 1223 (1935).

We approach our problem with full recognition of the fact that the law of contracts is applicable, and that the measure of the rights and duties of the parties is to be found in their intention as expressed by them in the contract. Mofrad v. New York Life Ins. Co., 206 F.2d 491 (10th Cir. 1953). To this we would add that if uncertainties or ambiguities are present, a liberal construction favorable to insured is to be adopted. Couey v. National Benefit Life Insurance Company, 77 N.M. 512, 424 P.2d 793 (1967); Fowler v. First National Life Insurance Co. of America, 71 N.M. 364, 378 P.2d 605 (1963); Erwin v. United Benefit Life Insurance Company, 70 N.M. 138, 371 P.2d 791 (1962).

The trial court determined that the receipt in issue was not ambiguous. Although included in the findings of fact, this is a legal determination. Jones v. International Union of Operating Engineers, 72 N.M. 322, 383 P.2d 571 (1963). Likewise, if unambiguous, the interpretation of the contract was one of law to be made by the court. Southwest Motel Brokers, Inc. v. Alamo Hotels, Inc., 72 N.M. 227, 382 P.2d 707 (1963). Appellant asserts that the contract is ambiguous. However, as we read it, there can be little question that it clearly states the circumstances under which it was to be effective as of October 18, 1965, the date of the application. Where no medical examination is required, the effective date is stated to be after the company receives...