Wilson v. Massachusetts Indem. and Life Ins. Co.

• Decision Date: 12 December 1990
• Docket Number: No. 89-6154,89-6154
• Citation: 920 F.2d 1548
• Parties: Naomi R. WILSON, an individual, and Naomi R. Wilson as Personal Representative of the Estate of Franklin Wilson, Plaintiff-Appellant, v. MASSACHUSETTS INDEMNITY AND LIFE INSURANCE COMPANY, Defendant-Appellee
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1548

920 F.2d 1548

Naomi R. WILSON, an individual, and Naomi R. Wilson as

Personal Representative of the Estate of Franklin

Wilson, Plaintiff-Appellant, v. MASSACHUSETTS INDEMNITY AND LIFE INSURANCE COMPANY,

Defendant-Appellee.

No. 89-6154.

United States Court of Appeals, Tenth Circuit

Dec. 12, 1990.

William E. Woodson, William E. Woodson & Associates, Norman, Okl., for plaintiff-appellant.

Reid E. Robison (Robert W. Dace and M. Richard Mullins with him on the brief), Oklahoma City, Okl., for defendant-appellee.

Before BALDOCK, BARRETT and EBEL, Circuit Judges.

PER CURIAM.

This appeal arises from an attempt by the appellant's husband, Franklin Wilson, to purchase life insurance from the appellee, Massachusetts Indemnity and Life Insurance Company (Milico), and Mr. Wilson's subsequent death prior to the issuance of a policy. The district court granted Milico's motion for summary judgment, thereby dismissing Mrs. Wilson's claims of breach of an insurance contract and bad faith failure of Milico to pay benefits under the terms of that contract, negligent delay in accepting or declining coverage to Mr. Wilson, and negligent delay in notifying Mrs. Wilson that coverage had been denied. Because we find that parol evidence is inadmissible here to vary the terms of the written document, that Mrs. Wilson has failed to raise a genuine issue of material fact as to her husband's insurability, and that any reliance on representations by Milico's agents by Mrs. Wilson under the circumstances of this case was unwarranted, we affirm the district court.

On July 19, 1987, Mr. and Mrs. Wilson met with Darrell Cobb, an authorized agent for Milico, for the purpose of obtaining life insurance for Mr. Wilson, a diabetic. During the course of this meeting, Mr. Wilson executed an application for insurance, naming Mrs. Wilson as the beneficiary.

The application signed by Mr. Wilson contained a "Conditional Premium Receipt" which provided:

There will be no insurance coverage prior to the policy issue date unless all conditions set forth below are met. They cannot be changed by the agent signing above. If all conditions are met and your death occurs before the delivery date of the policy, then you are covered in accordance with the provisions of this receipt and any policy provisions not in conflict.

The four conditions of coverage listed in the conditional premium receipt were the following:

All information given in your application must be accurate and complete.

You must be found to be a standard risk for the Policy applied for according to our underwriting rules.

All items requested by us concerning your insurability must have been received.

At least one months premium must be paid with the application.

Milico received Mr. Wilson's application on July 24, 1987, and cashed the Wilsons' check on July 27. On August 5 or 6, 1987, Milico requested Mr. Wilson's medical records from the Veterans Administration Hospital in Oklahoma City, Oklahoma. These records were received on August 31, 1987. Based on these records, Milico determined on September 4, 1987, that Mr. Wilson was not a standard risk and declined his application for insurance, although Mrs. Wilson was not informed of this decision until October 12, 1987.

Meanwhile, on August 30, 1987, Mr. Wilson entered Norman Regional Hospital, suffering from an apparent heart attack. He died on September 8, 1987. By letter dated September 14, 1987, Milico informed Mrs. Wilson that a policy had not been issued at the time of Mr. Wilson's death and that the Underwriting Department was attempting to determine if the policy could have been issued as applied for, this despite evidence, discovered later, that a decision had been made on September 4 determining Mr. Wilson to be an unacceptable risk. A copy of the conditional receipt and a claim form were enclosed. Milico specifically refused to acknowledge any liability at the time, reserving judgment until after a "review of the claim form and other items."

By another letter also dated September 14, 1987, Milico requested that its local agent, Gary Rose, assist Mrs. Wilson in filing her claim. Mrs. Wilson maintains that Mr. Rose informed her that he didn't see any problem with the claim and that a check should be received within two weeks. Affidavit of Naomi R. Wilson, Vol. I, Doc. 19, Exhibit "A".

In early October, Mrs. Wilson purchased an automobile and paid $500.00 earnest money for the purchase of a new home. On October 12, 1987, Milico informed Mrs. Wilson that her husband's application had been declined because he had not qualified for insurance. The premium amount was refunded on October 26, 1987.

On appeal Mrs. Wilson argues that the district court erred in concluding that the parties did not enter into a contract of insurance. She also urges that it was further error for the district court to grant summary judgment in favor of Milico on her claims of negligent delay in accepting or denying coverage and negligent delay in notifying her that coverage was denied. We address these issues in turn.

Existence of a Contract

Mrs. Wilson maintains, and for purposes of reviewing a grant of summary judgement we must accept as true, Ewing v. Amoco Oil Co., 823 F.2d 1432, 1437 (10th Cir.1987), that during the course of their meeting Mr. Cobb stated that as long as Mr. Wilson's diabetes was under control he was insurable as a "standard risk," that by signing the application and submitting the first month's premium Mr. Wilson would be covered until further notice, and that the check for the premium would not be processed until Milico had approved the application. Affidavit of Naomi R. Wilson, Vol. I, Doc. 19, Exhibit A.

Mrs. Wilson argues that by virtue of the representations made by its agent, Darrell Cobb, Milico entered into a binding oral contract for insurance with her husband. Indeed, if the only evidence of the dealings between the parties had been Mrs. Wilson's testimony regarding the meeting, we would be hesitant to affirm a grant of summary judgment. It has long been the law of Oklahoma that an insurance agent can bind the company by an oral contract of insurance, which contract gives rise to liability even without the issuance or delivery of a policy. Federated Mut. Implement & Hardware Ins. Co. v. Fairfax Equip. Co., 261 F.2d 207, 210 (10th Cir.1958) (construing Oklahoma law and citing cases).

In this case, however, we have more evidence of the terms of the parties' agreement than just the conflicting testimony of Mrs. Wilson and Mr. Cobb because here the parties reduced their agreement to writing in the form of the application for insurance signed by Mr. Wilson. Because of the existence of a written memorial of the parties' agreement, and absent fraud or mutual mistake, any evidence of prior or contemporaneous oral discussions or stipulations is inadmissible to vary or modify the terms of the writing. United Pac. Ins. Co. v. Northwestern Nat'l Ins. Co., 185 F.2d 443, 446 (10th Cir.1950); Ollie v. Rainbolt, 669 P.2d 275, 279 (Okla.1983). Once an oral contract is reduced to writing, prior oral discussions are merged into the written agreement. Albert & Harlow, Inc. v. Fitzgerald, 389 P.2d 994, 996 (Okla.1964).

Oklahoma has codified the parol evidence rule at 15 O.S. Sec. 137 (1983 & Supp.1990) which states: "The execution of a contract in writing, whether the law requires it to be written or not, supersedes all the oral negotiations or stipulations concerning its matter, which preceded or accompanied the execution of the instrument." This rule against the admissibility of parol evidence applies to insurance contracts just as it does to contracts in general, and the only exceptions to it arise in cases of ambiguity or where one party alleges fraud or mutual mistake. United Pac. Ins., 185 F.2d at 446.

There is nothing ambiguous about the insurance application at issue here. The conditional premium receipt, a part of the application signed by Mr. Wilson and given to him upon payment of the premium, clearly states, as one of its four conditions for coverage, that the applicant must be found to be a standard risk. The receipt is also clear that the agent cannot change the conditions. Mrs. Wilson does not allege that there was any fraud involved in the transaction. She does, however, argue that the parties were mutually mistaken about the date of coverage, thus making the parol evidence rule inapplicable. We disagree.

In order to overcome a motion for summary judgment the nonmoving party, Mrs. Wilson, must "make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). In order to establish the existence of a mutual mistake Mrs. Wilson must show by clear and convincing evidence that both parties to the contract were mistaken about an essential term, as a result of which the contract reflects the intention of neither party. See Cleary Petroleum Corp. v. Harrison, 621 P.2d 528, 533 (Okla.1980). Where a litigant relies on mutual mistake to evade the force of the parol evidence rule, such mistake must be "pled and proven by clear, cogent and convincing evidence." Albert & Harlow, 389 P.2d at 996 (quoting Lone Star Gas Co. v. Oakman, 283 P.2d 810 (Okla.1955)); see also Ohio Casualty Ins. Co. v. Callaway, 134 F.2d 788, 789 (10th Cir.1943) (evidence of mutual mistake "must be shown by proof of the greatest and most satisfactory kind").

While Mrs. Wilson's affidavit regarding Mr. Cobb's statement that coverage would exist until further notice might be evidence tending to show that Mr. Cobb was mistaken as to this essential fact, Mrs. Wilson has not produced any competent evidence to show that her husband labored under the same misconception. Mr. Wilson signed the application and the receipt which clearly stated, on the signature page, that...