Zayc v. John Hancock Mut. Life Ins. Co. of Boston

• Decision Date: 06 May 1940
• Citation: 338 Pa. 426,13 A.2d 34
• Parties: ZAYC v. JOHN HANCOCK MUT. LIFE INS. CO. OF BOSTON, MASS.
• Court: Pennsylvania Supreme Court

13 A.2d 34
338 Pa. 426

ZAYC
v.
JOHN HANCOCK MUT. LIFE INS. CO. OF BOSTON, MASS.

Supreme Court of Pennsylvania.

May 6, 1940.

13 A.2d 35

Appeal No. 16, March term, 1940, from judgment of Court of Common Pleas, Allegheny County, No. 245, October term, 1936; McNaugher and Kennedy, Judges.

Trespass by John Zayc, administrator of the estate of Jacob Zayc, deceased, against the John Hancock Mutual Life Insurance Company of Boston, Mass., a corporation, for damages alleged to have been sustained by plaintiff's decedent as result of defendant's failure to act upon an application for life policy within a reasonable time. Verdict for plaintiff for $2,881. From judgment for defendant non obstante veredicto, the plaintiff appeals.

Affirmed.

Argued before SCHAFFER, C. J., and MAXEY, DREW, LINN, STERN, BARNES, and PATTERSON, JJ.

Michael W. Huron, Doty & Thornton, William S. Doty, and Thomas A. Thornton, all of Pittsburgh, for appellant.

D. C. Jennings, of Pittsburgh, for appellee.

Vosburg & Vosburg, of Scranton, for intervenor.

PATTERSON, Justice.

The question for determination on this appeal is whether an insurance company is liable in an action ex delicto for neglect or unreasonable delay in acting upon an application for insurance where but for such delay the application would have been approved and the insurance issued in time to have protected the applicant against a loss which occurred to his damage during the period of such unreasonable delay.

Appellant, John Zayc, administrator of the estate of Jacob Zayc, deceased, instituted a trespass action against the John Hancock Mutual Life Insurance Company of Boston, appellee, to recover damages claimed to have been sustained by his decedent, Jacob Zayc, as a result of appellee's failure to act upon an application for life insurance within a reasonable time. The Statement of Claim averred that on June 25, 1931, Jacob Zayc made application to an agent of the appellee insurance company for a twenty payment life insurance policy in the sum of $2,000, with double indemnity provision, and that he paid $4 as a deposit on the first premium; that after June 25, 1931 Zayc was interviewed by agents of other companies, but, relying upon an alleged custom of insurance carriers to accept or reject applications within a reasonable time, the application made by him with appellee's agent, and appellee's retention of his deposit, he refrained from making any other application; that appellee did not reject or refuse the application on or before August 24, 1931, on which date Zayc was accidentally killed, and did not theretofore offer to return his $4 deposit; and that by reason of the negligence of appellee in failing to advise Zayc within a reasonable time that a policy would or would not be issued, he was deprived of life insurance protection which he otherwise would have had.

Appellee filed an Affidavit of Defense in the nature of a statutory demurrer, asserting that the Statement of Claim failed to set forth a cause of action. The court below overruled the demurrer saying (Zayc v. John Hancock Mutual Life Ins. Co., 30

13 A.2d 36

Pa. Dist. & Co. R. 34), "Irrespective of whether a contract is completed, it is the duty of an insurance company to act without unreasonable and negligent delay upon an application for insurance where part of the premium has been paid to the company at the time the application is made. In this pioneering case in our State, we are of the opinion that plaintiff's statement of claim presents a good cause of action in trespass". The court directed that appellee file an Affidavit of Defense on the merits, which it did, denying that Zayc had applied for insurance, but admitting that his mother, Mary Zayc, who was also to be named beneficiary, had made such an application and that at the time she had paid to an agent for appellee the sum of $4 as a deposit on account of the first premium. The case went to trial, and, at the close of appellant's evidence, appellee moved for compulsory non-suit. This motion was denied, whereupon appellee rested, without offering any testimony, and submitted a point for binding instructions, which was likewise refused.

The jury brought in a verdict for appellant in the sum of $2,881, the face amount of the policy plus interest less the amount of the first premium. Appellee filed a motion for judgment non obstante veredicto. After a reconsideration of the position taken by it in overruling appellee's statutory demurrer, the court below granted this motion and entered judgment for appellee on the ground that the company's delay in acting upon the application did not constitute actionable negligence, and on the further ground of material variance in that whereas appellant's Statement of Claim averred an application by Jacob Zayc, its proof showed an application by his mother, Mary Zayc. From judgment so entered the present appeal was taken.

It is the established rule in Pennsylvania, as in most jurisdictions, that mere delay, however great, in passing upon an application for insurance cannot be construed as an acceptance thereof by the insurer which will support an action ex contractu, notwithstanding payment of the premium at the time application is made. "When, as here, it is plain that the application and payment of the premium amount only to a proposal for insurance, we cannot make a contract out of it. * * * The proposal, and the premium advanced with it, go together. If the proposal be withdrawn, or rejected, the premium must be returned. At any time before acceptance of the proposal, the plaintiffs could have withdrawn it, and demanded payment of the premium. They were never bound as by contract, and of course the defendants were not." New York Union Mut. Insurance Co. v. Johnson, 23 Pa. 72, 75. "'An application for life insurance is not a contract. It is only a proposal to contract. * * * The payment of a premium when the application is signed does not bind the company.' Travis v. Nederland Life Ins. Co. [8 Cir.], 104 F. 486, 488; Cherokee Life Ins. Co. v. Brannum, 203 Ala. 145, 82 So. 175; 1 Couch, Insurance, 146, § 84. The receipt of the premium and holding it until after the death of the applicant would not give rise to a contract of insurance. New York Union Mut. Insurance Co. v. Johnson, 23 Pa. 72; Steinle v. New York Life Ins. Co. [5 Cir.], 81 F. 489; Dorman v. Connecticut Fire Ins. Co., 41 Okl. 509, 139 P. 262, 51 L.R.A.(N.S.) 873, 875." Munhall v. Travelers Insurance Co., 300 Pa. 327, 333, 150 A. 645, 648. See, also, Ripka v. Mutual Fire Ins. Co., 36 Pa.Super. 517, 526; Anno. 15 A.L.R. 1026.

But, appellant does not seek to enforce his claim for damage on any contractual basis. He asserts a right to recover on the theory that where an application has been made and there has been delay on the part of the agent in forwarding, or on the part of the insurance company in accepting or rejecting the application, such delay constitutes a tort. Manifestly appellant's attempt in this manner to hold the insurer responsible in damages for the amount of a policy because of delay, and thereby to accomplish by indirection that which the law has persistently refused to permit to be done directly, in an action ex contractu, cannot prevail, unless, independently of statute or contract, a legal duty devolved upon the insurance company either to accept or reject the application for insurance within a reasonable time. It is fundamental that negligence and liability therefor cannot be predicated upon a state of facts which does not impose any legal duty. "As a matter of course, there can be no recovery in such a case unless the defendant was guilty of a breach of some legal duty which he owed to the...