Opinion
Decided January 23, 1935.
Insurance — Life — Condition that policy ineffective until received by applicant — "Receive" construed — Tender of first premium not constructive receipt of policy.
1. A condition precedent in an application for life insurance that a policy shall not take effect until received by the applicant, contemplates that it shall be ineffective until obtained by the applicant as a result of delivery by the company.
2. The tender of payment of the first premium, in so far as the taking effect of the policy is concerned, does not operate as a constructive receipt of the policy by the applicant.
ERROR: Court of Appeals for Marion county.
Messrs. Guthery, Strelitz Guthery, for plaintiff in error.
Mr. James W. Galbraith, for defendant in error.
This is an error proceeding from the Court of Common Pleas of Marion county. In that court the plaintiff in error Dora M. Spragg was plaintiff and the defendant in error The Prudential Insurance Company of America was defendant. The parties will be hereafter referred to in the relation they appeared in the trial court.
This is an action by the named beneficiary of a life insurance policy for the recovery of the principal sum of such policy. The pertinent allegations of the petition are, in substance, as follows:
The defendant, The Prudential Insurance Company of America, is a corporation duly organized and existing under and by virtue of the laws of the state of New Jersey and engaged in the business of writing insurance on the lives of persons accepted by it as policy holders, and is duly qualified and authorized to transact its corporate business within the state of Ohio.
In consideration of the sum of $138.70 to be paid on delivery to Spragg of defendant's policy No. 7006665 on the life of Paul F. Spragg, and the further payment of a like amount thereafter on the 18th day of July in every year during the continuance of the policy until five full years' premiums shall have been paid, and an annual premium after the first five years of $243.30 on or before the first day of July 1935, and a like amount thereafter payable on the 18th day of July in every subsequent year during the continuance of the policy, the defendant on the 18th day of July, 1930, executed its policy of insurance No. 7006665, in writing, on the life of Paul F. Spragg in the sum of $10,000. A copy of the policy is attached to the petition.
Thereafter on or about the 28th day of July, 1930, while Paul F. Spragg's health, habits and occupation were the same as described in the application for the policy of insurance, the agent or representative of defendant company brought the insurance policy to Spragg, the assured named therein, at the home of plaintiff in Marion, Ohio, and exhibited the same to him and was then and there offered by him a credit on the indebtedness of the representative of the defendant to him and credit upon an indebtedness of the defendant to him in an amount which plaintiff cannot state but expects the evidence to show. The representative of the defendant objected to the proposed manner of payment of the premium due under the policy and requested that the settlement of any indebtedness owing to Spragg either by the representative of the defendant or by the defendant, be postponed pending adjustment thereof and ascertainment of the exact amount owing. The indebtedness of the agent of the defendant and the indebtedness of the defendant to Spragg was for legal services rendered by Spragg who was an attorney at law duly admitted to practice in the state of Ohio.
The representative of the defendant company who brought the policy of insurance to Spragg, was the agent who took the application of Spragg for the policy of insurance.
On the 28th day of July, 1930, when the representative of the defendant company refused to deliver the policy upon Spragg's offer to credit the representative and the company with indebtednesses owing to him as payment of the premium due under the policy, Spragg then tendered to said agent of the defendant company full payment of the first premium provided for therein and demanded delivery of the policy, which tender of full payment of the first premium provided to be paid under the policy was thereupon refused by the insurance company's representative and said representative likewise refused to deliver the policy of insurance to Spragg.
The plaintiff is the sole beneficiary of the policy of insurance under the terms thereof. Paul F. Spragg, the assured named therein, died on or about the 22nd day of August, 1930, and the plaintiff is the mother of Paul F. Spragg.
The assured Paul F. Spragg and the plaintiff have each performed all the conditions of the policy on their part to be performed other than the actual payment to defendant of the first premium provided to be paid in the policy, which payment, however, was offered and tendered as hereinbefore stated and which offer and tender of payment was thereafter and ever since has been continued in effect and maintained, and is offered and tendered with the petition.
The plaintiff has demanded payment of the policy less the first annual premium, but no part thereof has been paid to her.
The prayer of the petition is for judgment in the sum of $9861.30, being the face of the policy, less the first premium provided for in said policy of $138.70, together with interest from August 22, 1930.
The copy of policy attached to the petition is a standard form Mod. Life 5 with Dis. Inc. and ADB.
In its answer to the petition the defendant admits its corporate organization and existence and its engagement in the business of writing insurance on the lives of persons accepted by its policy holders, and its qualification and authority to transact its corporate business in the state of Ohio. It also admits that plaintiff was the mother of Paul F. Spragg and that Paul F. Spragg died on or about August 22, 1930; that a certain policy No. 7006665 was executed by defendant to insure the life of Spragg, on July 18, 1930, and that plaintiff was named as beneficiary therein; that on or about July 28, 1930, an agent or representative of the defendant company called on Spragg at the home of plaintiff at Marion, Ohio; and admits that no first premium for the policy was ever paid the defendant company or to any of its representatives; and that no delivery of the policy was ever made to Spragg or to anyone for him; and that plaintiff has demanded payment of the amount called for in the policy less the first annual premium and that no part thereof has been paid to her. The defendant denies each and every other allegation and part of allegations contained in the petition which are not specifically admitted in the answer.
In its answer defendant pleads as a second defense to the petition that on the 17th day of June, 1930, Paul F. Spragg made and signed his written application to this defendant for a policy of insurance upon the life of himself, and in said application among other things it was declared by him that the premium for such insurance was to be paid by him annually and that no part thereof had been paid in advance on account. And in such written application signed by Spragg, it was further provided:
"I further agree that the policy herein applied for shall be accepted subject to the privileges and provisions therein contained and that unless the first full premium is paid by me at the time of making this application, the policy shall not take effect until issued by the company and received by me and the full first premium thereon is paid, while my health, habits and occupation are the same as described in this application."
On the 18th day of July, 1930, the defendant executed its policy No. 7006665 on the life of Spragg on this application and as so applied for.
Among other things it is provided in the policy:
"Entire contract contained in this policy. — This policy together with the application, a copy of which is hereto attached, contains and constitutes the entire contract between the parties hereto * * *."
On or about the 28th day of July, 1930, on receipt of such policy of insurance from the home office of the company by the agent or representative of the company, the agent or representative went to the home of Dora M. Spragg and then and there saw Paul F. Spragg who was at such time sick and confined to his bed. Defendant alleges that Paul F. Spragg on said date was not in the same condition of health that he was at the time of, and as described in, his application for insurance, and that Paul F. Spragg was then afflicted with a disease from which he died on the 22nd day of August, 1930.
The first premium for such policy was never paid by Spragg nor by anyone for him to this defendant, and the policy was never delivered to or received by Spragg, nor by anyone for him, and by the provisions of the application and policy, the contract between the parties, the policy never took effect and the same is null and void.
To this answer a reply was filed by the plaintiff in which she admitted that on the date alleged in the answer, Paul F. Spragg made and signed his written application for a policy of insurance upon his life and that the written application contained the provision quoted in said second defense contained in the answer of the defendant. Plaintiff also admitted that on the 18th day of July, 1930, the defendant executed its policy No. 7006665 on the life of Paul F. Spragg and that the policy contained, among other provisions, the clauses quoted in the second defense set forth in defendant's answer herein; and that on or about the 28th day of July, 1930, an agent of the defendant went to the home of plaintiff in Marion, Ohio, and there saw Paul F. Spragg. The plaintiff denies all other allegations in the second defense except those admitted as above set forth.
There is no allegation in either the petition or reply of any waiver on the part of the defendant company, its representatives or agents, of any of the terms or conditions of the application for insurance issued thereon or of any facts estopping the defendant from requiring the performance of such terms and conditions on the part of Spragg or the plaintiff.
On the trial of the case in the Common Pleas Court, evidence was offered on behalf of both parties, but in the view we take of this case we deem it unnecessary to discuss the evidence in detail, it being sufficient to state that evidence was offered on behalf of the plaintiff tending to prove that when the agent of the defendant called at the home of the plaintiff with the policy of insurance on July 28, 1930, and after the agent had refused to apply credits owing by him and the defendant to Spragg to the payment of the amount of the first year's premium under the policy, that Spragg then offered to give a check to such agent for the amount of such premium and upon refusal of the agent to accept the check offered, tendered to such agent, in cash, the amount of such premium, and that the agent refused to accept such tender and deliver the policy, and took the policy with him when he left the plaintiff's house on that date; and that such tender has been kept good. This evidence except as to the refusal of the agent to deliver the policy, and that the agent took the policy with him when he left the plaintiff's house, is controverted by evidence offered on behalf of defendant. Evidence was also offered on behalf of plaintiff tending to prove that the health, habits and occupation of Spragg were on the day the agent of the defendant called at plaintiff's home, and the above mentioned tender is claimed to have been made, the same as described in the application for insurance, which evidence is controverted by evidence tending to prove that Spragg was sick on that date and that such sickness continued to the time of, and resulted in, his death.
At the close of plaintiff's evidence the defendant made a motion for a directed verdict which was overruled by the court. This motion was renewed at the close of all the evidence, and sustained by the court and verdict directed in favor of the defendant. Motion for a new trial was thereafter filed and overruled, and judgment entered upon the verdict, and this proceeding in error is brought to reverse this judgment.
This action is based solely on the written policy of insurance attached to the petition, and the application therefor. It is conceded in the pleadings that the policy was issued by the company but was not actually delivered to Spragg or to anyone for him.
The sole question raised by the petition in error on the pleadings, evidence and record is whether the admission mentioned and the evidence tended to show the performance and/or happening of the conditions precedent to the taking effect of the policy provided in the clause of the written application for insurance signed by Spragg, hereinbefore set forth. If the evidence tended to show such performance and/or happening, the court erred in directing a verdict. On the other hand, if such evidence did not tend to show such performance and/or happening the court properly directed a verdict. As the evidence adduced tended to prove the allegations of fact in the petition a similar question would have been raised by motion for judgment on the pleadings after the filing of the reply in which the allegations of the answer with reference to such clause in the application are admitted.
The insurance company and the applicant had the legal right to stipulate as to such conditions precedent to the taking effect of the policy as they might deem proper and such conditions might relate to the performance of an act by the company or the applicant, the happening of an event or the existence of a state of facts. Therefore the question raised is to be determind by interpreting the provisions contained in such clause, the pertinent part of which reads as follows:
"The policy shall not take effect until issued by the company and received by me and the full first premium thereon is paid, while my health, habits and occupation are the same as described in this application."
In terms the clause provides for conditions precedent to the taking effect of the policy, as follows:
First. The policy shall not become effective until issued by the company.
Second. The policy shall not take effect until received by the applicant.
Third. The policy shall not take effect until the first premium thereon is paid.
Fourth. That concurrent with the performance, happening or existence of each and all of the foregoing conditions the health, habits and occupation of the applicant are the same as described in the application.
In Funk Wagnall's Standard Dictionary, "receive" is defined as "To obtain as a result of delivery, transmission or communication."
The condition precedent with reference to the policy being received by the applicant, before taking effect, therefore contemplated the obtaining by the applicant as a result of delivery by the company of the policy before the policy should become effective.
It is contended by the plaintiff that under the terms of the clause hereinbefore referred to, the tender of payment of the first premium operated in law, in so far as the taking effect of the policy is concerned, both as a constructive payment of the full first premium and as a constructive receipt of the policy by Spragg, and consequently the admission of the issuance of the policy, together with the evidence tending to prove tender of payment of the full first premium at a time while the health, habits and occupation of the applicant were the same as described in the application, required the submission of the case to the jury.
It is the general rule that tender of payment is equivalent to actual payment in so far as the contractual rights of the parties are concerned and if the payment of the full first premium was the only condition precedent to the taking effect of the policy, the contention of the plaintiff would be correct. There is, however, as above stated, another condition precedent to the taking effect of the policy, set forth in the clause mentioned, that the policy shall not take effect until received by the applicant, that is, as hereinbefore explained, until obtained by the applicant as a result of delivery by the company. Under the construction contended for by plaintiff the provisions of the clause would have the same legal effect as if the words "received by me" were entirely omitted from the clause.
It is the general rule that contracts of insurance are to be most strongly construed against the insurer and in favor of the insured, but this rule does not authorize a perversion of language or the exercise of inventive powers for the purpose of creating an ambiguity where none exists, nor does it authorize the court to make a new contract for the parties or disregard the evidence as expressed or to refine away terms of a contract expressed with sufficient clearness to convey the plain meaning of the parties, and embodying requirements, compliance with which is made the condition to liability thereon. 14 Ruling Case Law, 931, Section 103.
There are also other rules of construction of equal dignity with the rule of strict construction, among which are the following:
"The different provisions of a contract of insurance must be so construed, if it can be reasonably done, as to give effect to each." 14 Ruling Case Law, 925, Section 102.
"Whenever there are two constructions to be placed upon a written contract, one of which will give force to all of its provisions that one must be observed and followed." Watson v. Norwich Union Fire Ins. Soc., 23 C.C. (N.S.), 363, 367.
Applying these rules of construction and giving effect to the plain words of the parties, it is clear that it was the intention of the parties, by the use of the phrase "the policy shall not take effect until * * * received by me" to provide a condition precedent to the taking effect of the policy separate from and independent of the condition "until the full first premium thereon is paid", and this is true whether such phrase is considered as relating to an act to be performed by either or both of the parties, the happening of an event or the existence of a state of facts.
Giving this effect to the clause it is clear that the tender of compliance with the last mentioned condition could not and did not operate as a compliance with the first mentioned condition, or, in other words, the company under this clause reserved the right, to be exercised by it or its agent to whom delivery was entrusted, to prevent the policy becoming effective by withholding for any reason or for no reason at all, the delivery of the policy irrespective of the fact as to whether tender of payment of the first premium on the policy was made.
The decision in the case of Guardian Life Ins. Co. v. Veser, 128 Ohio St. 200, 190 N.E. 405, has no application to the facts in this case as that decision applied to a tri-party contract for the issuance of policy and not to an action brought on the policy.
Although the clause mentioned has been in general use by insurance companies for a number of years, the instant case is apparently the only case in which such clause has been construed, as we have made a thorough search of the authorities and have found none directly in point, although the case of Erickson v. Missouri State Life Ins. Co. (Mo.App.), 256 S.W. 108, decided December 4, 1923, tends to support the construction adopted.
As there was no evidence tending to prove the receipt of the policy by Spragg or by any one for him, the verdict was properly directed in favor of the defendant.
Holding these views, the judgment of the lower court will be affirmed.
Judgment affirmed.
KLINGER, J., concurs.
The majority opinion accurately sets forth the substance of the pleadings upon which the case was tried and likewise states the tendency of the evidence introduced, excepting the portion in relation to the occurrence when the agent who had the policy for delivery to the insured, which portion, in my opinion, goes no further than that the agent had with him the policy, took it from his pocket, held it in view of the insured and relatives of the latter then present, and after the tender to the agent, of the cash, by the insured in the amount of the first premium, which cash the agent did not take into his hands, the agent placed the policy in his pocket and departed. There is no testimony whatsoever tending to prove that anything was said by the agent or by the insured or by any other person present, concerning the retention of the policy by the agent; nor was there any testimony whatsoever tending to prove that the agent was clothed with the authority to exercise discretion pertaining to a withholding of the policy from the insured. There was testimony that the agent we have referred to was the representative of the insurer in the taking of the application for the insurance, and that he received the policy from the insurer for delivery and collection of the premium.
By admission in the pleading of the insurer, the policy had been issued by it pursuant to the application, prior to the time we have referred to when the agent exhibited it.
The evidence introduced in behalf of plaintiff tended to prove that the insured did every conceivable thing possible on his part, short of using physical force, to pay in cash, the premium.
Strange as it may seem that the agent did not take the money when tendered, and that there is no testimony of any explanation thereof, yet it is the firmly settled rule that on a motion to direct a verdict, the evidence in behalf of the party against whom the motion is made, must be taken as true and given effect most favorable to that party. Following that rule, as we must, reasonable minds might properly conclude that what was done by the assured in his effort to pay the premium which the majority of this court rightly held to have been such tender as to be the equivalent of payment, was also an acceptance and receiving of the policy by him.
As the majority opinion states, there was evidence tending to prove that the insured's health, habits and occupation were the same as described in the application, which requirement was one of the three, and there were but three requirements on the part of the insured, the other two being payment of the first premium and that the insured accept and receive the policy. The same evidence may properly prove more than one issue in a case.
Nowhere in either the application or the policy, and the application is in terms made part of the policy, is there any allusion to delivery of the policy excepting as may be implied from the accepting and receiving of the policy by the insured.
The quoted portion of the application covering the matter, in the majority opinion, makes clear that after receipt of the application the only requirement expressly stated on the part of the insurer was to issue the policy, and all that was left for the insured to do after the issuance of the policy was to accept and receive it and pay the premium while the insured's health, habits and occupation were the same as described in the application.
In this case the action of plaintiff was on a contract in writing prepared by defendant, and where such is the case and there is uncertainty of meaning necessitating interpretation, such interpretation must be given in favor of the other contracting party.
Following that unquestionable rule I am of opinion that whether the insured accepted and received the policy, did the equivalent of paying the first premium, and was at that time in the same health and had the same habits and occupation as when he made the application for the insurance, were submissible to the jury and therefore the court erred in directing a verdict.
Text writers declare and many cases hold, indeed there are no authorities to the contrary, that manual delivery of an insurance policy, that is conferring physical possession of it on the insured, even when a policy provides in express terms that it shall be delivered to the insured as a condition precedent to the taking effect of the policy, is not necessary, constructive delivery being sufficient, but, as we have said, the word "delivery" is nowhere used in the contract of insurance in the instant case.