Summary
In Duncan v. John Hancock Mut. Life Ins. Co., 137 Ohio St. 441 [ 31 N.E.2d 88, 91], the court said that the provisions of the clause are obviously ambiguous and susceptible of two different constructions, that the insurer could have used clear language and that the ambiguity must be resolved against the company.
Summary of this case from Ransom v. Penn Mutual Life Ins. Co.Opinion
No. 28147
Decided December 24, 1940.
Life insurance — "Binding receipt" issued to applicant — Present contract of interim or temporary insurance — Commences upon signing application and paying initial premium.
Where a "binding receipt" is issued by a life insurance company to an applicant, providing that no liability is assumed by the company on account of the initial premium payment "nor until it shall issue a policy, but if death occurs after the date of the application * * * and prior to the date of issue of such policy, payment in accordance with and subject to the conditions and provisions of the policy applied for shall be made; provided the applicant is insurable under the company's rules and the application is approved and accepted by it at its home office as to plan, premium and amount of insurance," the parties will be deemed to have intended to effect a present contract of interim or temporary insurance on the life of the applicant, to commence immediately upon the signing of the application and payment of the initial premium.
CERTIFIED by the Court of Appeals of Cuyahoga county.
Appellant herein was named as beneficiary in her husband's application for insurance upon his life. Her husband died and she instituted suit in the Municipal Court of Cleveland to recover from the appellee herein the amount of insurance provided for in the application. The case was tried to the court, without the intervention of a jury, upon a stipulation of facts.
The stipulation discloses that on or about September 9, 1937, Dell B. Duncan, deceased husband of appellant, applied in writing for a policy of insurance with the John Hancock Mutual Life Insurance Company, appellee herein, for the face amount of $720, designating the appellant, Mrs. Amelia M. Duncan, as beneficiary. There was paid to the appellee at that time the sum of one dollar, representing the advance premium payment, and the customary receipt was detached from the application and given to the applicant. The application was transmitted by the appellee's medical examiner to the home office in Boston, Massachusetts, on or about September 13, 1937. At that time a discrepancy was discovered between the applicant's occupation as described on the face of the application and that described in the medical examiner's report on the reverse side of the application. In accordance with the company's practice, the application was returned to the company's Cleveland office on or about September 14, 1937, for correction.
It was further stipulated that Dell B. Duncan, the applicant, became ill on September 24, 1937, and died on or about September 29, 1937, before completion "of the above-indicated investigation" and before the application was returned to the company's home office. The application was never "accepted or approved" by the company as to plan, premium or amount of insurance because of the discrepancy contained in the application and "because the applicant died before the completion of the above-indicated investigation nor was said application ever rejected" by the company.
It was further stipulated that the claim for payment of the insurance was seasonably made by appellant; that proper and satisfactory proof of death was submitted to appellee, but that appellee denied the claim and tendered to the appellant a return of the premium paid, which appellant refused to accept. No notice had ever been given by the appellee to Dell B. Duncan, the applicant, that the application was rejected or approved.
The receipt issued by the company to the applicant was in evidence and contains the following language:
"John Hancock Mutual Life Insurance Company of Boston, Mass. —
"Receipt for initial premium
"Proposed insured ......................... 19 ..
"Received from ................ the sum of ....... in connection with an application for insurance made on this date and subject to the following conditions. It is understood and agreed that no liability is assumed by the company on account of this payment nor until it shall issue a policy, but if death occurs after the date of the application from which this receipt is detached and prior to the date of issue of such policy, payment in accordance with and subject to the conditions and provisions of the policy applied for shall be made; provided the applicant is insurable under the company's rules and the application is approved and accepted by it at its home office as to plan, premium and amount of insurance. If a policy is issued, the deposit will be applied to payment of the premiums thereon from its date, otherwise the deposit will be returned to the payer thereof upon surrender of this receipt.
"District ........... Agent ........... Debit ......
"Agents' authority is limited — See reverse side."
On the reverse side of the receipt was the following language:
"Limitations on agents' authority
"No agent has authority to make, modify, or discharge contracts for the company or to waive or exercise any of its rights.
"Notice to or knowledge of any agent or medical examiner, whenever given or acquired, is not notice to or knowledge of the company and does waive any conditions of the policy.
"No agent or medical examiner is authorized to approve applications or to pass upon insurability.
"If you do not receive a policy or the return of this deposit within four weeks, please notify the company at Boston, giving the name of the agent, the amount paid and the date of payment."
The trial resulted in a judgment for appellant in the sum of $792.72 An appeal was prosecuted to the Court of Appeals, where the judgment was reversed and final judgment entered in favor of appellee herein. The Court of Appeals certified the case to this court on the ground that its judgment is in conflict with that rendered by the Court of Appeals of Butler county in the case of Prudential Ins. Co. v. Howard.
Messrs. Krieg Eckstein and Mr. Lawrence H. Williams, for appellant.
Messrs. Bushnell, Burgess Fulton and Mr. Robert M. Weh, for appellee.
At the outset, it must be stated that the effect of the discrepancy between the applicant's occupation as described on the face of the application and that as described in the medical examiner's report on the reverse side of the application, is not in issue. Nor is the question whether the applicant was insurable under the rules of the company presented as an issue.
The sole question presented for our determination is whether the appellee insurance company is liable under the terms and provisions of its receipt, since the applicant died subsequently to the issuance of the receipt but before the application had been "approved and accepted."
The type of receipt here involved is generally referred to as a "binding slip" "interim receipt" or "binder."
In 29 American Jurisprudence, 158, Section 143, it is stated that: "A binding slip or interim receipt, also called a 'binder,' is ordinarily a document given to the insured to bind the company in case a loss occurs pending action upon the application and the actual issuance of a policy. It is generally held that such a slip or receipt issued by the duly authorized agent of an insurance company constitutes a temporary contract of insurance under which the company is liable for any loss occurring during the period covered by it." See, also, 1 Couch Cyclopedia of Insurance Law, 162, Section 91.
Such receipts have been variously construed by the courts, depending in great part upon the particular wording of the provisions therein contained. See collection of cases in 81 A.L.R., 332; 107 A. L. R., 194.
Determination of the issue in the instant case requires construction of the receipt.
In Copelin-Mohn, Inc., v. Buckeye Union Casualty Co., 135 Ohio St. 287, at page 290, 20 N.E.2d 713, the court said: "It is a rule of construction generally followed that where an insurance contract is so drawn as to be equivocal, uncertain or ambiguous, and be fairly susceptible to two or more different but sensible and reasonable constructions, the one will be adopted which, if consistent with the objects of the insurance, is most favorable to the insured. Great American Mutual Indemnity Co. v. Jones, 111 Ohio St. 84, 144 N.E. 596, 35 A.L.R., 1023; 22 Ohio Jurisprudence, 340, Section 185; 1 Couch Cyclopedia of Insurance Law, 375, Section 188."
The language in the receipt requiring construction reads: "No liability is assumed by the company on account of this payment nor until it shall issue a policy, but if death occurs after the date of the application * * * and prior to the date of issue of such policy, payment in accordance with and subject to the conditions and provisions of the policy applied for shall be made; provided the applicant is insurable under the company's rules and the application is approved and accepted by it at its home office as to plan, premium and amount of insurance." (Italics ours.)
Appellant contends that from the above-quoted language it may reasonably be inferred that the parties intended interim or temporary insurance to go into effect immediately upon the payment of the initial premium and issuance of the receipt; that the interim or temporary insurance thus effected was to be for the period between the making of the application and its approval and acceptance or rejection by the insurer.
Appellee, on the other hand, contends that both the application and the receipt expressly provided that there was to be no liability until a policy was issued unless the initial premium was paid at the time the application was signed, in which event payment would be made if death occurred prior to the issuance of the policy, and provided the application was accepted and approved at the home office as to plan, premium and amount of insurance; and that since the application was never accepted or approved by the company, it follows that no contract was ever made, and consequently liability does not arise.
From the language "provided the applicant is insurable under the company's rules and the application is approved and accepted by it [the company] at its home office as to plan, premium and amount of insurance," it is possible to construe the meaning of the receipt to be that it was the intention of the parties that liability should not attach to the company unless the applicant was an insurable risk and until the application was approved and accepted "as to plan, premium and amount of insurance." Yet, from the language "but if death occurs after the date of the application * * * and prior to the date of issue of such policy, payment in accordance with and subject to the conditions and provisions of the policy applied for shall be made," it is equally possible to construe the meaning of the receipt to be that it was the intention of the parties that liability should attach to the company if death should occur "after the date of the application." Otherwise, the words "after the date of the application" would be devoid of any meaning and be superfluous. (Italics ours.)
Were it the intention of the parties that liability should not attach "after the date of the application" but should attach only after approval and acceptance and before the policy is issued, would not that language, or language of similar import, have been used? Surely, the words "after the date of the application" were intended to have some meaning and binding force and effect. The provisions of the receipt are obviously ambiguous and susceptible of two different constructions. It was possible for the appellee, as composer of the provisions of the receipt, to have been clear and thereby to avoid ambiguity. "An insurer will not be permitted to benefit from an ambiguity of his own creation." Copelin-Mohn, Inc., v. Buckeye Union Casualty Co., supra, at page 291.
Under the rule of construction laid down in Copelin-Mohn, Inc., v. Buckeye Union Casualty Co., supra, the ambiguity must be resolved against the author, the appellee herein, and the parties must be deemed to have intended that interim or temporary insurance should go into effect immediately upon the signing of the application and payment of the initial premium.
Where a "binding receipt" is issued by a life insurance company to an applicant, providing that no liability is assumed by the company on account of the initial premium payment "nor until it shall issue a policy, but if death occurs after the date of the application * * * and prior to the date of issue of such policy, payment in accordance with and subject to the conditions and provisions of the policy applied for shall be made; provided the applicant is insurable under the company's rules and the application is approved and accepted by it at its home office as to plan, premium and amount of insurance," the parties will be deemed to have intended to effect a present contract of interim or temporary insurance on the life of the applicant, to commence immediately upon the signing of the application and payment of the initial premium.
Judgment of the Court of Appeals reversed and that of the Municipal Court affirmed.
WEYGANDT, C.J., ZIMMERMAN, TURNER, MATTHIAS and HART, JJ., Concur.
WILLIAMS, J., dissents.