Opinion
No. 33819
Decided June 16, 1954.
Insurance — Casualty — Premium paid with application — No duty to act on application within reasonable time — Failure to so act — Resulting damage to applicant not recoverable in tort action.
1. Ordinarily an applicant for a policy of casualty insurance, who pays the premium at the time of the application, may not, in an action in tort, recover from an insurer damages resulting from the failure of the insurer to act upon such application within a reasonable time.
2. Apart from statute and in the absence of some express or implied promise supported by consideration, an insurer owes no duty to one, from whom it has solicited an application for casualty insurance and from whom it has received the premium to be paid for such insurance, to act upon such application within a reasonable time. On its failure to so act, such insurer's obligation is merely to return the amount of the premium.
CERTIFIED by the Court of Appeals for Williams county.
In his amended petition plaintiff alleges "that Kenneth Bly was a duly authorized agent of the defendant, The Contimental Casualty Co.," that defendant "is an insurance company insuring all types of casualty risks * * *, that on August 30, 1950, he did apply to * * * Bly for an insurance policy covering the risks of poliomyelitis, if he or his family became afflicted by said disease, and on the same day * * * did pay to * * * Bly, the agent of the defendant, the sum of ten dollars ($10), and did receive from the agent * * * Bly, a receipt for ten dollars ($10) as full payment on the poliomyelitis policy," that "on or about the 7th day of September, 1950, his daughters, Carolyn * * * and Joyce * * * and his son * * * did become afflicted by the disease of poliomyelitis," that "on the 8th day of September, 1950, the defendant * * * did issue to the plaintiff an insurance policy, * * * that the defendant failed to use due diligence and did unreasonably delay the acceptance of said application by this plaintiff and that if the defendant had accepted said application within a reasonable time, the disease contracted by his children * * * and the losses resulting therefrom, would have been covered by said policy," that "if the defendant had rejected said application within a reasonable time, the plaintiff would have procured insurance elsewhere," that "if the defendant had acted upon the application of the plaintiff within a reasonable time, the damages sustained by the plaintiff by reason of the illness of the children of the plaintiff, would have been covered by said policy, and the policy would have been in force at the time the children incurred the disease * * *, that the defendant, having solicited and received the application and premium for the insurance from the plaintiff, owed the plaintiff the duty to act upon said application within a reasonable time * * *," and that "by reason of the negligence and unreasonable delay and failure of the defendant in acting upon and passing upon said application for said insurance, the plaintiff has been damaged in the sum of $15,000."
Defendant's demurrer to the amended petition was overruled.
At the trial, plaintiff testified that he went to Bly's office and talked to him about poliomyelitis insurance. At that time plaintiff signed an application for a policy of insurance. He also paid to Bly the ten-dollar premium for the two-year coverage to be provided for in the policy. Bly gave him a receipt for that payment. Plaintiff testified that Bly then said to plaintiff that he was covered by poliomyelitis insurance.
Defendant's policy was issued on and dated September 8, 1950. The evidence indicates that plaintiff's children, to use the words of the amended petition, "did become afflicted by" poliomyelitis before September 8, 1950, that is, on September 6 and September 7.
The provisions of the policy issued cover "poliomyelitis which first manifests itself after the effective date of" the policy.
The receipt for the premium reads as follows:
"No. _____ August 30 1950 "Received of Kenneth Patten "Ten and no/100 _____ dollars "Full payment on polio policy "$10.00 Kenneth T. Bly"
The application for the policy was signed by the plaintiff and is in the following form:
"Protection Becomes Effective Noon Date of Policy and Continues in Force for Two Full Years"__________
"APPLICATION FOR POLIOMYELITIS INSURANCE TO CONTINENTAL CASUALTY COMPANY"1. What is Your Name? Kenneth Patten
Residence Address? West Unity Ohio
City _____ Zone _____ State_____
Age? 33 Date of Birth? Aug 15 1917
Occupation? Farmer
"2. Have you or any member of your family had poliomyelitis within the last 90 days?
"No
"3. Are you applying for:
"* * *
[x] Family Policy and attaching $10.00 for 2 years?
"Dated Aug 30 1950
Signature Kenneth Patten
Applicant
"PREMIUM DUE FOR 2-YEAR TERM MUST ACCOMPANY THIS APPLICATION"LICENSED SOLICITOR
"OR BROKER E.C. Cook
"ADDRESS Toledo O"
This application is on a printed form and on the back of the form is an advertisement which states in a prominent place "immediate coverage from date of policy."
The Common Pleas Court directed a verdict for the defendant.
On appeal to the Court of Appeals, that court reversed the judgment rendered on that verdict and remanded the cause to the Common Pleas Court for a new trial. Subsequently, the Court of Appeals found that the decision and judgment which it had rendered was in conflict with the decision rendered by the Court of Appeals for Cuyahoga county in the case of Jekubow v. Prudential Ins. Co., 28 Ohio Law Abs., 353, and ordered the record of the case to be certified to this court for review and final determination.
Messrs. Newcomer, Newcomer Shaffer, for appellee.
Messrs. Gebhard Hogue, for appellant.
There is a conflict in the evidence as to whether Bly told plaintiff, when plaintiff signed the application and paid his ten dollars, that plaintiff was covered by poliomyelitis insurance. In view of the prominent provisions in the application which plaintiff signed that "protection becomes effective noon date of policy," it is doubtful whether plaintiff could have relied on that statement which he testified Bly made. In any event, the allegations of plaintiff's amended petition do not refer to any such statement of defendant's agent but rely entirely upon the claimed delay of defendant in acting upon plaintiff's application.
Furthermore, it is conceded by plaintiff that this action is not based upon any contractual obligation of defendant. Cf. Hartford Fire Ins. Co. v. Whitman, 75 Ohio St. 312, 79 N.E. 459. Therefore the basic question to be determined is whether an applicant for a policy of casualty insurance, who pays the premium at the time of the application, may, in an action in tort, recover from the insurer damages resulting from the failure of the insurer to act upon such application within a reasonable time. Stated another way, that question is whether an insurer owes any noncontractual duty to one, from whom it has solicited an application for casualty insurance and from whom it has received the premium to be paid for such insurance, to act upon such application within a reasonable time. Obviously, in the absence of such a duty, there can be no basis for recovery for a failure to act upon such application.
The courts of last resort in this country have been in disagreement on the answer to that question. It will serve no useful purpose to discuss the numerous conflicting decisions or the reasons given therefor. They are referred to in a recent comprehensive annotation entitled "Rights and Remedies Arising Out of Delay in Passing Upon Application for insurance," 32 A.L.R. (2d), 487 to 539, inclusive. As stated in an article by William L. Prosser entitled "Delay in Acting on an Application for Insurance," 3 University of Chicago Law Review, 39, 43:
"An examination of the * * * cases sustaining the liability of the insurance company for unreasonable delay immediately reveals the fact that there is more agreement upon the conclusion that the company should pay that upon any process of reasoning to support it * * *."
Our attention has been called to no statute which imposes any such duty on an insurer.
In the absence of statute, the recognition of any such duty would appear to be entirely inconsistent with elementary principles of the common law as heretofore understood in this state. From an examination of the written application signed by plaintiff, it is apparent that it represents at most a written offer to the defendant insurer which contemplates that it may be accepted by the defendant by the issuance of a certain kind of insurance policy. There is no claim that it was accepted by or on behalf of defendant before defendant issued the policy on September 8. Certainly, defendant was under no duty to accept the offer. Probably, if defendant did not accept the offer within a reasonable time, it could not accept it so as to impose upon plaintiff, without some further assent of plaintiff, the contract, which plaintiff had indicated that he was willing to make with defendant if his offer was accepted within a reasonable time. In such an instance, it would be the duty of defendant to return the premium to plaintiff. We know of no principle of the common law which imposes upon an offeree any further duty to act upon an offer which he receives, even though he may have solicited that offer.
The judgment of the Court of Appeals is reversed and that of the Common Pleas Court is affirmed.
Judgment reversed.
MIDDLETON, HART and STEWART, JJ., concur.
I concur in the judgment of reversal, but prefer to base my concurrence on grounds other than those stated in the majority opinion.
This is an action in tort based on negligence to recover damages from an insurer. Undisputed facts are that the application for the policy of insurance was made to a local agent at West Unity, Ohio, on Wednesday, August 30, 1950. It was promptly transmitted to the general agent of the insurer at Toledo and arrived Friday, September 1. That same day the general agent forwarded the application to the home office of the insurer in Chicago. In accordance with the generally prevailing custom, the home office was closed on Saturday and Sunday, September 2 and 3. Monday, September 4, was Labor Day, a legal or public holiday, and the home office was likewise closed on that day. On Tuesday, September 5, the application was stamped "Received," and thereupon, in conformity with standard practice, examination and processing of the application immediately began. The policy was issued on September 8 and by its terms became fully effective on such date.
In the circumstances described, any evidence of unreasonable delay in handling the application and in issuing the policy is absent. Because of the nature of the action and under the allegations of the amended petition, it was incumbent on the plaintiff to show negligence on the part of the insurer to sustain any right of recovery he might have. As a matter of law, there was a failure of proof in this respect, and the trial court properly directed a verdict for the defendant.
Dissents on the grounds, as held by the majority of the Court of Appeals, that the allegations of the petition do state a cause of action in tort and that the evidence presents a factual question for determination by the jury as to whether the elapse of nine days in issuing the promised policy was a reasonable delay under the circumstances.