No. 14751 IN THE SUPREME COURT OF THE STATE OF MONTANA

MARY E. CAMERON, individually and MARY E. CAMERON AS PERSONAL REPRESENTATIVE in intestacy of the estate of Archie H. Camerson, deceased, Plaintiffs and Appellants,

VS. FIRST NATIONAL BANK IN BOZEMAN, a national banking association,and UNIVERSAL UNDERWRITERS LIFE INSURANCE COMPANY, a Stock Company, Defendants and Respondents.

Appeal from: District Court of the Eighteenth Judicial District, Hon. W. W. Lessley, Judge presiding. Counsel of Record: For Appellants: Landoe, Brown, Planalp,Kommers & Lineberger,

Bozeman, Montana Gene I. Brown argued, Bozeman, Montana For Respondents: Anderson, Symrnes, Brown, Gerbase, Cebull & Jones,

Billings,Montana Rockwood Brown argued, Billings, Montana Drysdale,McLean, Screnar & Cok, Bozeman,Montana James J. Screnar argued, Bozeman,Montana

i+ L: - Filed: Submitted: November 2, 1979Mr. Justice Gene B. Daly delivered the Opinion of the Court. This is an appeal from a summary judgment granted by the DistrictCourt of the Eighteenth Judicial District, Gallatin County, in favor of the defendants-respondents. Plaintiff-appellantMary E. Cameron,aspersonal representative of her father's estate,brought an action to quiet title to a mobile home that was being purchased by her father from Premier Homes, Inc., under a retail installment sales contract at the time of his death. By this action she also sought to have defendants pay the remaining balance of the purchase price on themobile home for their failure to provide her father,Archie Cameron, with a policy of credit life insurance. Summary judgmentwas granted in favor of respondents after both sideshad answered interrogatoriesand after respondents had filed affidavits in supportof their motion for summary judgment. The judgment

was granted on the grounds that there never was a contract of insurance. Mary Cameron is the daughter of Archie Cameron and is the personal representative of his estate. Cameron died

on January 20, 1978. One of the assets of his estate was a 1972Columbiamobile home which Cameronpurchased from respondentPremier Homes, Inc., on August 10, 1976. On that date Cameron signed a retail installment contract with Premier to purchase the mobile home. Boid Lehman, Premier's salesman, handled the transaction. The retail installment contract contained the following provision regarding credit life insurance: "CREDIT LIFEAND DISABILITY INSURANCE is not required by Seller in connectionwith this transaction. Buyer as of the date hereof, is able to perform usual activities or occupation,and otherwise qualifies for such insurance. This insurancemay be obtained through Seller for the term of this contract at the cost indicated below: ( ) Credit Life Insurance $ 307.50 ( ) Credit Life and disability Insurance $ "I desire credit ( ) life and ( ) disability insurance. IAM UNDER 66YEARS OF AGE. "Date 8-10-76 

### x /s/ Archie H. Cameron Signature of Insured Buyer "THIS ISNOT A COMMITMENTTO PROVIDECREDIT LIFE OR CREDIT LIFEAND DISABILITY INSURANCE." The total deferred contractprice included the $307.50 premium for credit life insurance. The retail installment contractwas assigned to respondent FirstNational Bank of Bozeman the same day. The insurance policy was to be with respondent Universal Underwriters Life InsuranceCompany. Premier Homes, aspart of its business sellingmobile homes, had an agreement with Universal Underwriters Life Insurance Co. whereby Premier Homes acted as Universal's agent for the purpose of selling credit life insurance. Cameron did not receive an application for credit life insurance until September 14, 1976,when he completed and signed an applicationprepared for him by Boid Lehman. On the application Cameron indicated that he had high blood pressure and was under treatment, that he had been treated for arthritis, that he was notworking at the time, and that he was drawing disability from the Three Forks Portland Cement Co. This application was forwarded to the main office of Premier Homes, where Helen Martin, an employee of Premier,determined that Cameron was ineligible for credit life coverage under rules dictated to Premier by respondent Universal Underwriters Life Insurance Co.In his affidavit,which the District Court accepted as being true, ~oid Lehman, the salesmanwho sold the mobile home to Cameron, stated that six days later, on September 20, 1976, at the request of the manager of Premier'shome office, he drove to Cameron's home in Three Forks and personally notified Cameron that he was not qualified for credit life insurance and thathe did not have any coverage. This "request"was corroborated by the affidavit of Helen Martin, a fellow employee of Premier Homes. Cameron never receivedwritten notice that his application for credit life insurancewith Universal Underwriters Life Insurance Co. had been rejected. No policy was ever issued to Cameron. His application was never forwarded by Premier to Universal, since Premier's employee Helen Martin determined that it should be summarilydenied. The District Court found that Universal never had notice that an application had been made and that itwas unaware thatArchie Cameron ever existed or that credit life coveragewas being claimed until a demand for payment on the policy was made by the attorney for the Cameron estate in a letter addressed to Premier onMarch 23, 1978. This demand was refused. Although Cameron's application for credit life insurancewas rejected on September 20, 1976, the $307.50 premium for insurancewhich had been included in the contractprice

was not refunded or credited to his account until March 1978,after Cameron's death and after the attorney for his estate had demanded payment on the policy. At that time

a refund and credit of the $307.50 premium plus interest

was made. Twoprincipal issues are presented to this Court on appeal:1. Whether or not defendants-respondentswere entitled to summary judgment as a matter of law if they failed to follow the provisions of section 33-21-204(2), MCA, and section 33-21-206(3),MCA? 2. Whether or not there remained any genuine issues of material factmaking summary judgment improper in this case? Mary Cameron argues that summary judgmentwas improperly granted to respondents in this case because there remained genuine issues of material fact and because respondents

were not entitled to summary judgment as a matter of law. Rule 56(c), M.R.Civ.P. The reason respondents were not entitled to judgment as a matter of law is that they failed to comply with the requirements of Montana's statutes regulating credit life insurance. Specifically, respondents failed to deliver an application for credit life insurance to Cameron at the time the indebtednesswas incurred,August 10, 1976, and they failed to either accept or reject his applicationwithin thirty days of that date, contrary to the provisions of section 33-21-204(2), MCA; although respondents "required" Cameron to make a payment of $307.50 in connectionwith credit life insurance, a policy was

never issued; although respondents allegedly gave oral notice in person, they failed to give him immediatewritten notice of that fact as required by the statute, section 33-21-206(3), MCA; and, respondents failed to make an appropriate credit to his accountpromptly, not doing so until contacted by the attorney for Cameron's estate inMarch 1978. Each of these actions or lack of action was contrary to the provisions of section 33-21-206(3), MCA. RespondentFirstNational Bank in Bozeman is liable under these provisions as a "creditor" under section 33-21-103(3), MCA. Furthermore, respondents as the moving parties failed to meet their burden to establish the absence of any genuine issues of material factand consequently are not entitled to summary judgment. Respondents contend that the summary judgmentwas proper as a matter of law. There never was a contract for insurance,as Cameron's application for credit life insurance was promptly rejected by respondents and personal notice of -- this rejectionwas -- given Q Premier's employee, Boid Lehman 

### - on September 

### -- 1976. 20, The payment of an insurancepremium by Cameron as part of the total deferred price of the mobile home did not create a contractof insurance. 

### No policy was ever issued, and respondentUniversal Underwriters never knewof Cameron's application,as it had been summarilydenied by Premier. Therefore, summary judgmentwas proper. Section 33-21-206(3), MCA, only applies where the creditor "requires"the debtor to carry credit life insurance. Since the retail installmentcontract provided that insurance was not required, this section is also inapplicable to the present case. (Evenif this Court accepts appellant's argument that section 33-21- 206(3), MCA, applies where the debtor is required 

### -- to make

a payment in connectionwith credit life insurance,appellantwaived the advantage of the written notice requirement, which is intended solely for his benefit.) As a preliminarymatter, itmust be determined whether FirstNational Bank of Bozeman ("Bank")and Universal Underwriters Life Insurance Company ("Insurance Company"),

aswell as Premier Homes, Inc. ("Premier")are properparties to this action. Respondent Bank is potentially liable for the obligations of a "creditor"under section 33-21-206(3), MCA, because it comes within the definition in section 33-21-103(3), MCA: "'Creditor'means the lender of money or vendor or lessor of goods, services,property, rights, or privileges, for which payment is - - arranged through a-credittransaction or 

### any successor to the right, title, or interest 

### -- of such a lender, vendor, or lessor.

### " (Em

### --- - phasis added.) Since the Bank took an assignment of the retail installment contract, itmust complywith the requirements of section 33-21-206(3), MCA, as Premier's successor in interest. Respondent Insurance Company is not liable in any event because, even though Premiermay have acted as its agent in passing upon Cameron's application for credit life insurance, the requirements of section 33-21-206(3), MCA, are directed at a creditor and not at an insurer. Appellant Mary Cameron contends that summary judgment

was improperly granted to respondents in this case because there remained genuine issues of material factand because respondents were not entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P., provides that summary judgment "shallbe rendered forthwith if the pleadings, depositions, answers to interrogatories,and admissions on file, togetherwith the affidavits, if any, show that there is

no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." The first issue in this appeal is whether or not respondentswere entitled to judgment as a matter of law. Appellant urges that respondentswere not entitled to summary judgment because they failed to comply with the requirements of sections 33-21-204(2) and 33-21-206(3), MCA,which are part of Montana'smodel act for the regulation of credit life insurance and creditdisability insurance. Section:33-21-204,MCA, provides in relevantpart: "(1) All credit life insurance and creditdisability insurance sold shallbe evidenced by an individual policy or in the case of group insuranceby a certificate of insurance, which individual policy or group certificateof insurance shall be delivered to the debtor at the time the indebtedness is incurred except as hereinafter provided. 

### " (2) If the individualpolicy or group certi-- 

### - ficate debtor a COPY 

### - notice debtor of -insurance -- is not delivered 

### -- to the at the time the indebtedness is incurred, 

### ---- of -- the application for suchpaicy or 

### -- a

pp of 

### -proposed insurance, signed by the and setting forth the name and home office address of the insurer, the name or names of the debtor, the amountof payment by the debtor separately in connectionwith credit life insurance and creditdisability insurance coverage,and a brief description of the coverage provided or to be provided, shallbe 

### --delivered 

### --- to the debtor at the time such indebted- 

### ---- ness is incurred. The copy of the application -- for or notice of proposed insurance shall refer exclusively to insurance coverage and shall be separate and apart from the loan, sale, or other credit statementof account, instrument, or agreement unless the information required bv this section isprominently set forth therein.

~.' Upon approval -- of the application, if any, or acceptance of 

### -- the insurance 

## - and within 30 zys of the date upon which 

## indebtedness?^ in

### --- curred,

## the insurer shall 

## -- cause the individual policy or group certificate of insurance

## -- to be delivered 

### -- to the debtor. 

### he application or notice of proposed insurance shall state that, 

## - - upon acceptance by the insurer, the insurance shallbecome effective as of the date the indebtedness is incurred." (Emphasisadded.) Subsection (2)applies only when the credit life insurance is not evidenced by a policy delivered to the debtor at the time the indebtedness is incurred. Appellant contends that since respondents failed to deliver a copy of the application for credit life insurance to Cameron onAugust 10, 1976,when the indebtedness on the mobile home was incurred,and did notprovide him with an applicationuntil September 14, 1976, they have violatedthe provisions of this subsection. Furthermore, appellant argues that the third sentence of section 33-21-204(2), MCA, means that respondentswere required toact on the application by either accepting orrejecting it within 30 days from the date the indebtednesswas incurred. since the installment sales contractwas signed on August 10, 1976, and Cameron did not receive an application until September 14, 1976, it allegedlywas not actedupon within the timeprovided by statute. Contrary toappellant's contentions, it isclear that section 33-21-204, MCA, speaks only tothe situationwhere

a contract for credit lifeinsurance has been entered, and the section isnot applicable inthis case where therewas

no contract and where no policy was ever issued. Archie Cameron's application for credit lifeinsurance

was denied, and no policy was issued. Mere payment of the premium does not create a contract of insurance. 43 Am.Jur.2d Insurance BS 195, 208, 210. Furthermore, the insurer's delay inaccepting orrejecting an applicationdoes not create

a contract of insurance. InWeaver v. WestCoast Life Insurance Co. (1935), 99 Mont. 296, 304, 42 P.2d 729, 733, thisCourt observed: "Itisa well-settled rule, establishedby the greatweight of authority, thatmere delay inpassing upon an application for insurancecannot be construed as an acceptance thereof by the insurer so asto support an action 

### - ex contractu." It is appparent that therewas no contract of insurance inthe case before thisCourt. A reading of the statute demonstrates that it isintended toapply only inthe situationwhere a policy of insurance isultimately issued by the insurer. Another statute, section 33-21-206(3),MCA, deals specificallywith the situation involved in thiscase, where no policy of insurance was ever issued. Finally, the language of section 33-21-204(2), MCA, demonstrates that it isapplicable only "[ulpon approval of the application, if any, or acceptance of the insurance 

# . . ." The second statutewhich appellant claimswas violated,

so astomake summary judgment improper, is section 33-21- 206(3), MCA, which provides: "(3) - If - a creditor requires - a debtor -- tomake a payment inconnectionwith credit life - insurance

# or credit disability insurance and an individual policy or group certificateof insurance isnot issued, the creditor shall immediately givewritten notice to such debtor and shall promptly make an appropriatecredit tothe account." (Emphasis added.) Respondents contend thatby itsown terms, thisprovision is inapplicable because the retailinstallment contract expresslyprovided that "CREDIT LIFE AND DISABILITY INSURANCE isnot required by Seller inconnectionwith this transaction." Such an interpretationmisreads the statute, which applies "[ilf a creditor requires a debtor tomake a payment inconnection with credit lifeinsurance 

# .

# .." The criticalwords are "requires

# . . . payment," not "requires 

# . .

# . insurance." Thus, even though credit lifeinsurance was not required, if the purchaser selected to insure, payment of the premium allegedly was required. Itisnot disputed thatpayment of the $307.50 premium was made atthe timethe contractwas signed and that that amount was included inthe total contract price tocover credit lifeinsurance. What this allboils down to is a question of fact which was neither addressed nor resolved by the trial court--namely, was a payment required? If a payment was required, the statuteapplies; if no payment was required,the statute does not apply. Respondents do littlemore that argue that the statute does "require" insurance,not payment, to become effective,and we have rejected that argument. A determination on this point is necessary for the resolution of this matter and, as such, is a genuine issue ofmaterial fact. If payment was required, respondents could not be entitled to a judgment as a matter of law because of their failure to complywith section 33-21-206(3), MCA

# . Itdoes not appear that the required standardswere seriously applied here. We have an affidavitby the salesman, not a disinterested party, that he gave personal notice to a man now deceased who cannot answer. His co-worker,who cancelled the application for insurance, gave affidavit that the salesmanwas asked to notify Cameron, not that he did

so. Thereafter, the affiants attempted to obtain insurance for Cameron; no attemptwas made to refund the premium paid by Cameron. The most logical inference that flows from these facts does not favor respondents. If the inferences are correctly drawn againstmovant, there seems little doubt the present result could stand. We have the same situation in regard to the payment of the insurance premium in the firstplace. If all inferencesare drawn againstmovant, the answer would be that Cameronwas required to make the initial payment if he wanted the insurance. In a case of this kind when available evidence is flimsy at best and most of it subject to dispute only by a deceased person, equity and fairness demand more evidence than produced here before summarydisposal. At the veryleast, a procedure should be followed which would in some

manner test the credibility of the two witnesses against the word of a deceased person. Some effort should be made todetermine if the deceased was required tomake the premium payment when he did, therefore placing him under the protection of section 33-21-206(3), MCA. The summary judgment of the District Court isvacated

as improperly issued and the cause remanded for further proceedings consistentwith this opinion.,,d'' iMr. Justice John C. Sheehy speci.211~ concurring:

I agree that the summary judgment against Cameron must be vacated, and thematter remanded to the District Court for furtherproceedings, but on different grounds than set forth in themajority opinion. The DistrictCourt, in itsmemorandum attached to its order granting summary judgment,placed weight on the fact that in the application for credit to Premier Homes, Inc., therewas contained the statement "THIS IS NOT A COMMITMENT TO PROVIDE CREDIT LIFE OR CREDIT LIFEAND DISABILITY INSURANCE.

### " It should be understood that the quoted statement, contained in the application for credit,has no bearing whatever insofar as the insurer,Universal Underwriters Life InsuranceCompany is concerned. The application for credit is not designed to be an application for insurance. It is designed to go to Premier Homes, Inc., the creditor, and eventually to its assignee, FirstNational Bank of Bozeman. The application for credit has no part in the decision of Universal Underwriters as to whether it will issue credit life or disability insurance on this particular risk. The reason the language appears on the credit application form is an outgrowth of the federal Truth in LendingAct. Pub. L. 90-321, Title I, S106(b), 82 Stat. 148; 15 U.S.C. 1605(b). Because that language appears in the application for credit, the creditor, Premier Homes, Inc., is not required to include the cost of insurance in computing the finance charge percentage which the creditor must disclose to the borrower under the federalTruth in LendingAct. When this purpose of the language on the application for credit form isunderstood, one sees that ithas no bearing on whether Cameron is entitled to insurance.Because the credit application form itself is not an application for insurance, itwas necessary, as the facts in this case show, for an agent of Premier Homes, Inc. to return to Cameron on September 14, 1976, to obtain a true application for insurance. It is this formwhich Cameron filled out, and truthfully indicated the fact that he was retired because of disability, and suffered from arthritis and other ailments. There is a second element in thememorandum opinion of the District Court which must at this point be explained away. The District Courtheld that because Premier itself refused the credit life application, "nonotice or instrumentswere
ever given to Universal Underwriters Life InsuranceCompany about the application,and likewise no policy was issued therefore. Universal Life Insurance Company was unaware that Archie Cameron ever existed, and had no knowledge whatsoever of claimed credit life coverage for this person." That finding of the District Court disregards the fact that Premier Homes, Inc. was an agent of Universal Underwriters Life InsuranceCompany. Universal is bound by the acts of its agent, and by the agent's knowledge. In fact, all knowledge of the agent relating to matters within the agent's 

# A authority aae imputed to the insurance company. Section 28-10-604,MCA. In this case Vniversal's agent collected the insurance premium, took the written insurance application,determined itself that the application did not fit the insurer's underwriting rules, and the agent on its own turned down the insurance for Cameron. But at that point, under the statute then in existence, it was the duty of the insurance company, through its agent or otherwise, to "immediately give writtennotice to suchdebtor" and to "promptly make an appropriate credit to the account." Section 33-21-206(3),MCA. The reason that those strict provisions of insurance law apply to credit life and disability business is because of the nature of this business in our present commercial world. In the credit life business insurers do not compete with each other to get insureds, but rather they compete with each other to get agents such as Premier Homes, Inc. Because the creditor, the lender, is also the agent of the insurance company writing credit life, the insurance company has entetobusiness itwould not otherwisehave. For this reason, insurance companies allow to such creditors as agents a substantial portion of the credit life premium for writing the business. This is one of the factors that cause premiums for credit life and disability to be quite high in relation to the risk assumed, That the procedure is successful is attested to by the fact that there is a high "penetration" of credit life and disability insurance in installment credit risks; some report as high as 90 to 95percent. TheNational Association of InsuranceCommissionerswas

aware of this when itproposed the model law that Montana has adopted as its credit life and disability insurance provisions. Section 33-21-101, et seq., MCA. Because of the prospective peril for borrowers-insureds in credit transactions, the model code incorporates strict provisions with respect to denial of coverage, and provides for immediate notice to the borrower, as well as return of his premium through a reduction of his debt account. If we ignore the plain mandates of these statutes relating to insurance,we negate the intention of the legislaturein thesematters, and substitute our own rules of insurance law instead ofwhat the legislature established. The insurer, through its agent, did not follow the law in turning down the insurance coverage in this case. It kept for one and a half years the premium which it should have returned immediately. "Oversight"or "inadvertence"is not a legal

excuse 

### for thus ignoring the lawful duty imposed upon the insurer. The only lawfulway that we can give effect to the intention of the legislature in these matters is to hold here that the insurance company,having failed in its lawful duty to give prompt written notice that the borrower was not insured, and failing to give prompt return of the paid premium, is estopped to claim now, after the death of the insured, that he is not covered by the insurer. We cannot condone the failures of the insurerwhen there are but three or four pages of statutes relating to credit life and disability insurance on our law books, by allowing it to shelter itself under the claims of oversight and inadvertence, when the duty of the insurer is to conduct its business in this state according to our laws. This is not too much to ask of such an insurer. The only fact issue upon which this case depends is whether the creditor required the debtor to make the premium payment in connectionwith his application for credit life insurance,under section 33-21-206,MCA. On the record, it appears that thiswas the case. If Premier Homes, Inc., at the time of the application in this case,made it a practice to add the cost of insurance to the borrower's debt in the usual casewhere Universal Life Underwriters was to be the insurer, itmight then be concluded that the debtor was in fact required to make thepremium payment. That is the single fact issue which I think is involved in this case,becauseotherwise it appears estoppel prevents the company from raising the no-contract issue. The claim of Premier Homes and Universal Underwriters that Cameron "waived" his right to written notice and immediate repaymentof his premium cannotbe sustained,becausewaiver is a "voluntary abandonment of a known right." There is

no way that I can see,after the death of Cameron, to prove his knowledgeof these factors.

Justice