Title: Hilfiger v. Transamerica Occidental Life
Citation: N/A
Docket Number: 980074
State: Virginia
Issuer: Virginia Supreme Court
Date: September 18, 1998

Present:  All the Justices 
 
JAMES A. HILFIGER 
 
v.  Record No. 980074     OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
September 18, 1998 
TRANSAMERICA OCCIDENTAL LIFE  
INSURANCE COMPANY 
 
UPON QUESTIONS OF LAW CERTIFIED BY THE UNITED STATES 
COURT OF APPEALS FOR THE FOURTH CIRCUIT 
 
 
Pursuant to our Rule 5:42, the United States Court of 
Appeals for the Fourth Circuit certified three questions of 
Virginia law to this Court regarding the enforceability of a 
life insurance policy.  The questions involve the application 
of Va. Code §§ 38.2-302 and -319.  We accepted the questions 
by order entered February 13, 1998. 
 
The facts, as presented in the certification order, are 
as follows.*  On January 28, 1995, James A. Hilfiger (Hilfiger) 
filled out an application for a life insurance policy with 
Transamerica Occidental Life Insurance Company (Transamerica) 
seeking insurance upon the life of his father, Paul L. 
Hilfiger.  On the application form, Hilfiger answered all 
questions on his father's behalf, and where the form required 
the "signature of proposed insured," Hilfiger signed his 
father's name.  Deborah C. Highsmith, a Licensed Resident 
                     
* Because the federal district court granted summary 
judgment in favor of Transamerica Occidental Life Insurance 
Company, the facts are presented in the light most favorable 
Agent of Transamerica, signed the application as a "witness to 
all signatures."  Highsmith knew that Hilfiger was signing the 
application on behalf of his father.  
Hilfiger's father did not see the life insurance 
application, nor did he give Hilfiger written consent to sign 
his name.  However, Hilfiger claims that he spoke to his 
father about the policy, and that his father gave him oral 
authorization to take out the policy.  The application named 
Hilfiger as the sole beneficiary for the policy. 
In May 1995, Hilfiger's father underwent a medical 
examination in connection with the life insurance application.  
At the medical examination, Hilfiger's father signed a form 
entitled "PART II of an Application for Insurance to the 
Transamerica Occidental Life."  This form did not identify the 
type of insurance applied for, who the proposed beneficiary 
was, or the amount of coverage sought.  Transamerica issued 
the insurance policy on October 9, 1995. 
On November 13, 1995, Hilfiger's wife, Donna C. Hilfiger, 
became a broker for Transamerica.  Shortly thereafter, she 
executed an amendment to the insurance policy as a 
Transamerica resident agent.  As with the original 
application, Hilfiger signed his father's name to the form.  
                                                                
to Hilfiger.  United States v. Leak, 123 F.3d 787, 794 (4th 
Cir. 1997). 
 
2
Hilfiger's father did not see the document, but Hilfiger 
asserts that he discussed the amendment with his father.  Nine 
days after the amendment was executed, Hilfiger's father 
became ill.  He died four days later on December 3, 1995. 
Transamerica refused to pay the proceeds of the life 
insurance policy.  Hilfiger filed a motion for judgment 
against Transamerica in the Circuit Court of the City of 
Virginia Beach seeking the proceeds of the policy, additional 
damages, and costs.  Transamerica removed the case to the 
United States District Court for the Eastern District of 
Virginia and later filed a motion for summary judgment.  The 
federal district court granted Transamerica's summary judgment 
motion, concluding that the execution of the policy did not 
comply with Code § 38.2-302 and, therefore, was void.  
Hilfiger appealed to the Court of Appeals. 
In certifying the questions to this Court, the Court of 
Appeals stated that the answers would be determinative of the 
proceeding pending before it.  We address the three questions 
in order. 
I. 
 
The Court of Appeals first asks: 
Whether the son's signing his father's name as 
"proposed insured" violates Va. Code § 38.2-302, 
where the son discussed the policy with his father, 
had verbal authorization to apply for the policy, 
and his father later submitted to a medical 
 
3
examination and signed a form entitled "PART II of 
an Application for Insurance to the Transamerica 
Occidental Life?" 
 
At common law, a policy of insurance taken out on the 
life of an insured without the insured's knowledge or consent 
by someone other than the insured was usually held void as 
against public policy.  1 Bertram Harnett & Irving I. Lesnick, 
The Law of Life and Health Insurance § 3.04[1][a] (1997).  The 
reason for this rule was the risk to the insured that a 
beneficiary would be tempted to "hasten by improper means the 
time when he will receive the benefits of the policy."  Wood 
v. New York Life Ins. Co., 336 S.E.2d 806, 809 (Ga. 1985); 
Hopkins v. Hopkins, 614 A.2d 96, 100 (Md. 1992). 
Code § 38.2-302(A) codifies this common law principle, 
stating in pertinent part that: 
No contract of insurance upon a person shall be 
made or effectuated unless at the time of the making 
of the contract the individual insured, being of 
lawful age and competent to contract for the 
insurance contract (i) applies for insurance, or 
(ii) consents in writing to the insurance contract. 
 
The statute provides the requisite protection for an insured 
by identifying two alternative conditions for creating a valid 
contract of life insurance.  The specific conditions 
identified by the General Assembly reflect an intent to 
require unequivocal evidence that an insured approved the 
creation of a contract of insurance on his or her life.  With 
 
4
this purpose in mind, we conclude that the facts in this case, 
as recited in the certification order, do not establish proof 
of either condition. 
First, the evidence in this case, that Hilfiger's father 
knew about the policy and orally authorized Hilfiger to apply 
for the policy, does not constitute an application for the 
policy by the insured as required by the statute. 
At one time, the insured's knowledge of the policy alone 
was sufficient to establish compliance with the requirements 
of the Code.  Former Code § 38.1-330, the predecessor to Code 
§ 38.2-302, provided in relevant part that "[n]o contract of 
insurance upon the person . . . shall be made or effectuated 
unless . . . the individual insured . . . applies therefor, 
has knowledge thereof, or consents thereto . . . ."  In 1986, 
however, the General Assembly eliminated the phrase "has 
knowledge thereof," leaving the two current alternative 
conditions as the only means of creating a valid contract of 
life insurance.  Acts 1986, ch. 562. 
We also conclude, as Hilfiger acknowledges, that orally 
authorizing another to take out a policy does not alone 
constitute "applying" for the policy.  If oral authorization 
alone were enough to satisfy the application requirement, the 
written consent alternative would be rendered superfluous.  
 
5
Wren v. New York Life Ins. Co., 493 F.2d 839, 841 (5th Cir. 
1974)(interpreting a similar statute). 
Nevertheless, Hilfiger asserts that the application prong 
of the section was satisfied in this case because his father 
"materially participated" in the application process by 
providing a medical history and submitting to a medical 
examination.  We disagree.  "Material participation" in the 
application process is not synonymous with applying for the 
policy.  As we have said, the purpose of the conditions 
required for a valid contract of life insurance is to 
eliminate any doubt that the insured knew about and agreed to 
the issuance of the insurance contract.  Here, providing 
medical information in conjunction with the issuance of an 
insurance policy did not reflect consent to the contract of 
insurance. 
For the same reason, we reject Hilfiger's contention that 
his father's signature on the medical examination form 
qualified as a consent in writing to the insurance contract.  
The insured's signature on the medical form affirmed only that 
the information provided on the form was correct.  Although 
the form itself stated that it was a part of an application 
for insurance, it contained none of the terms of the contract.  
It was not, and could not have been, a written consent "to the 
insurance contract" as required by Code § 38.2-302. 
 
6
For these reasons, we conclude that the facts of this 
case do not satisfy either alternative required by Code 
§ 38.2-302 for the creation of a valid contract of life 
insurance.  Accordingly, we answer the first question in the 
affirmative. 
II. 
In the second certified question the Court of Appeals 
asks: 
Whether the insurance policy should be enforced 
on behalf of the beneficiary despite the violation 
of § 38.2-302, in light of Virginia Code § 38.2-
319's provision that "[a]ny insurance contract made 
in violation of the laws of this Commonwealth may be 
enforced against the insurer?" 
 
 
We answer this question in the negative.  If Code § 38.2-
319 required enforcement of a policy issued in violation of 
Code § 38.2-302, the protection for an insured intended by 
Code § 38.2-302 could never be realized, and Code § 38.2-302 
would be meaningless.  Code § 38.2-319 does not compel such a 
result. 
By its own terms, Code § 38.2-319 applies to a contract 
of insurance which is "made" in violation of a law of the 
Commonwealth.  Code § 38.2-302 declares that if the statutory 
requirements are not met, no life insurance policy can be 
"made or effectuated."  Thus, in the absence of compliance 
with the provisions of Code § 38.2-302(A), no contract of 
 
7
insurance is created, and any policy issued under those 
circumstances must be void ab initio.  Wood, 336 S.E.2d at 
809, 811-12 (interpreting a similar statute).  Contra Jackson 
Nat'l Life Ins. Co. v. Receconi, 827 P.2d 118, 131 (N.M. 
1992). 
Here, no contract of life insurance was "made or 
effectuated" because there was no compliance with Code § 38.2-
302(A).  Therefore, Code § 38.2-319 does not require 
enforcement of the insurance policy issued by Transamerica in 
this case. 
III. 
Finally, the Court of Appeals asks: 
Whether an insurance company can be estopped to 
rely on § 38.2-302 because its agent knew about the 
incorrectness of the signature on the application? 
 
Estoppel is an equitable principle that prevents one 
"whose action or inaction has induced reliance by another from 
benefiting from a change in his position at the expense of the 
other."  Employers Commercial Union Ins. Co. of America v. 
Great American Ins. Co., 214 Va. 410, 412, 200 S.E.2d 560, 562 
(1973).  Hilfiger argues that Transamerica should be estopped 
from relying on Code § 38.2-302 to avoid payment on the life 
insurance policy because it is charged with the knowledge of 
its agents, both of its agents knew that the insured did not 
sign the application form, and both agents failed to inform 
 
8
Hilfiger of the consequences of that omission.  This failure, 
Hilfiger asserts, prevented him from taking the appropriate 
corrective measures to secure a valid life insurance policy 
for his father.  
We have addressed the application of equitable estoppel 
in the context of enforcing insurance policies against an 
insurer.  Id.; Reserve Life Ins. Co. v. Ferebee, 202 Va. 556, 
118 S.E.2d 675 (1961); New York Life Ins. Co. v. Eicher, 198 
Va. 255, 93 S.E.2d 269 (1956); Gilley v. Union Life Ins. Co., 
194 Va. 966, 76 S.E.2d 165 (1953).  And, as Hilfiger points 
out, we have applied the doctrine to enforce an insurance 
policy based on imputing to the insurer its agent's knowledge 
of false statements on the application.  See Gilley, 194 Va. 
at 974, 76 S.E.2d at 170.  These cases all involved the level 
of knowledge and complicity of both the agent and applicant in 
supplying such false information.  None of these cases, 
however, involved consideration of whether the equitable 
doctrine of estoppel should be applied in a manner which 
negates a significant public policy codified by the General 
Assembly.  
Jurisdictions addressing that situation have not been 
unanimous in their conclusions or rationales.  One court 
applied equitable estoppel based on the theory that the  
statutory requirements for a valid life insurance contract 
 
9
reflect a public policy to protect the insured and the 
beneficiary, rather than to preserve the public order and 
morals and, therefore, the statutory requirements can be 
waived by the beneficiary.  Adam Miguez Funeral Home, Inc. v. 
First Nat'l Life Ins. Co., 234 So.2d 496, 499 (La. Ct. App. 
1970).  Another court concluded that the failure to apply 
equitable estoppel under these circumstances would allow 
insurers to perpetrate a fraud upon policyholders by accepting 
premiums on a policy, knowing that the policy was void from 
the beginning.  Holmes v. Nationwide Mut. Ins. Co., 244 
N.Y.S.2d 148, 153 (1963).  
In contrast, equitable estoppel has not been applied in 
these circumstances on the theory that its application would 
invite beneficiaries and insurers' agents to create a binding 
contract of insurance on the life of another in direct 
contravention of the policy addressed by the common law and 
statutes in imposing requirements for a valid policy.  Hunt v. 
Pyramid Life Ins. Co., 732 S.W.2d 167, 169 (Ark. Ct. App. 
1987); Time Ins. Co. v. Lamar, 393 S.E.2d 734, 735-36 (Ga. Ct. 
App. 1990). 
We are persuaded that the better rationale is not to 
apply equitable estoppel to enforce a life insurance policy 
issued in contravention of Code § 38.2-302.  That statute was 
not enacted for the protection of the beneficiary but to 
 
10
protect the insured against potentially improper motives of 
the beneficiary.  Thus, contrary to the conclusion reached 
elsewhere, we conclude that a beneficiary is not entitled to 
waive the statutory requirements.  As we have already stated, 
applying Code § 38.2-319 to enforce a contract which Code 
§ 38.2-302 renders void ab initio eliminates the very purpose 
of the statute.  To apply equitable estoppel in these 
circumstances also:  
would permit the unreasonable result that [the 
conduct of an insurance company or its agent] would 
breathe life into an insurance contract which the 
General Assembly [for reasons of individual and 
public protection] intended to have no life, and 
would frustrate the strong public policy that no 
contract for life insurance should be made unless 
the insured applies for or consents in writing to 
the contract.   
 
Lamar, 393 S.E.2d at 736 (citing Wood, 336 S.E.2d at 812).  
 
Accordingly, we answer the third certified question in 
the negative. 
First certified question answered in the affirmative. 
          Second certified question answered in the negative.
          Third certified question answered in the negative. 
 
JUSTICE KINSER, with whom JUSTICE KOONTZ joins, dissenting. 
 
 
I would construe Code § 38.2-302(A) differently from the 
majority and would, therefore, answer the first certified 
question in the negative.  I agree that the statute identifies 
“two alternative conditions” for making a valid life insurance 
contract, allowing a proposed insured either to apply for life 
 
11
insurance or to consent to such a contract.  However, as I 
understand the majority’s position, a proposed insured’s oral 
authorization combined with “material participation” in the 
application process does not constitute “applying” for the 
insurance contract.  I disagree.1
 
The part of Code § 38.2-302(A) at issue provides that no 
life insurance contract is made or effectuated unless “the 
individual insured . . . (i) applies for insurance, or (ii) 
consents in writing to the insurance contract.”  The statute 
fails to define “applies;” therefore, the term must be “given 
its ordinary meaning, given the context in which it is used.”  
Dep’t of Taxation v. Orange-Madison Coop. Farm Serv., 220 Va. 
655, 658, 261 S.E.2d 532, 533-34 (1980).  “The context may be 
examined by considering the other language used in the 
statute.”  City of Virginia Beach v. Bd. of Supervisors of 
Mecklenberg County, 246 Va. 233, 236-37, 435 S.E.2d 382, 384 
(1993). 
Examining the language chosen by the legislature, I find 
it significant that the phrase “in writing” appears after the 
disjunctive “or” and immediately following “consents” and that 
the two phrases, “applies for insurance” and “consents in 
                     
1   Notably, the majority states only what action is 
insufficient to apply for a life insurance contract and fails 
to delineate or define specifically the requirements necessary 
to apply for insurance under Code § 38.2-302(A). 
 
12
writing,” are separately identified by the designations “(i)” 
and “(ii).”  As a general rule, “proper grammatical effect 
will be given to the arrangement of words in a sentence of a 
statute,” Harris v. Commonwealth, 142 Va. 620, 624, 128 S.E. 
578, 579 (1925), and a presumption exists that the General 
Assembly understood basic rules of grammar when drafting the 
statute.  Frere v. Commonwealth, 19 Va. App. 460, 464, 452 
S.E.2d 682, 685 (1995).  Fundamental rules of grammar require 
the placement of a phrase so as to indicate clearly what the 
phrase modifies.  John C. Hodges et al., Harbrace College 
Handbook 249 (12th ed. 1994). 
Applying this rule to Code § 38.2-302(A), the phrase “in 
writing” modifies “consents,” the word immediately preceding 
the phrase, and does not modify “applies.”  But see Alleman v. 
Lincoln Nat’l Life Ins. Co., 636 F.2d 1195, 1196 (10th Cir. 
1981) (holding that writing provision in Utah statute, which 
states that “[n]o life . . . insurance contract . . . shall be 
made . . . unless . . . the individual insured . . . in 
writing applies therefore [sic] or consents thereto,” modifies 
not only “applies” but also “consents”).  By choosing not to 
modify “applies” with the phrase “in writing,” the General 
Assembly intended not to restrict the method by which an 
individual can apply for insurance.  See Forst v. Rockingham 
Poultry Mktg. Coop., Inc., 222 Va. 270, 278, 279 S.E.2d 400, 
 
13
404 (1981) (“When the General Assembly uses two different 
terms in the same act, it is presumed to mean two different 
things.”).  Moreover, when the General Assembly has intended 
for a proposed insured to apply for insurance in writing, it 
has so stated.  See Code § 38.2-3737(A) (“No contract of 
insurance upon a debtor shall be made or effectuated unless 
. . . the debtor . . . applies for the insurance in writing 
. . . .”).  Thus, the General Assembly knows what language to 
use when it wants to condition the making of an insurance 
contract upon submission of a written application. 
Therefore, in my view, under the provisions of Code 
§ 38.2-302(A), consent to an insurance contract must be in 
writing, but the act of applying for insurance is not confined 
to any particular form.  In other words, the mode of applying 
for a life insurance contract is not limited to a written 
application personally signed by the proposed insured.  Accord 
Walker v. Jackson Nat’l Life Ins. Co., 20 F.3d 923, 924-25 (8th 
Cir. 1994) (holding that insured can apply for insurance 
without signing application).2
                     
2   An example of a statute that plainly requires a 
written application signed by the insured is Mass. Gen. Laws 
Ch. 175, § 123 (1998).  This section states that “[n]o life 
company shall issue any policy of life or endowment insurance 
. . . except upon a written application therefor signed or 
assented to in writing by the person to be insured . . . .” 
 
14
While rules of grammar are not permitted to defeat the 
purpose of a statute, Harris, 142 Va. at 624, 128 S.E. at 579, 
construing “applies” to denote more than the narrow meaning of 
an application signed by the proposed insured does not thwart 
the common law principle that Code § 38.2-302(A) embodies.  A 
proposed insured’s signature on an application form is not 
critical to proving that the individual applied for insurance 
if other facts evidence the proposed insured’s intent to 
apply.  See Walker, 20 F.3d at 925 (finding that signature of 
insured on insurance application was not crucial to proving 
his knowledge of policy and identity of beneficiary); Crump v. 
Northwestern Nat’l Life Ins. Co., 236 Cal. App.2d 149, 155 
(1965) (holding insured’s signature not essential where 
insured’s agent prepared application and insured later 
ratified insurance contract).  In other words, if the facts 
show that the proposed insured acted with the purpose of 
obtaining life insurance, then no risk exists of “allowing one 
person to have insurance on the life of another without the 
knowledge of the latter.”  Walker, 20 F.3d at 925. 
In the instant case, the actions of Hilfiger’s father 
show that he applied for insurance as contemplated by the 
provisions of Code § 38.2-302(A).  Because the district court 
granted summary judgment to Transamerica, the facts and 
inferences must be construed in the light most favorable to 
 
15
Hilfiger.  United States v. Leak, 123 F.3d 787, 794 (4th Cir. 
1997).  See also Anderson v. Liberty Lobby, Inc., 477 U.S. 
242, 249 (1986) (“at the summary judgment stage the judge’s 
function is not . . . to weigh the evidence and determine the 
truth of the matter”).  The facts show that Hilfiger orally 
discussed the policy with his father and that the father 
verbally authorized his son to obtain the policy.  As the 
United States Court of Appeals for the Fourth Circuit stated 
in its certification order, “we can infer that the insured 
father ‘authorized’ Hilfiger to sign for him and provided the 
answers which Hilfiger filled in on the application forms.”  
Moreover, the father underwent a medical exam during which he 
signed a form titled “Part II of an Application for Insurance 
to the Transamerica Occidental Life.”  Thus, the evidence 
shows not only oral authorization, but also undisputed overt 
actions on the part of the father that not only corroborate 
his oral authorization but also establish his participation in 
the application process.  This is not a case of mere oral 
authorization, which, as the majority observed, would render 
the written consent alternative superfluous. 
Given these facts, I conclude that Hilfiger’s signing his 
father’s name as the “proposed insured” does not violate Code 
§ 38.2-302.  As the majority stated, “[T]he purpose of the 
conditions required for a valid contract of life insurance is 
 
16
to eliminate any doubt that the insured knew about and agreed 
to the issuance of the insurance contract.”  That purpose is 
fulfilled in this case.  
Accordingly, for these reasons, I dissent.3
 
                     
3   Because I would answer the first certified question in 
the negative, I need not address the remaining two questions. 
 
17