Opinion ID: 2525309
Heading Depth: 3
Heading Rank: 1

Heading: Temporary Insurance Contract

Text: On appeal, the McGilvrays argue that the district court should have concluded that temporary insurance on Tylar was in effect on the day he died. First, they argue the conditions which gave rise to a contract of temporary insurance in Toevs v. Western Farm Bureau Life Ins. Co., 94 Idaho 151, 483 P.2d 682 (1971), are present here and should operate to bind Farmers New World Life to provide coverage for Tylar's death. The McGilvrays also assert that all of the conditions set forth on the receipt form used by the insurance company were met, thus the company was obligated under the temporary insurance agreement to pay benefits upon Tylar's death. In Toevs, this Court affirmed the lower court's decision holding the insurer liable for double indemnity on the death of the insured, even though Toevs had not yet obtained a medical examination required in conjunction with his application for insurance when he died from an accidental shooting. Id. at 155, 483 P.2d at 686. The Court considered the ambiguous language in the application and in the receipt as to the effective date of coverage, as well as the unequal bargaining power between the insurer and the insured whereby the insurer required payment in full of the premium with the application. Id. Specifically, the Court held that the insurer's use of a conditional premium receipt, which allowed the company to rescind and withdraw its promise of coverage, created a temporary contract of insurance. Id. The conditions that led the Court to adopt the doctrine of temporary insurance in Toevs, however, are not found in the McGilvrays' case. There was no delivery of a conditional premium receipt to the McGilvrays at the time the application for insurance was completed. The payments that were to be applied to the insurance premiums were only made subsequent to the date the application was signed and had yet to be processed by means of the automatic withdrawal authorization procedure. In order for the doctrine of temporary insurance to apply, there must exist an ambiguity regarding the effective date of insurance. Wells v. United States Life Ins. Co., 119 Idaho 160, 804 P.2d 333 (Ct.App. 1991), citing Toevs, supra . Because the evidence is clear that Kenneth and Pfleger had never discussed whether temporary insurance was available on Tylar's application or when specifically the policy on Tylar's life was to become effective, the McGilvrays cannot reasonably claim an ambiguity in the information conveyed to them as to when the insurance would take effect. Kenneth's belief, therefore, that coverage began upon payment of the premium was not based on representations made by Pfleger nor derived from language found in the application itself, which Kenneth testified he had not read. The district court correctly concluded in this case, that there was not the unequal bargaining power between the insurer and the insured, which caused the Court in Toevs to hold that temporary insurance was in effect. We uphold the district court's decision distinguishing the McGilvrays' claim from Toevs and affirm the court's holding that temporary insurance was not in force at the time of Tylar's death. Next, the McGilvrays contend that they met all of the conditions for temporary insurance as outlined in the receipt, which was a part of the application. The McGilvrays claim they are entitled to receive death benefits for Tylar from Farmers New World Life, pointing to language in the receipt that states: Temporary coverage for the amount applied for (excluding ADB) or $50,000, whichever is less, will begin when the primary Applicant completes, signs and delivers this Application with at least 1/12th of the minimum first year's premium to the Agent. They assert that coverage began when the premium payment was made and submitted with Tylar's application and that coverage was in effect on the date of Tylar's death. The premium receipt, also known as a conditional receipt, is an instrument that affords insurance coverage to the applicant between the date of the application and the actual issuance of the policy. Heideman v. Northwestern Nat'l Life Ins. Co., 546 N.W.2d 760 (Minn.App.1996); Smith v. Westland Life Ins. Co., 15 Cal.3d 111, 123 Cal.Rptr. 649, 539 P.2d 433 (1975) (contract of insurance immediately created upon receipt of the application and payment of the premium is not terminated until the insurer has actually rejected the application and by appropriate notice communicated such rejection to the insured and refunded the premium payment to the insured). In Idaho, a conditional premium receipt creates a temporary contract of insurance, Toevs v. Western Farm Bureau Life Ins. Co., supra , which is separate and apart from the application for insurance. Metropolitan Life Ins. Co. v. Daniels, 745 So.2d 1062 (Fla.App.1999); Bickford v. Metropolitan Life Ins. Co., 114 N.H. 237, 317 A.2d 573 (1974). The express terms for a contract of temporary insurance are embodied in the receipt referred to by the McGilvrays. In addition to the payment of a premium along with the application, however, are the requirements that (1) the primary applicant be more than fifteen days and less than 70 years of age on the date the application is signed; and (2) questions 1, 2, 3, and 4 on page 4 of the application be truthfully answered No. These eligibility requirements, or conditions precedent, must be satisfied for a contract to materialize. See Valley Bank v. Christensen, 119 Idaho 496, 808 P.2d 415 (1991); W.L. Scott, Inc. v. Madras Aerotech, Inc., 103 Idaho 736, 653 P.2d 791 (1982); Hoff Companies, Inc. v. Danner, 121 Idaho 39, 822 P.2d 558 (Ct.App.1991). Here, the agent testified that he left unanswered the health questions on page 4, Section J, related to temporary insurance, because Kenneth indicated that he was unable to make a premium payment when the application was completed and signed. The district court determined that the parties never discussed temporary insurance coverage and that the amounts deposited into the life insurance premium account to be later withdrawn for premium payments did not create a contract of temporary insurance. The district court also concluded that the receipt the McGilvrays rely on to prove a contract of temporary insurance was never given to them and thus cannot form the basis of a contract. It is not necessary to decide whether the McGilvrays' application was completed, signed and delivered with the required premium amount, because we affirm district court's conclusion on an alternative ground. We hold that no contract for temporary insurance was formed because of a failure of the express condition that the applicant provide answers to four questions in Section J. See Rexburg Realty, Inc. v. Compton, 101 Idaho 466, 616 P.2d 245 (1980). Therefore, the district court did not err in dismissing the McGilvrays' claim based upon the assertion of a contract of temporary insurance.