Opinion ID: 179725
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Heading: Conditional Receipt

Text: Because we find that the express language of the conditional receipt controls June's claim for benefits, we begin there. The relevant facts are undisputed. The application Richard submitted to Western Reserve was five pages long and contained the following language: The Company shall have sixty days from the date hereof within which to consider and act on this application and if within such period a policy has not been received by the applicant or notice of approval or rejection has not been given, then this application shall be deemed to have been declined by the Company. The language was on the last page of the application, which was also the signature page. When he submitted his application, Richard also paid a $385 premium. In return, he received a one-page conditional receipt that disclosed the following terms: ... The policy you applied for will not become effective unless and until a policy contract is delivered to you and all other conditions of coverage are met....    Any conditional coverage provided by this Receipt will terminate on the earliest of: (a) 60 days from the date the application was signed; (b) the date the Company either mails notice to the applicant of the rejection of the application and/or mails a refund of any amounts paid with the application; (c) when the insurance applied for goes into effect under the terms of the policy applied for; or (d) the date the Company offers to provide insurance on terms that differ from the insurance for which you have applied.    If one or more of this Receipt's conditions have not been met exactly ... the Company will not be liable except to return any payment made with the application. If the Company does not approve and accept the application for insurance within 60 days of the date you signed the application, the application will be deemed to be rejected by the Company and there will be no conditional insurance coverage. In that case, the Company's liability will be limited to returning any payment(s) you have made upon return of this Receipt to the Company. ... This Receipt does not provide any conditional insurance until all the conditions and requirements are met as outlined above. The 60-day limit of coverage expressed in the application and in the conditional receipt expired on January 12, 2007. By that time, Western Reserve had not accepted or denied Richard's application (or taken much action on his application at all, as described below). Richard died on February 26, 2007. On July 23, 2007, Western Reserve returned the premium Richard had paid with his application, with interest. [1] An insurance policy is interpreted as any other contract. See Hoosier Insurance Co. v. Audiology Foundation of America, 745 N.E.2d 300, 307 (Ind.App. 2001); Smith v. Allstate Insurance Co., 681 N.E.2d 220, 223 (Ind.App.1997). Where there is no ambiguity in a contractual provision, that provision's plain language controls. Burress v. Indiana Farmers Mutual Insurance Group, 626 N.E.2d 501, 505 (Ind.App.1993), citing Brunner v. Economy Preferred Insurance Co., 597 N.E.2d 1317, 1319 (Ind.App.1992). Ultimately, the court's role is to give effect to the intent and reasonable expectations of the parties as expressed in the contract, and does not extend to changing the contract's terms. Colonial Penn Insurance Co. v. Guzorek, 690 N.E.2d 664, 669 (Ind.1997). June argues that this longstanding tenet of Indiana law, that the plain language controls, is tempered by other Indiana cases holding that, until a life insurance company notifies an applicant during his lifetime that his application has been denied and returns his premium, the insurer cannot terminate insurance coverage regardless of the plain language. We disagree with this view of Indiana law. In making her argument, June relies primarily on two Indiana cases. The first, Kaiser v. National Farmers Union Life Insurance Co., 167 Ind.App. 619, 339 N.E.2d 599 (1976), indeed held that an insurance company could not terminate life insurance coverage under a conditional receipt unless, within the applicant's lifetime, it had both notified the applicant of its denial and returned the applicant's premium. Kaiser, who was 20 years old at the time, applied for a term life insurance policy and paid the first quarterly premium due on the policy. Due to his age, the insurance company's agent told Kaiser that he could not purchase a term policy but instead could apply for a whole life policy. He did so, tendering an additional premium and receiving a conditional receipt, but he was killed in an accident before the company formally accepted or denied his application. The court in Kaiser found that the conditional receipt created a contract for temporary interim life insurance subject to the company's rejection of Kaiser's application. Because the company did not reject Kaiser's application prior to his death, it was liable for the benefit stated in the application. As the court explained: any conditions contained in the receipt are to be treated as conditions subsequent thereby compelling an insurer to act affirmatively or negatively on the application. Moreover, where an applicant is not acceptable, he must be notified and the premium returned. An insurer cannot terminate the risk so assumed unless the applicant is so notified in his lifetime. Kaiser, 339 N.E.2d at 604. The second case on which June relies, Monumental Life Insurance Co. v. Hakey, 171 Ind.App. 56, 354 N.E.2d 333, 334 (1976), looked to Kaiser and echoed its holding in finding that a contract existed and the insurer was liable for the benefits stated in Hakey's application where the company had not notified Hakey of the need for a medical examination within his lifetime, it had accepted his premium, and it had issued a receipt. Kaiser and Hakey do not control here. The applicants for life insurance in those cases did not receive a conditional receipt that expressly terminated interim coverage at the expiration of a specified time period, as did the conditional receipt that Richard received from Western Reserve. We relied on precisely that distinction in Hornaday v. Sun Life Insurance Co. of America, 597 F.2d 90 (7th Cir.1979), which also applied Indiana law. Hornaday applied for life insurance from Sun Life, paid a premium, and received a conditional receipt in exchange. One condition of the conditional receipt was that the insurance provided by the receipt terminated after 60 days. Sun Life accepted Hornaday's application and issued the policy, but the company was unable to deliver the policy to (and to collect the full premium from) Hornaday in spite of several attempts to do so. Hornaday then died after the 60-day time limit for the conditional receipt had expired. Hornaday's widow sought benefits under the conditional receipt. Relying on Hakey and Kaiser as June does here, Hornaday's widow argued that under Indiana law, an insurance company could terminate a temporary insurance contract only if the company notified the applicant of the termination within the applicant's lifetime and returned the premium the applicant had paid. See Hornaday, 597 F.2d at 92. Because the insurer had satisfied neither of those requirements, Hornaday's widow argued that the insurer was on the hook for coverage regardless of the expiration of the time limit in the conditional receipt. The insurer, in turn, argued that Barr v. The Insurance Co. of North America, 61 Ind. 488 (1878), controlled. Barr dealt with interim fire insurance under a conditional receipt that stated it would expire 30 days from the date of the insurance application. The loss occurred before the insurer made a decision to issue or deny a policy, but after the 30 days had run. The Barr court held that the insurance company was not liable because the written contract of assurance expired by its own limitation, before the loss occurred. Barr, 61 Ind. at 493. Looking to Kaiser, Hakey, and Barr, we explained in Hornaday that if the insurer had wanted to terminate coverage within the 60-day period of the conditional receipt, it would have been required to give notice of termination and return the premium Hornaday had paid. Otherwise, Hornaday's premium and application provided him with life insurance for only 60 days. Hornaday did not pay a premium for insurance beyond 60 days, and the insurer did not deliver the life insurance policy. Therefore, Hornaday's coverage terminated when the conditional receipt expired. Because Hornaday died outside of the coverage period, his widow was not entitled to benefits under the conditional receipt. Hornaday, 597 F.2d at 93-94. Kaiser and Hakey stand for the general proposition that an insurance company cannot accept an application and a premium from an applicant, giving the applicant reason to believe he is insured, and then, when the worst happens, avoid liability by asserting that the applicant was not an insurable risk after all. In that scenario the insurer would have accepted a premium without accepting any risk, an outcome that Kaiser and Hakey recognized, of course, to be patently unfair. The public policy underlying these cases does not extend, however, to a case such as this in which the conditional receipt (and here, the application also) contains express and unambiguous language limiting interim coverage to a specific time period, as in Barr. Although Barr is over 130 years old, it is still good law in Indiana. It is consistent with Indiana contract law and is not inconsistent with the public policy expressed in Kaiser and Hakey. Based on the plain language of the application and the conditional receipt, we do not believe that Richard could have had any reasonable expectation of insurance coverage after the expiration of the 60-day period. Accordingly, as in Hornaday, the express termination of the conditional receipt after 60 days is controlling. We affirm the grant of summary judgment on this ground.