Court Opinion

ID: 9659632
Source: CourtListenerOpinion
Date Created: 2023-08-23 21:51:08.135385+00
Date Added: 2024-06-11T18:14:10.146316
License: Public Domain

ON PETITION FOR REHEARING
DOUGLAS B. HEEN, District Judge.
Urging reconsideration of the issues of this case, the defendant insurance company has petitioned, asking a rehearing. In so petitioning, the defendant has adopted the several conclusions of the dissenting opinion, one of which is that the applicant, Mr. Damm, “fully understood” or was “fully cognizant” that insurance was not to be effective until he furnished a satisfactory medical examination and was accepted as a risk by the defendant company; and that since such required medical information was not furnished by the applicant, there was no interim or temporary insurance coverage from the date of the completed application.
Retaining allegiance to the line of decisions discarded by Etheridge v. Woodmen of World Life Ins. Soc’y, 114 Ga.App. 807, 152 S.E.2d 773 (1966), cert. granted 1967, and other cases of like import expressing the modern view, the dissent, despite prepayment of a premium at the time of completion of the application, would hold that there was no insurance coverage whatsoever until a later date, when the applicant furnished required medical information and was stamped an acceptable risk by the defendant company. Justification of this conclusion is attempted by a comparison of conditional receipts, a field which yields with reluctance, if at all, to comparative analysis, other than generalized and arbitrary classification.
In stating that Etheridge does not square with the case at hand on the facts, the dissent compared the conditional receipt in Etheridge with that of this case. Paulk v. State Mut. Life Ins. Co., 85 Ga.App. 413, 69 S.E.2d 777 (1952), denied that interim insurance was effected from the time of application under a conditional receipt which provided that “the insurance shall be effective as of the date of the application or of the medical examination, whichever is later.” The receipt in Paulk, for all practical purposes, is almost identical with that *623of this case. Etheridge, under the somewhat different conditional receipt, specifically overruled Paulk and held interim insurance to be in effect from the date of the application. It is evident under Ethe-ridge that temporary insurance under a conditional receipt similar in terms to that of this case would commence at the time the application was completed rather than as of the date the applicant furnished required medical information; and the attempted comparison of differing conditional receipts lends little, if any, assistance to the dissent, or to the defendant, in this case.
The dissent, however, predicates its decision that there was no insurance coverage in this case on the assertion that Mr. Damm, as stated, “fully understood” that he was required to furnish medical information and, having failed to do so, was uninsured.
Additional facts in this case deemed unnecessary in arriving at the majority opinion assume apparent added significance in the wake of the factor of “knowledge”, as such is raised by the dissent. Briefly, at the time of making application, the defendant’s soliciting agent had Mr. Damm complete Part Two of the application form furnished by the defendant. Part Two was to be completed if the desired insurance was to issue without a medical examination. To emphasize this, the application in bold lettering set forth that, “If non-medical case — all answers must be completed.” With the direct assistance, guidance, and encouragement of the defendant’s agent, Mr. Damm answered all questions contained in Part Two, which, of course, was a part of the application signed by the applicant.
Mr. Damm’s completion of Part Two of the application, at the instance of the defendant’s agent, demonstrates that the agent then at the very least was unaware and did not understand that a report of medical examination of the applicant was required before there could be insurance coverage. Since the agent did not have this, knowledge, it cannot be inferred that Mr. Damm did. The defendant company, admitting that at no time nor in any manner did it deal directly with Mr. Damm, but to avoid the impact of these facts, contends that its agent later orally informed Mr. Damm of the necessity of his physical examination. The method and means of such notification were left to the defendant’s agent, and his efforts in this direction, disclosed solely by his testimony, are characterized at best as casual, contradictory, and uncorroborated and, in our judgment, do not warrant the conclusion reached by the dissent that the applicant “fully understood” that there would be no insurance coverage until the applicant furnished a report of his physical condition to the defendant company and was accepted by the latter as a risk.
Interim insurance arising by advance payment of an insurance premium and issuance of a binding conditional receipt should not be defeated by vague oral communications, the only documentation of which would lead the applicant, Mr. Damm in this instance, to believe that insurance coverage existed without a medical examination. The divergent views developed in these opinions are illustrative, we believe, of the desirability that the legal relationship between an applicant and an insurer should be fixed and determined, not from the supposed knowledge of an applicant since deceased, but rather as a settled incident springing from the insurer’s issuance of a conditional receipt upon prepayment of the premium by the applicant.
Of necessity, the underlying theory of the dissent is that the conditional binding receipt and the application are simply an applicant’s offer to be insured by the company and nothing more. Etheridge, in commenting upon and specifically overruling decisions expressing similar reasoning, employed the following language:
These cases are in our opinion based on a misconception of contract law in that they proceed on the basis that the conditional binding receipt coupled with the application for life insurance constitutes *624a mere offer to the company. It is this premise in those cases that we renounce.

Etheridge v. Woodmen of World Life Ins. Soc’y, supra, 152 S.E.2d at 775.
We adhere to our holding of the majority opinion that prepayment of the insurance premium constituted an acceptance by the applicant of the company’s offer to provide interim insurance pending consideration of the applicant’s offer to purchase a policy of life insurance. Further, knowledge, or lack of it, that a physical examination report of the applicant was required by the defendant company, is not an element in the existence of interim insurance. Prudential Ins. Co. of America v. Lamme, 83 Nev. 146, 425 P.2d 346 (1967).
The defendant next argues that even if interim insurance arose at the time the insurance application was completed, such coverage had lapsed because the applicant had paid only a quarterly premium and his death occurred some five and one-half months after completion of the application. In support of this argument, the defendant cites N.D.C.C. Secs. 26-03-26, 26-03-27, 26-03-29, and 26-03-30, all of which are standard forms of insurance policies, and particularly points to those paragraphs providing that payment of premiums shall be in advance and “payment of a premium or installment thereof shall not maintain the policy in force beyond the date when the next premium or installment thereof is payable.”
These provisions of the standard policies so cited have no application because here no policy had issued. Further, this specific provision of the standard policies may be modified or altered by agreement of the parties. By acceptance of the premium in advance, the defendant in this case agreed to provide interim insurance from the date the application was completed until its re-j ection.
Temporary insurance is measured not by the amount of premium paid but, rather, arises from and upon the act of prepayment of premium and provides interim insurance coverage pending the insurer’s consideration of the applicant’s offer to purchase the policy of life insurance.
Consideration of the facts of this case and of the relative positions of the parties dictates that the insurer has some responsibility in the termination of interim insurance. We hold that a prepayment of insurance premium and issuance of a conditional receipt gives rise to and extends interim insurance from the time of application for a reasonable time thereafter or until the applicant is notified in writing by the insurer that the application was rejected. The applicant was not so notified in this case of rejection of his application. Further, we are also agreed from all of the circumstances of the case that Mr. Damm’s death occurred within a period during which interim insurance reasonably should have been in effect. It follows that the applicant was accorded temporary insurance coverage by the defendant, which was in effect at the date of Mr. Damm’s death.
The petition for rehearing is denied.
ERICKSTAD and KNUDSON, JJ., concur.
WM. L. PAULSON, J., deeming himself disqualified, did not participate; DOUGLAS B. HEEN, District Judge of the Second Judicial District, sitting in his stead.