Court Opinion

ID: 9682741
Source: CourtListenerOpinion
Date Created: 2023-08-24 13:15:39.665528+00
Date Added: 2024-06-11T18:17:41.031689
License: Public Domain

George Rose Smith, J., dissenting. It is certainly a sound rule that an ambiguity in an insurance contract is to be construed against the insurer, but I cannot see what the rule has to do with this case. The majority say: “When all of the terms and conditions of the binding receipt and the application are considered, there is some ambiguity, which must be construed against the insurance company * * * ” Yet nowhere in the majority’s fairly long opinion is there a sentence or even a word stating in what respect the receipt and application are ambiguous. The courts have often condemned the practice of creating an ambiguity, where there really is none, in order to resolve it against the insurer; but it is something new for a court merely to announce the rule and on that basis hold the insurer liable, without at least suggesting what language is ambiguous. The majority also state: “The binding receipt certainly binds the insurance company to something.” It certainly does. It binds the company to issue a policy as of the date of the receipt if the applicant is a risk acceptable to the company. That obligation is illustrated in two of the three cases relied upon by the majority, the Albers case and the Starr case. In both those cases the insured was in fact in good health when the binding receipt was issued and was later approved as a risk acceptable to the company. In both cases the applicant died before the policy was delivered. It was correctly held in each case that the company was liable, for that interim protection is exactly what the binding receipt provides. Of course the distinction is that in those cases the applicants were acceptable risks; here Thomas was admittedly not an acceptable risk. It is convenient at this point to mention the only other decision relied on by the majority, the Stonss case, which the opinion describes as “very similar to the case at bar.” Very similar? In that case the insured was not only in good health but the policy was actually issued and delivered to him. The company, however, had dated it as of its issuance rather than as of the issuance of the binding receipt, and the only question was its liability for disability arising in the interim. I find it difficult to discover the similarity. Laying aside the matters just mentioned, I come to what seems to be the sole reason for imposing liability in this case: the fact that the insurer had not returned the premium at the time of the applicant’s death. That point can he considered in either of two ways, but in neither instance can it be said to have resulted in the creation of a contract of insurance between the parties. First, was it the insurer’s duty to return the premium within less than sixty days after the issuance of the binding receipt? I cannot see that it was. The company had sixty days in which to decide whether Thomas was an acceptable risk. If Thomas had died during the sixty days and also before the company had reached its decision, the insurer would not have been liable if it later determined in good faith that Thomas was not insurable. The only difference is that here the company reached its decision, in good faith, before the applicant’s death. It notified Thomas that the policy could not be issued without a medical examination, but it did not return the premium, nor did Thomas ash that it he returned. Under the majority’s reasoning the insurance contract must have come into existence at that instant, for neither party ever took any other step toward the making of a contract. In other words at that point, because the premium had not been returned pending the medical examination, Thomas could have brought a suit for specific performance to require that the policy be issued. I need not dwell on the patent fallacies in this reasoning. Of course Thomas could have requested the return of his premium, but he chose not to do so. He knew that the company was unwilling to issue the contract; so how can it be said that there was a meeting of the minds, when neither party to the transaction either thought or had the slightest reason to think that an agreement had been reached? Second, if we assume for the sake of argument that the company was required to return the premium pending the medical examination, what then? The plain answer lies in the language of the binding receipt: that receipt continued in force rather than becoming “null and void.” Thomas’s rights, and those of his estate or beneficiary, must then be determined by the provisions of the receipt, which declares in unambiguous language that the insuranee shall not be effective unless the applicant is a risk acceptable to the company. It has never been suggested that the company did not act in good faith in determining that Thomas was not an acceptable risk. Thus even if we regard the receipt as having been in force at the time of Thomas’s death, it is still not a basis for affirming this judgment.