Court Opinion

ID: 9764431
Source: CourtListenerOpinion
Date Created: 2023-08-29 03:21:32.083328+00
Date Added: 2024-06-11T07:29:56.445237
License: Public Domain

On Appellant’s Motion for Rehearing
Appellant has filed a motion for rehearing signed by its attorneys, W. A. Griffis, Jr. and Craig Porte*, of San Angelo, Texas, which contains the following language:
“ * * * there is language in the Court’s Opinion which is completely unjustified, irresponsible, and, if allowed to remain upon the Minutes of the Third Court of Civil Appeals, will serve only to malign and to impugn the motives, character and reputation of Appellant as an insurance company, when its integrity is not in question, and has not been questioned herein even by the Appellee. Once the present Opinion of this Court is published, Appellant will suffer the consequences of the Court’s attack upon it, without opportunity or forum within which to defend itself. As must be obvious, we refer here to the findings and conclusions of the Court that the language of the premium receipt in question and sued upon by Appellee is deceptive, that the language is vague, intangible, misleading and contrary to public interest.
“Added to this unjust indictment of Appellant as a company using a receipt containing such language, is the holding of this Court which will hereafter indict the insurance industry as a whole, for the Court has now said that the sworn testimony of an officer-witness for an insurance company following a loss or alleged loss asserted against the company may be ‘realisticly discounted’; in effect, the Court cannot expect and does not expect that the official of an insurance company would be truthful concerning that company’s determination of insurability once a loss has occurred.
*310# * * * ⅜ #
“In the face of Cochran v. Wool Growers Central Storage Company, 166 S.W.2d 904, 140 Tex. 184, and Dunlap v. Wright, [Tex.Civ.App.] 280 S.W. 276, no writ history, this Court not only has cast aside the direct, positive and uncontradicted sworn testimony of the witness Helen Smith, but has found that no proper official of an insurance company can be expected to testify truthfully relative to determination of that official incident to an application presented to the company for insurance. The Court has, by virtue of its utterances, stricken from future cases against insurance companies the necessity for administering oaths to insurance company officials or employees, or of even having them testify. It matters not what they may say — their testimony will be ‘realistically discounted’, whether there is contradictory testimony or contradicting circumstances, in any event.
“The unmerited and ill-advised language of the Court in its Opinion, as above set forth, warrants complete and immediate rectification, irrespective of anything else the Court may do in connection with this Motion of this case pending upon appeal.
“Proceeding further, it is noted that although Appellee did not find the language of the premium receipt of such nature as to require complaint, did not plead the language of the receipt as being contrary to public policy, or illegal, or deceptive, vague, intangible, or misleading, but rather' ‘by pleading and proof, assumed the conditions prerequisite to recovery’, Colorado Life Insurance Company v. Teague, [Tex.Civ. App.] 117 S.W.2d 849, this Court has boldly assumed the role of advocate by raising these ‘defenses’ which Appellee did not raise in her lawsuit. This would appear to place these points of ‘public interest’, ‘deceptive language’, and the like, in the category of fundamental error, and yet the Court does not tell us this.
* * * * * *
“It is obvious that this Court, without any complaint, urging, or even suggestion on the part of Appellee or anyone else, has seen fit to disregard entirely the contract upon which the lawsuit was based, and upon which both parties relied in the Trial Court, and has applied the record of this cause to a new contract, a creature of this Court and one entirely devoid of references to-the rules and practices of reinsurance which are every day occurrences in the insurance industry.
⅝ ⅜ * ⅝ * ⅝
“Has the Court, indeed, again found it difficult to explain the obvious or has the Court merely sought and found a means of refuge from the usual necessity in a case upon a contract to apply the law and the facts, if any, to that contract. In expressly itself continually, not on the contract sued upon, but on a contract created by the Court absent the very heart of the conditional language of the premium receipt, the Court has completely circumvented and negatived those rules and practices of Appellant Company which bring into play the reinsurance procedure existing between Appellant and Republic National Life Insurance Company by saying that such rules and practices are those ‘with which the applicant for insurance has not agreed to contract and may not wish to contract’.
íjí ⅜ - ⅜ ⅜ ⅜ ⅝
“The Court is further concerned that during the period of time the company is formulating an opinion of insurability, the company will have the premium payment, but the applicant will not be covered by insurance. And yet, the Supreme Court of Texas has found nothing contrary to public policy or good insurance practices in this sitúa*311tion.1 Southland Life Insurance Company v. Vela, [147 Tex. 478] 217 S.W. 2d 660, Supreme Court; Southwestern Life Insurance Company v. Evans, [Tex.Civ.App.] 262 S.W.2d 512, writ of error refused. The Court’s failure in this regard can only he justified by .a complete disregard of the previous jurisprudence of Texas, allowing life insurance companies in Texas the freedom and liberty to accept or reject, and to choose, the applications made to such companies.”
It is true that appellee did not ask us to review the evidence. It was appellant which assigned as 'error the absence and insufficiency of evidence to support the jury’s answers to material issues submitted to it. The first assignment requires us to view the evidence in a manner most favorable to the verdict and the latter assignment requires us
“ * * * to consider and weigh all of the evidence in the case and to set aside the verdict and remand the cause for a new trial, if it thus concludes that the verdict is so against the great weight and preponderance of the evidence as to be manifestly unjust' — this, regardless of whether the record contains some 'evidence of probative force’ in support of the verdict.” In re King’s Estate, 150 Tex. 662, 244 S.W.2d 660, 661.
We may have incorrectly evaluated, appraised, considered and weighed the evidence, but we did not improperly do so; nor would we have weighed the evidence at all if appellant had not requested us to do so.
We are not the first court to consider a device by which an insurance company receives pay for a risk not incurred.
In Starr v. Mutual Life Ins. Co. of New York, 1905, 41 Wash. 228, 83 P. 116, 117, the Supreme Court of Washington considered a receipt in this form:
“I have paid $-to the subscribing soliciting agent, who has furnished me with a binding receipt therefor, signed by the secretary of the company, making the insurance in force from this date, provided this application shall be approved and the policy duly signed by the secretary at the head office of the company and issued.”
In discussing this receipt the Court stated :
“The chief object of the provision would, therefore, seem to be to enable the insurance company to collect premiums for a period during which there *312was in fact no insurance, and consequently no risk.”
In speaking of a similar receipt, the Supreme Court of Oregon in Francis v. Mutual Life Ins. Co. of New York, 1910, 55 Or. 280, 106 P. 323, 327 stated:
“The clause seems to he a mere trick on the part of the insurance company to deceive the applicants into the belief that they have temporary insurance, and thereby induce them to part with their money in advance of the issuance of the policy. It is a practice unworthy of a great business corporation, and is commented upon by Rudkin, J., in Starr v. Mutual Life Ins. Co., 41 Wash. 228, 83 Pac. [116] 117, in terms none too severe.”
In Western & Southern Life Ins. Co. v. Vale, 1938, 213 Ind. 601, 12 N.E.2d 350, 354 the Supreme Court of Indiana, in addressing itself to this question stated:
“In other words, it is recognized that such a receipt is calculated to. convey the impression to the applicant for insurance that he is insured, and to procure money from him as premium for insurance over a period when he is not insured at all. Put otherwise, it means that, by a device calculated to deceive, the applicant is defrauded out of so much of the premium paid as would provide insurance for the period between the application and the acceptance and delivery of the policy.”
In Ransom v. The Penn Mutual Life Ins. Co., 1954, 43 Cal.2d 420, 274 P.2d 633, 635 the Supreme Court of California, in Bank, stated the substance of the Court’s language in Albers v. Security Mut. Life Ins. Co., 41 S.D. 270, 170 N.W. 159, with apparent approval as follows:
“ * * * it was said that if the company did not intend that the insurance should be effective from the date of the application it would be obtaining a premium for a period during which there was no insurance, and this would not be dealing honestly with the insured.”
In Metropolitan Life Ins. Co. v. Grant, 9 Cir., 1959, 268 F.2d 307, 311, the involved receipt contained this provision:
“The Company shall incur no liability under this application until a policy has been delivered and the full first premium * * * paid * * * ⅛ which case such policy shall be deemed to have taken effect as of the date of issue as recited therein, except as follows: If an amount equal to the full first premium on the policy applied for is paid to and accepted by the Company at the time Part A of this application is signed and if this application is approved at the Company’s Home Office for the class, plan and amount of insurance herein applied for, then the insurance in accordance with the terms of the policy applied for shall be in force from the date hereof.”
Appellant paid the first premium and was notified to appear for a medical examination, but he was accidentally killed before meeting his appointment. The Court held that there was a contract of interim insurance between the date of the application with payment' of premium and approval by the company, one of the Concurring Justices stated:
“I think, as Chief Justice Gibson said, it would be unconscionable to permit the company to escape the obligation thus undertaken by it.” 2
The whole question of binding receipts in life insurance is thoroughly and excellently treated in 44 Yale L.J. p. 1223. The author there says:
“An examination of a large number of binding receipts indicates that for purposes of analysis they are best divisible into two categories. Under one type of receipt, hereafter called the first *313type, it is provided that any insurance effected shall, by reason of the payment of the premium at the time of the application, be in force from the date of the medical examination, provided the application shall be ‘approved and accepted’ as applied for, at the home office. Another type of receipt provides that the insurance shall be effective as of the date of the medical examination, if the company shall be satisfied that on that date the applicant was an insurable risk, and that the application was otherwise acceptable under the company’s regulations for the amount and plan of the policy applied for.”
The receipt before us clearly falls within the first classification.
The author, after stating some of the benefits, other than insurance, which accrues by reason of dating the insurance from the date of the application, continues:
“But despite these various benefits, the fact remains that the applicant does not receive the main object for which a premium is paid and which the language of the receipt may lead him to expect, namely, insurance from the date of payment of the premium.
“To some courts, this latter fact of itself has served to brand the first type of receipt as unfair.
⅜ ⅝ ⅜ ⅜ ⅝ ⅝
“ * * * the fact that the insurance company is exacting an unearned premium if it does not become liable from the time of the payment of the initial premium, may well serve to explain the adverse attitude of these courts towards the insurance company using the first type of receipt.
“Regardless, however, of whether these courts’ understanding of ‘justice’ is correct, their attitude has nevertheless led lawyers to believe that other courts which have not adjudicated the issue of the legal effect of the binding receipt of the first type, will also enforce a ‘just relationship.’ But since insurance companies are willing to support an opposing view in an attempt to uphold their contracts, as they understand them, litigation necessarily results. It is this consequence, perhaps more than that of unfairness in the terms of the contract, that is thoroughly undesirable, since it conflicts with the recognized purpose of life insurance. Policies are carried by many people with limited resources. For such individuals, court action, with its attendant uncertainties, costs, and postponed payments, naturally is a serious handicap, since it may exhaust much of the benefit to be gained from an insurance policy. And since life insurance is often bought to protect the otherwise impecunious dependents of the insured, the necessity of legal action, regardless of who is finally successful, immediately destroys a large part of the possible benefit of insurance.
“Such a condition would seem socially undesirable. But its elimination will probably depend upon whether companies using the first form of receipt will substitute a more clearly expressed receipt, frankly stating in terms plain even to a layman that the company is bound only as of the date of acceptance, or will adopt the second type of binding receipt, providing for the assumption of an insurance risk by the company from the date of the medical examination. Ordinarily, the only uncertainty which might give rise to litigation under the latter type of receipt would be uncertainty as to the question of fact, whether the applicant was an insurable risk as of the time of the medical examination. At the same time, the adoption of the second form of binding receipt would eliminate the question of possible misrepresentation of non-disclosure arising under the first form of binding receipt.
*314“Past experience has convinced many companies, particularly the larger and more reliable ones, that less stringent agreements, involving fewer legal complexities mid defenses, better serve their own interests in the long run. It may be expected therefore, that companies still employing the first form will profit by that experience, and change their receipts as well as their practice to conform to apparently more just methods of doing business.” (Italics ours.)
Yet, appellant asks:
“From whence arises this great concern of this Court for a period of time in which there is no insurance cover-, age and no knowledge of an applicant as to his status of insured or not insured?”
The answer is simple. Our concern stems from our innate sense of fairness, and from what we conceive to'be the well founded disinclination of a person to pay for something he does not receive.
We did not and we do not hold the receipt and its use to be against public policy. In order to hold this, we would need a prohibitory statute or constitutional provision. We believe that such receipt is against the public interest and we certainly are not alone in this view.
Let us make our decision clear. We have discussed and weighed the evidence because it was our duty, activated by appellant and not by appellees, in order to ascertain if the jury verdict was, as appellant contends, so against the overwhelming weight and preponderance of' the evidence as to be manifestly unjust. We have considered and weighed the evidence as we believe the jury had a right to consider and weigh it. We have not held, as it appears some courts have held, that appellant is liable as a matter of law, and without the necessity of proving approval of the application of Mr. Bruce. We simply sustain the jury verdict.
The motion is overruled.

. In this case the Court stated:
“No public policy is violated by a contract between an insurance company ami an insured whereby premiums are to be paid from the effective date of the policy rather than the date of its delivery, even though the effect thereof is to charge a premium for a period when the insured has no protection. It was pointed out in the case last-above cited, and in the case of Kurth v. National Life & Accident Insurance Co., Inc., Tex.Civ.App., 79 S.W.2d 338, writ refused, that it is to the interest of both parties to have a certain date upon which to calculate not only the due dates of premiums but the premium rate, cash and loan value, and the paid-up insurance benefits available to the insured.”
This treatment of life insurance is, it seems to us, wholly from an investment point of view. That some life insurance does have investment value is not doubted, but that such is not its principal value is shown by the following quotation taken from a column of the Austin American of May 4, 1961, sponsored by the Austin Chapter of the American Society of Chartered Life Underwriters, made in response to a query as to whether life insurance should be dropped and the premium money put “into bonds or possibly stocks that will bring a more substantial return,” the answer, in part, being:
“Comparing bonds or stocks with life insurance is just about like comparing scrambled eggs and orange juice. We happen to like both for breakfast.”

. See Kansom v. The Penn Mutual Life Ins. Co., supra.