MOORE v. INSURANCE CO. OF NORTH AMERICA

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Docket Number

Gen. No. 49,165.

Attorney(S)

Vogel Vogel of Chicago (David F. Holland, of counsel), for appellant. Edward H. Norton, of Chicago, for appellee.

Judges

Michael J. Burke

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Smart Summary

Factual and Procedural Background

Carlisle Moore, as beneficiary, sued Insurance Company of North America after Gertrude M. Griffin applied on August 29, 1962 for a $2,000 life policy naming Moore beneficiary and paid the initial premium of $16.95. Griffin died on November 25, 1962. On November 26, 1962 the insurer purportedly rejected the application by letter to its broker, who informed plaintiff by letter dated November 30, 1962. Plaintiff refused the tender of the $16.95 and sought $2,000 plus interest and attorney's fees. The defendant's motion to strike and dismiss was denied in the municipal court; defendant stood on the motion and judgment was entered for plaintiff for $2,500 (including $500 attorney's fees). The defendant appealed. The appellate court reversed and remanded with directions to allow defendant's motion and enter judgment for the defendant.

Legal Issues Presented

Whether an application for life insurance, with payment of the initial premium but followed by insurer's rejection after the applicant's death, establishes a contractual basis for recovery by the applicant's intended beneficiary.
Whether such facts can support a tort (negligence) claim by the beneficiary absent allegations of a duty and breach owed to the beneficiary.

Arguments of the Parties

Defendant-Appellant's Arguments

The allegation of a mere application for insurance, rejected after the applicant's death, does not support recovery in contract or tort by the applicant's intended beneficiary.

Plaintiff-Appellee's Arguments

The insurer's attempted rejection of the application and retention of the initial premium after the passage of three months and after the applicant's death is ineffectual to bar liability; plaintiff cites Lumbermen's Mutual Ins. Co. v. Slide Rule Scale Co. in support.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Lumbermen's Mutual Ins. Co. v. Slide Rule Scale Co., 177 F.2d 305 (CCA 7 1949) affirming 79 F. Supp. 394.	Authority of agents: distinction between a general agent who can bind the insurer and a mere solicitor; liability where agent was authorized to issue binders.	The court found Lumbermen's distinguishable and not supportive of plaintiff because that case concerned agent authority and binders; one company in Lumbermen's that was not liable was in substantially the same position as defendant here (had merely solicited applications and rejected a purported binder).
Zayc v. John Hancock Mut. Life Ins. Co. of Boston, 338 Pa 426, 13 A.2d 34.	Delay in passing on an application cannot be construed as acceptance by the insurer; applications governed by general contract principles.	The court cited Zayc for the principle that mere delay, however great, in acting on an application is not acceptance and cannot support an action ex contractu.
Miller v. Illinois Life Ins. Co., 255 Ill. App. 586.	An application for insurance is an offer that creates no rights until accepted; delay cannot be construed as acceptance.	The court relied on Miller to hold that the statement of claim failed to state a cause of action because an unaccepted application imposes no contractual rights or duties on the insurer.

Court's Reasoning and Analysis

The court examined the complaint's allegations: application, payment of initial premium, applicant's death, and insurer's purported posthumous rejection. It analyzed the legal effect of an insurance application under contract principles, distinguishing cases about agent authority and binders (Lumbermen's) from cases holding that unaccepted applications do not create enforceable rights (Zayc, Miller). The court noted the complaint did not allege any binder, temporary coverage, or parol contract of coverage, nor did plaintiff assert a tort claim alleging any duty owed to him or its breach. Applying the cited authorities, the court concluded an application is a mere offer that may be revoked or lapse prior to acceptance and that delay does not constitute acceptance; therefore the statement of claim failed to plead ultimate facts establishing liability in contract or tort.

Holding and Implications

Holding: The judgment for plaintiff is reversed and the cause is remanded with directions to allow defendant's motion and to enter judgment for the defendant and against the plaintiff.

Implications: The direct effect is dismissal of plaintiff's claim and entry of judgment for the insurer. The opinion applies existing contract-law principles to insurance applications and does not announce a new legal doctrine beyond those precedents.

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Carlisle Moore, Plaintiff-Appellee, v. Insurance Company of North America, Defendant-Appellant.

MR. PRESIDING JUSTICE BURKE delivered the opinion of the court.

Carlisle Moore filed a statement of claim against Insurance Company of North America alleging that on August 29, 1962, Gertrude M. Griffin, applied to defendant for $2,000 insurance on her life, naming her son, plaintiff, as beneficiary and paying to defendant the initial premium of $16.95; that on November 25, 1962, the applicant died; that on November 26, 1962, defendant purportedly rejected the application for insurance by letter to its broker, who advised plaintiff thereof by his letter dated November 30, 1962; that plaintiff refused to recognize the purported rejection of the application after the death of his mother, and that defendant refused to pay any part of the $2,000 to plaintiff except the tendering to him of the $16.95, which he refused. Plaintiff asks judgment for $2,000 plus interest and reasonable attorney's fees. The defendant's motion to strike the statement of claim and to dismiss the action was denied, whereupon defendant stood on the motion and judgment was entered for $2,500, including $500 allowed as attorney's fees. The defendant appeals.

Defendant, in urging reversal, states that the allegation of a mere application for insurance, rejected by the insurance company after the death of the applicant, does not afford a basis for recovery in either contract or tort in a suit brought by applicant's intended beneficiary. Plaintiff rejoins that the attempted rejection of the application and the initial premium paid therefor after the passage of three months and the death of the applicant is ineffectual to bar liability of the insurer for the amount of insurance sought. In support of his position plaintiff cites Lumbermen's Mutual Ins. Co. v. Slide Rule Scale Co., 177 F.2d 305 (CCA 7 1949) affirming 79 F. Supp. 394. We do not think that this case supports plaintiff's position. The case involved the question of the authority of a general agent, as distinguished from one who merely solicits applicants for insurance, to bind his principals. The one insurance company that was found not liable in Lumbermen was in substantially the same position as the defendant in the case at bar. The company that was held not liable in the federal court had merely authorized the agent to solicit applications When the agent attempted a binder or temporary coverage this company rejected it and declined to accept the risk. The District Court held that the purported binder was unauthorized and that the insurance company was not liable. The companies that were held had authorized the agent to receive and accept proposals for insurance and to issue binders. In the case at bar the statement of claim does not allege a binder, or temporary coverage or even a parol contract of a binder or temporary coverage. Plaintiff in the instant case merely alleges an application for insurance and a rejection. The subject matter was considered by the Supreme Court of Pennsylvania in Zayc v. John Hancock Mut. Life Ins. Co. of Boston, 338 Pa 426, 13 A.2d 34. The court said that the legal relation between an applicant for insurance and the insurer are fundamentally the same as those between parties negotiating any other type of contract and are to be tested and governed by the principles applicable to contracts in general and held that mere delay, however great, in passing upon an application for insurance cannot be construed as an acceptance thereof by the insurer which would support an action ex contractu, notwithstanding payment of premium at time application is made. In the case of Miller v. Illinois Life Ins. Co., 255 Ill. App. 586, decedent's intended beneficiary alleged an application for insurance, payment of the initial premium, the death of the applicant and the rejection of the application after the applicant passed away. In affirming the dismissal of the action, the court said, p 589: "An offer to enter into a contract, which is not accepted, creates no rights, but may be revoked or lapsed before acceptance. [Citing cases.] Delay in passing upon an application for insurance cannot be construed into an acceptance by the insurer."

[1, 2] The plaintiff does not make any attempt to assert liability on a tort theory for negligence in acting upon the application. The statement of claim does not allege any duty owed to him by the defendant or any breach of the duty. Under the Miller case an application for insurance is a mere offer and creates no rights and imposes no duty upon the insurance company. We find that the statement of claim fails to set forth ultimate facts presenting a cause of action upon either a contract or a tort liability theory. Therefore the judgment is reversed and the cause is remanded with directions to allow defendant's motion and to enter judgment for the defendant and against the plaintiff.

Judgment reversed and cause remanded with directions.

FRIEND and BRYANT, JJ., concur.