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NATIONAL LIFE & ACCIDENT INSURANCE COMPANY v. MOORE.
33897.
Complaint on insurance policy; from Whitfield Superior Court-- Judge Paschall. October 9, 1951.
CARLISLE, J.
1, 2. The jury was authorized to find that the contract of insurance sued upon was in full force and effect on the date of the insured's death, that the loss sustained was covered by the contract of insurance, and that the insurance company's refusal to pay the loss was in bad faith. 3-5. The assignments of error in special grounds 1, 2, and 3 of the motion for a new trial, upon the exclusion of certain evidence and the refusal of the court to grant a motion for a continuance, are without merit.
This is the second appearance of this case in this court. The decision, when the case was here before, is reported in National Life & Accident Insurance Co. v. Moore, 83 Ga. App. 289 (63 S. E. 2d, 447), and although the report of the case there reveals the state of the pleadings at the time of that decision, the pleadings have been so variously amended since that time that it is necessary here to restate them in order to present a clear picture of the relative positions taken by the parties at the time of the trial.
"Not valid if altered or if serial number amount and date different from application.
"Received of Ernest L. Moore a deposit of 2.15 dollars to cover all of the first monthly premium on proposed insurance, if issued, for $1,000.00 on the life of app. for which an application numbered as below is this day made to the National Life and Accident Insurance Company. Such deposit will be returned (a) if application is declined or (b) if a policy is issued other than as applied for and applicant declines to accept it. No insurance is in force on such application unless and until a policy has been issued thereon and delivered in accordance with the terms of such application, except that when such deposit is equal to the full first premium on the policy applied for and such application is approved at the home office of the company for the class, plan and amount of insurance and at the rate of premiums as so applied for, then, without affecting the issue date and anniversaries as set forth in the policy, the amount of insurance applied for will be in force from the date of this receipt, but no obligation is assumed by the company unless and until such application is so approved. If a policy is offered by the company that is not in all respects the same as the policy applied for, such policy will not take effect unless and until it has been accepted by the applicant and the additional premium therefor, if any, has actually been paid to and accepted by the company [during?] the lifetime of the applicant.
"Date 6/10/1949. No. 468919. P. L. Langston, Agent District Rome, Ga.
"If policy is not delivered to you within 60 days from date, this receipt should be presented at the district office, or the home office in Nashville, Tenn., for redemption."
In the original answer, filed August 30, 1950, the foregoing allegations of paragraph 2 of the petition were admitted, but by an amendment to its answer allowed and ordered filed on September 25, 1950, the defendant struck from its original answer the admission of the allegations of paragraph 2 of the petition, and alleged: "At the time of making said application for insurance, the applicant was the man who sold and delivered the daily paper to the soliciting agent, P. L. Langston. The applicant agreed to deliver the newspaper for one month without any charge to the agent and to give the agent credit for one month's subscription paid in advance in exchange for said agent giving him a receipt for $2.15, the amount of the first month's premium on said policy, if said policy were approved by the home office. That after the death of said Ernest L. Moore, the said agent learned that the said Ernest L. Moore had failed to give him credit of $2.15 on his daily paper account and he did not deliver said paper for one month without charge, nor did anyone do so for him, and it was necessary for said agent to pay this amount to the man who delivered his daily paper after the death of Ernest L. Moore."
In paragraph 3 of the original petition it was alleged that the deposit of $2.15 covered all of the first full monthly premium on the proposed insurance, and this was admitted by the defendant in its original answer filed August 30, 1950, but by a later amendment, filed on September 25, 1950, this admission was struck from the answer.
By an amendment to her petition on September 25, 1950, the plaintiff attached a copy of the application for the proposed insurance, the material provisions of which are as follows: "26. On my own behalf and in behalf of any person who may have or claim any interest in any policy issued hereon: (1) I hereby declare that each of the statements contained herein is full, complete, true, and without exception, unless such exception is noted, and made as inducements to the execution of a policy of life insurance for which this is an application. (2) I hereby agree that the proposed contract shall not be effective until the policy has been issued and the first premium actually paid and accepted by the company and the policy has been delivered to and accepted by me in my lifetime, and while in good health, except as provided in the receipt referred to in Part I, Item 34 hereof. (3) I hereby agree that no statement has been made or information given in connection with this application or the proposed insurance which is, in any way, inconsistent with anything appearing herein or in the above mentioned receipt. (4) I hereby agree that in the case of apparent errors or omissions discovered by the company in the foregoing application, or in the event the company is unwilling to issue a policy upon the plan in the rating class, or in the amount applied for, or with any supplementary contracts applied for, the company is hereby authorized to amend this application by noting the change in space 15, of Part I hereof, and to prepare and submit the policy on a different plan and a different rating class, or in a different amount from that applied for, or without any supplementary contracts applied for, and I agree that my acceptance of such policy, accompanied by a copy. of this application as amended, shall constitute a ratification of such changes or amendments. (5) I hereby agree that only the president or secretary of the company in writing, has the power to waive, alter, or modify this application or any policy issued pursuant thereto. (6) I expressly waive, on behalf of myself or any other person, all provisions of law forbidding any physician or other person who attended or examined me, or who may hereafter attend or examine me, from disclosing any knowledge or information which they thereby acquired, and I hereby specifically authorize all such persons to freely communicate their knowledge to the company if it requests them to do so." It also appears from the application that to the question, "To what extent do you now, or have you in the past, used intoxicants, morphine, cocaine, or other habit-forming drugs?" the reply by the applicant was "None."
In paragraph 4 of the original petition it is alleged that the application was approved at the home office of the defendant company for the class, plan, the amount of insurance, and the rate of premium applied for.
In paragraph 5 it is alleged that the defendant company issued a policy of insurance on the life of Ernest L. Moore, the applicant, with the plaintiff named as beneficiary; and in paragraph 6 it is alleged that the date of approval of the application and of the issuance of the policy is unknown to the plaintiff but well known to the defendant. The allegations of these paragraphs were denied in the defendant's original answer, and by an amendment to the answer, filed October 19, 1950, it was alleged that according to the rules of this company regulating the action of its agent, the agents are required to obtain a payment by an applicant of at least one week's premium, and that in this case the agent violated the rules of the company and he himself furnished the premium of $2.12 for the applicant Moore and Moore did not pay out any money whatever to obtain the policy, nor did he pay four weekly payments in advance, nor any other sum. The application was sent through the process of being approved and issued by the company and the company, relying on the truth of the statements of the applicant Moore contained in his written application, which was to be attached to and made a part of the policy, but which contained certain false representations which were material, did actually issue the policy and then learned that Moore had been killed in an automobile accident by running up on a bank on the side of the road while intoxicated, and then learned that he had not made any payment of premiums as required by the rules of the company and as required by the contract, but that the payment had been advanced for him by P. L. Langston, the defendant's agent. The defendant then refused to issue ("issue" changed to "deliver" by an amendment filed April 5, 1951) the policy and Langston then paid the plaintiff, Mrs. Moore, the sum of $2.12 and obtained a release and satisfaction of the policy for which Ernest L. Moore had applied. (The italicized words were stricken by a subsequent amendment to the answer, filed on April 5, 1951.) It was further alleged in the amendment to the answer, filed on October 19, 1950, that the applicant's answer "None," to the question "To what extent do you now, or have you in the past used intoxicants, morphine, cocaine, or other habit-forming drugs?" was false and misled the company in deciding to issue the policy for the reason that the applicant Moore had on several occasions drunk to excess and had become intoxicated and on the night of his death when he ran off the road he was intoxicated, and by reason of these false representations the policy is void and since the applicant never paid anything to the company as a premium the contract is entirely unilateral and was obtained by a conspiracy between the defendant's agent Langston, and the applicant Moore in that they represented that the applicant had paid $2.12, when in fact, the applicant had paid nothing for the policy. By a subsequent amendment to the answer, filed on April 5, 1951, the defendant struck any part of its answer indicating that the premium on the policy was paid to the company by its agent Langston and alleged that no premium was paid by the applicant, and no
premium was paid to the company by Langston or anyone else.
In paragraphs 7, 8, and 9 of the petition, it was alleged that the insured, Ernest L. Moore, died on June 12, 1949, from bodily injuries caused solely by external, violent and purely accidental means resulting from an automobile's turning over on him; that upon learning of the death of Moore the defendant failed and refused to deliver the policy to the plaintiff, his wife, and has continued in such refusal; that the insurance was in force and effect on the date of the death of the insured. The defendant denied these allegations in its original answer.
In paragraph 10 of the petition it is alleged that the defendant refused payment under the policy, and this was admitted by the defendant in its answer.
In paragraph 11 of the petition it is alleged that the plaintiff requested the defendant company to surrender possession of the policy to her so that she might know its terms and conditions but the defendant failed and refused to do so and she is unable to account for such refusal. The defendant's reply to these allegations, in its original answer, was that it admitted that the policy was not delivered, but that this was because the policy was never issued.
In paragraph 12 of the petition, the defendant was notified to produce the application for the insurance and the policy. To this notification, the defendant again replied, in its original answer, that it could not produce the policy as it had never been issued.
In paragraph 13 of the petition as finally amended on April 5, 1951, it is alleged that although more than sixty days had elapsed since the giving of notice and demand for payment on March 21, 1950, the defendant has not paid the loss and still owes the plaintiff $1000 plus interest from the date of demand and that the defendant's failure to pay the plaintiff the amount due under the contract of insurance is without reason or excuse, and is frivolous and in bad faith which makes the defendant liable for the penalty of 25% of the $1000 due and reasonable attorney's fees in the sum of $500 as provided for in Code 56-706.
Upon the trial of the case, the jury returned a verdict for the plaintiff for the sum sued for, 7% interest on that sum for one year, 25% of the sum sued for as a penalty, and $500 as attorney's fees. The defendant's motion for a new trial, based upon the usual general grounds, and three special grounds, was overruled and it excepted.
1. Although it appears that the allegations in the defendant's original answer, referring to the dealings between Moore and Langston as to the payment of the premium, were stricken by the trial court on special demurrer, essentially the same facts were included in a subsequent amendment to the answer which the court allowed and ordered filed, and it does not appear from the record before this court that the plaintiff preserved any exception to the allowance of this latter amendment. Thus, viewed in the state in which the pleadings reached this court, at the time of the trial the defenses presented by the answer were: (1) the contract of insurance was void for a material misrepresentation in the application with reference to the applicant's use of intoxicants; (2) the first premium had not been paid as recited in the premium receipt. The defense that the application for insurance had never been approved, the major defense when the case was here before, was eliminated from the case by the defendant's admission in its answer that, although the policy was issued (and the policy would scarcely be issued if the application had not been approved), it had not been delivered. Thus, eliminating for the moment the question of the propriety of the recovery of the statutory penalty and attorney's fees, the questions for solution are narrowed, under the general grounds, to whether the contract for insurance was void for a material misrepresentation in the application, or whether the contract never became of force because the first premium had never in fact been paid.
In National Life & Accident Ins. Co. v. Barnes, 61 Ga. App. 730 (1) (7 S. E. 2d, 299), it was held that in applications for insurance the question, "To what extent do you now, or have you in the past, used intoxicants, morphine, cocaine, or other habit-forming drugs?" is "generally held to have reference to the 'habitual' or 'customary' use of such drugs or drinks, and does not refer to an 'occasional' or 'exceptional' use of such drugs or drinks." Under this construction of the question, the applicant's answer "None" can not, under the evidence, be said to have amounted to a material misrepresentation. While there is evidence from which the jury could have inferred that the applicant was drunk at the time of the accident which resulted in his death, such intoxication was subsequent to the application. The only other evidence bearing upon the applicant's use of intoxicants at all was the testimony of one witness that he had on one occasion seen the applicant returning home when "he walked like a man that was a little full or about half sick," and it was the witness's impression that he had been drinking. This evidence did not demand, or even authorize, a finding that the applicant's answer to the question in the application was untrue, and the defendant's effort to nullify the contract of insurance upon the ground of a material misrepresentation was ineffective.
Under the decision of this court when the case was here before, the contract of insurance, evidenced by the "binder receipt" became of force when the application for insurance was approved. The approval of the application was admitted, as we have said. The binder receipt reciting the payment of the first monthly premium was introduced in evidence, and Langston, the defendant's soliciting agent, testified that, at the time the application was prepared and the premium receipt was issued on June 10, Moore delivered to him, Langston, his daily newspaper for which Langston paid him at the end of the month, and that they agreed that at the end of the month Moore would mark the newspaper account paid up and Langston would pay the first monthly premium. There was evidence that the records of the defendant company indicated that the first monthly premium had been paid; that the company accepted the agent's word as to the payment of the premium by the applicant and settled with the agent once a month for such premiums; that is, under the custom followed by the company with its agent, the agent was required to pay over to the company, between the first and tenth of the following month, the premiums which he had collected on insurance which he had written and sent in to the company in any one month. There was evidence that other records of the company, those of its cashier, indicated that the premium had never been paid. In its first answer to the plaintiff's petition, the defendant admitted payment of the first monthly premium, and although this admission was later stricken, counsel for the plaintiff read this admission into evidence. Under these circumstances, the jury was authorized to find that the premium had in fact been paid. See, in this connection, Williams v. Empire Mutual Annuity &c. Ins. Co., 8 Ga. App. 303 (9) (68 S. E. 1082); and Liberty National Life Ins. Co. v. Parrimore, 70 Ga. App. 320 (28 S. E. 2d, 190), and cases cited.
It follows, therefore, that the jury were authorized to find, as they obviously did, that the insurance was in force at the time of the insured's death and was due and payable at the time of the trial.
2. As has been pointed out earlier, the plaintiff, after all the evidence was in, amended her petition so as to include the statutory penalty and attorney's fees provided for by Code 56-706. In order to recover under this section, it is necessary that it appear that the insurance company's refusal to pay the loss was in bad faith, and the mala fides of the company is generally a question for the jury. Liberty Mutual Ins. Co. v. A. C. L. R. Co., 66 Ga. App. 826, 834 (9 S. E. 2d, 377), and cases cited. The insured died on June 12, 1949. By March 21, 1950, at which time formal demand was made for payment, payment had not been made. On July 31, 1950, suit was filed by the plaintiff. The defendant in its answer first admitted that the first monthly premium had been paid, but contended that the application for insurance had never been approved, approval of the application constituting a condition precedent to the insurance of the applicant. By amendment, these positions taken by the defendant were reversed, and it was then contended that, although the application had been approved, the premium had never been paid. Certain marks on the application, which was in the possession of the defendant, when explained by the defendant's own witnesses, showed that in fact the application had been approved and that this evidence was before the defendant at the time the defense of "no approval" was made. In addition to reversing its positions, the defendant set up the defense of a material misrepresentation in that the applicant had answered "None" to the question as to the extent to which he used or had used intoxicants. The defendant produced no evidence to substantiate this defense. Counsel for the plaintiff illustrated the defendant's changes in position by reading the appropriate pleadings into evidence, and in addition read other parts of the defendant's pleadings, which showed that the defendant had also replied to the plaintiff's notice to produce the policy that it could not do so as it had never been issued, a position which also was reversed by the defendant's admission that the policy had in fact been issued but had not been delivered. The defendant introduced no evidence in explanation of its varied changes of position in its defenses to the suit and the answers to such questions as to whether the policy had been issued, the application approved, the premium paid, were certainly within its knowledge or easily ascertainable; and certainly when it is considered that the insured died on June 12, 1949, and the case did not go to trial until April 5, 1951, the defendant had had ample time to investigate and establish some basis, if basis there was, for its contention that the applicant had misrepresented his use of intoxicants. In the light of the foregoing circumstances, the jury were authorized to find that the defendant's refusal to pay the loss covered by the contract of insurance was in bad faith. On the question of utilizing admissions in pleadings as evidence although stricken from the pleadings, see Alabama Midland Railway Co. v. Guilford, 119 Ga. 523 (46 S. E. 655).
3. From what has been said in division 1 of this opinion concerning the agreement between the applicant for insurance and the defendant's agent as to the payment by the agent of the first monthly premium, the exclusion of the evidence upon which error is assigned in special ground 1 (numbered 4) was harmless, and this ground is without merit.
4. Evidence showing the insured to have been intoxicated at the time of the accident which resulted in his death, and which was subsequent to the time of the issuance of the "binder receipt," in the absence of any evidence showing a prior habit of using intoxicants, in no way illustrated the falsity of the insured's representation made in the application as to his use of intoxicants at the time of, or prior to, the issuance of the receipt and the preparation of the application; nor would such evidence illustrate any other issue in the case. The trial court did not, therefore, err in excluding the evidence to which exception is taken in special ground 2 (numbered 5).
5. In special ground 3 (numbered 6), error is assigned upon the trial court's refusal of the defendant's motion for a continuance, on the ground of surprise occasioned by the plaintiff's amendment adding allegations and a prayer for the statutory penalty and attorney's fees, after all the evidence had been introduced. A party may at any stage of the cause amend his pleadings in all respects, whether in matter of form or of substance. Code, 81-1301. In view of the history of the case and the evidence on the hearing for a continuance, the trial court was authorized to determine that the defendant would not by a continuance be placed in any better position than it was at the trial to defend against the demand for the statutory penalty and attorney's fees, made in the plaintiff's amendment; and the trial court did not, therefore, abuse its discretion in overruling the motion for a continuance. Weil v. Schoenberg, 36 Ga. App. 706 (137 S. E. 842); Deen v. Wheeler, 7 Ga. App. 507 (67 S. E. 212).
The trial court did not err in overruling the motion for a new trial for any reason assigned.
ON MOTION FOR REHEARING.
Counsel for the defendant in their motion for a rehearing lay great stress upon the rule that, where admissions have been made in pleadings which are stricken subsequently, they can not be used as solemn admissions in judicio so as to estop the pleader's denial or explanation of such admissions. No such effect was given the defendant's admission of payment of the premium in this case. The admission of payment in the original answer, which was later stricken, was introduced in evidence by the plaintiff and was entitled to be considered along with the various other pros and cons on the question of payment of the premium. No other effect was given or intended to be given by this court to such admission
As we have already pointed out in the original opinion in this case, it is the habitual or customary use of intoxicants which would materially increase the risk to the insurer, so that a misrepresentation by an applicant as to such use would render the contract of insurance voidable at the option of the insurer. The customary and habitual use of intoxicants might well be considered by the insurer to have reached the proportions of a malady, but not so where there had been an occasional or exceptional use of intoxicants. The only direct evidence of the insured's having ever used intoxicants was that of his drunkenness on the day of his death, and the facts of this case are totally unlike that line of cases exemplified by Stipcich v. Metropolitan Life Insurance Co., 277 U. S. 311 (48 Sup. Ct. 512), where, between the time of the application and the time of the policy, the applicant discovered himself to be afflicted with a serious malady, duodenal ulcer, and unlike those cases in which it is provided that the applicant shall be in good health at the time of the delivery of the policy and the payment of the premium. McKenzie v. Northwestern Mutual Life Ins. Co., 26 Ga. App. 225 (105 S. E. 720).
We have held in the original opinion that there was evidence from which the jury was authorized to find that the first premium was actually paid; and this being so, the following cases relied upon by counsel for the defendant are entirely beside the point: Scurry v. Cotton States Life Ins. Co., 51 Ga. 625; Metropolitan Life Ins. Co. v. Thompson, 20 Ga. App. 706 (93 S. E. 299); Reese v. Fidelity Mutual Life Association, 111 Ga. 482 (36 S. E. 637); Clark v. Mutual Life Ins. Co., 129 Ga. 571 (59 S. E. 283); Reliance Life Ins. Co. v. Hightower, 23 Ga. App. 573 (99 S. E. 140); Penn Mutual Life Ins. Co. v. Blount, 37 Ga. App. 756 (142 S. E. 183); Penn Mutual Life Ins. Co. v. Blount, 165 Ga. 193 (140 S. E. 496). In none of those cases was such a finding authorized.
Rehearing denied. Gardner, P. J., and Townsend, J., concur.
Walter H. Bolling, Mitchell & Mitchell, contra.
Hardin & McCamy, Wm. F. Buchanan, for plaintiff in error.
DECIDED MAY 27, 1952 -- REHEARING DENIED JULY 28, 1952.
Saturday May 23 04:55 EDT


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