Stringham v. Mutual Ins. , 44 Or. 447 ( 1904 )

Mr. Justice Wolverton,

after stating the facts as above, delivered the opinion of the court.

1. This action is upon a contract of insurance formulated by the application and its accompanying documents, and the acceptance or approval thereof by the company. While it is alleged that the policy is in full force and effect, that instrument is not made the basis of the action. It is not set out, nor is the effect of its provisions stated in'the pleadings, nor was it offered in evidence, or any of its terms or conditions alluded to, for the purpose of controlling the action, or in any manner defining or fixing the rights and liabilities of the parties concerned. The policy was never in fact delivered by the company to the applicant. This is conceded both by the allegations of the complaint and the reply. Of course, there could be no delivery to him after his death, by which event the correlative rights and obligations of the parties became finally fixed and established: Thompson v. Travelers’ Ins. Co. 11 N. D. 274 (91 N. W. 75). It is said: “The policy of insurance is the final contract between the parties, and the effect of its acceptance is to supersede all preliminary agreements in respect to insurance”: 16 Am. & Eng. Enc. Law, (2 ed.) 856. So that the final consummation of the contract of insurance includes both the delivery of the policy and its acceptance by the insured. The applicant has a right to reject the policy if it does not conform to the agreement of the parties for its execution, and, until delivery and acceptance, either expressly or by inference or implication, the contract is not filial^ executed, although it may be so far assented to as to give a right of action thereon.

2. To determine, therefore, whether plaintiff has a cause of action as alleged, we have but to look to the application which was made for insurance, the note executed in connection therewith, the receipt given by Cummins and accepted by the applicant, and the defendant’s subsequent action in reference thereto. The application, by its terms, is made the basis and a part of the proposed contract of insurance, one of the stipulations on the part of String-ham being as follows:

“I hereby agree that all the following statements and answers, and all those that I make to the company’s medical examiner, in continuation of this application, are by me warranted to be true, and are offered to the company as a consideration of the contract, which I hereby agree to accept, and which shall not take effect until the first premium shall have been paid, during my continuance in good health, and the policy shall have been signed by the secretary of the company and issued.”

The receipt executed and delivered by Cummins to Stringham stipulates, on the other hand, that the note, “if paid when due, will be in full for the first annual premium for a policy of insurance for $1,000, * * provided a policy is issued on his application mad.e this day.” These instruments must be construed together to arrive at the real agreement and understanding of the contracting parties. By the application it is made a condition of the contract’s becoming effective that the first premium shall have been paid during the continuance in good health of the applicant, and the policy shall have been signed by the secretary of the company and issued. If these things have been done and performed, plaintiff’s right of action upon the contract of insurance has accrued; otherwise not.

We will dispose first of the controversy relative to the meaning of the term “issued,” as employed in the application, it being insisted on the part of the plaintiff that it signifies simply the completion and signing up of the policy bjr the secretary and its execution at the office of the company, while, upon the other hand, it is contended that it includes as well the delivei'y of the policy to the applicant. Among the many cases that have passed under our notice, the term seems to have been used interchangeably to denote either one or the other of these conditions, but we have been cited to no case that attempts to determine as a general rule when an insurance policy is deemed issued. We are impressed that the term has a double application, and its meaning is to be determined by the relation in which it is employed. In the present instance it is obvious that the especial purpose of the stipulation with reference to the payment of the first annual premium, the signing of the policy by the secretary and its issuance, was to fix upon some definite act or acts in the course of the negotiations that should be taken or construed as indicating an acceptance or approval of the application by the company, and thus to conclude the contract so as to make it binding upon the company, and entitle the applicant to his insurance. It is often difficult to determine when an offer has been assented to, and it was to obviate such an embarrassment that the stipulation was introduced into the application. As it relates to the issuance of the policy, the purpose here suggested is fully subserved when the instrument is drafted in complete form, signed by the secretary, and fully executed at the office of the company. A delivery to the applicant is not necessary as an indication of such acceptance, unless the parties should see fit to make it so. By another clause of the application, the soliciting agent, on the payment of the premium, might have furnished the applicant with a binding receipt, signed by the secretary of the company, making the insurance in force from the date of such application, but with the proviso that the application should be approved, “and the policy duly signed byfithe secretary at the head office of the company and issued.” Although no such receipt was given here, the clause is valuable for construction, and, when the stipulation now being discussed is read in connection with it, there can scarcely be a mistake as to the intendment of the parties, which is that the company should become bound at a time anterior to the final delivery of the policy to and its acceptance by the insured, which time was to be indicated in part by the act of the company in issuing the policy at the head office. We conclude, therefore, that the term “issued” was used as indicative of the completed signing up and execution of the instrument, making it ready for d elivery.

3. This construction is suitable and reasonable, although it must be admitted that the term as employed is not without ambiguity. But if it may be said that it is susceptible of two constructions, and there is a doubt as to its true meaning, then it should be construed, as we have construed it, most strongly against the insurer: Kerr, Ins. § 65; 3 Berryman, Digest Law Ins. § 3012.

4. The next inquiry is, was the note taken and accepted in payment of the first annual premium? We are disposed to treat Cummins as the agent of the company, clothed with full authority to take the application, accept the note, and issue the kind of receipt here involved, and thereby bind the company to the same extent as if the dealings were had with a general agent, with full authority in the premises. The form of the documents was evidently authorized by the company, and the authority of Cummins, he having used them, and the company evidently having acted upon them, must be considered ample to make the very kind of use of them for which they were adapted. The receipt shows the condition upon which the note was executed and delivered to Cummins, or, we may say, to the company; that is, that it was in full for the first annual premium, if paid when due, not that itwras in present payment of such premium. So that, construing the application and receipt together, they simply mean that, if the note is paid when due, and during the continuance in good health of the applicant, both elements or conditions concurring, then that the premium should be considered as paid, and, if the policy shall have been signed by the secretary and issued meanwhile, the contract of insurance would be fully effectuated, but not until these things shall have been accomplished. It has been firmly settled by this court that the acceptance of a note is not to be considered as taken in discharge or payment of the debt unless it is at the same time so agreed and understood: Black v. Sippy, 15 Or. 574 (16 Pac. 418); Johnston v. Barrills, 27 Or. 251 (41 Pac. 656, 50 Am. St. Pep. 717); Schreyer v. Turner Flouring Co. 29 Or. 1, 4 (43 Pac. 719); Kiernan v. Kratz, 42 Or. 474, 484, 485 (69 Pac. 1027, 70 Pac. 506). There is here not only no agreement shown that the note was accepted as payment of the first annual premium, but the receipt negatives the idea, and expressly indicates that it was not to be so taken unless paid when due during the continuance in good health of the applicant. Such is manifestly the contract of the parties, and none other can reasonably be extracted from the negotiations. The character of the contract is not above criticism as in a measure delusive, but, the applicant having deliberately entered into it, he must be presumed to have understood its purport and meaning, and the courts cannot do otherwise than enforce it, unless it was the result of fraud or mistake, which is not claimed for it.

5. Counsel for plaintiff seem to think that the acceptance by the company of the note of the applicant for the amount of the first premium and the issuance of the policy, although such issuance was subsequent to the time of the applicant’s becoming ill with pneumonia, and without knowledge on the part of the company of such illness, was tantamount to a waiver of the condition in the application that the first premium shall have been paid during the continuance in good health of the applicant, and that the note was therefore received in present payment of the first annual premium, notwithstanding the stipulation contained in the receipt. It is impossible to see how such a result could follow, when, as we have seen, the contract depends upon the application, note, and receipt, construed together, and the acceptance of the application thus formulated, which was to be evidenced by the signing of the policy by the company’s secretary and its issuance. The stipulation contained in the application and the receipt showing the conditions upon which the note was given constitute the very terms of the contract consummated by the acceptance on the part the company, and there could be no waiver of any condition entering into and going to make up the contract. A contract once made may be modified, and provisions favorable to either party may be relaxed. And “it seems to be settled,” say the Supreme Court of California, in Farnum v. Phoenix Ins. Co. 83 Cal. 246, 252 (23 Pac. 869, 871, 17 Am. St. Rep. 233), “by a controlling-preponderance of authority, that an express provision in a policy of insurance that the company shall not be liable on the policy until the premium be actually paid is waived by the unconditional delivery of the policy to the assured as a completed and executed contract under an express or implied agreement that a credit shall be given for the premium, and that in such case the company is liable for a loss which may occur during the period of the credit”; citing a large array of authorities. The doctrine has the approval, also, of a later case of the same court (Griffith v. New York Life Ins. Co. 101 Cal. 527, 36 Pac. 113, 40 Am. St. Rep. 96), and is applicable as prescribing a limitation upon the insurer where the contract of insurance is fully consummated by a completed delivery of the policy under an express or implied agreement for an extension of credit; but such is not the case here. If there had been a delivery of the policy here, and Stringham had accepted it, and the company had then retained his note under such circumstances as to lead him to believe that he had a valid present insurance, there would have been larger grounds for insisting upon a waiver of the condition of payment during the good health of the applicant. There has been no such a delivery of the policy, and no waiver, if any might have ensued by its delivery without further insistance upon payment of the premium, can be invoked.

6. The payment of the premium by Dillon to Waterman, the company’s agent at Portland, without the knowledge of Waterman or the company of the fact of Stringham’s death, could not alter the case in the least, nor operate as a waiver on the part of the company of any condition that it might otherwise have insisted upon; the rights of the parties, as we have seen, having become fixed by his death.

It follows from these considerations that the plaintiff has not established her cause of action against the defendant upon the alleged contract of insurance, the premium not having been paid during Stringham’s continuance in good health, as contemplated by the agreement of the parties. Passing the error assigned relative to the motion for judgment on the pleadings, we are clear that there was error in directing a verdict for the plaintiff, and that the defendant’s motion for judgment of nonsuit should have been granted. The judgment will therefore be reversed, and the cause remanded for such further proceedings as may be deemed proper, not inconsistent with this opinion.

Reversed.