McLean v. Life of Virginia

180 S.E.2d 431 (1971)

11 N.C. App. 87

Ethel L. McLEAN v. LIFE OF VIRGINIA.

No. 7111DC43.

Court of Appeals of North Carolina.

April 28, 1971.

*432 Bryan, Jones, Johnson, Hunter & Greene, by James M. Johnson, Dunn, for plaintiff appellee.

Anderson, Nimocks & Broadfoot by Henry L. Anderson, Fayetteville, for defendant appellant.

PARKER, Judge.

The "Advanced Payment Receipt" given by the insurance company in this case provides that the insurance shall take effect on the date the application is completed only if, among other things, the defendant insurance company determines to its satisfaction that on that date the proposed insured is insurable "at the premium rate applied for, in accordance with the Company's rules, limits and standards for the policy applied for. * * *" The receipt further expressly provides that "[i]f the insurance applied for is not effective under the exact conditions specified in this receipt, the insurance shall not take effect until a policy therefor is delivered to and received by the applicant and the first premium paid while the Proposed Insured is insurable according to the Company's rules and standards for such policy."

All of the evidence in this case indicates that the application which plaintiff and her husband made for an insurance policy to be issued at standard premium rates was not accepted by the defendant insurance company because it determined on the basis of information contained in the medical examination of Charles N. McLean, one of the proposed insureds, that he was not insurable at the premium rate applied for in accordance with its rules, limits and standards for the policy applied for. There was no evidence that in making this determination the insurance company acted unreasonably, arbitrarily, or in bad faith. There is no dispute but that the medical examination, which was made for the insurance company by the proposed insured's own personal *433 physician, correctly revealed that the proposed insured had been hospitalized within the year for treatment of a peptic ulcer. The defendant presented uncontradicted evidence in the testimony of an Assistant Manager of its Underwiting Department and from the pertinent page of its Underwriting Manual which established the rating applicable for an individual 45 years of age, as was Charles McLean, who is shown to have had peptic ulcer hospitalization within one year of the application. That the plaintiff wife, who had also previously had an ulcer, was not rated was explained by the fact that her ulcer occurred in 1963, some five years before the application, and did not require hospitalization. While there was some evidence that the defendant's local agent may have learned of Charles McLean's death a day or two after it occurred, there was evidence that the personnel in defendant's Underwriting Department learned of his death only on 3 or 4 June, some six or seven days after the rated policy was issued.

It was an express condition of the advance payment receipt that the proposed insured be insurable at the premium rate applied for if the insurance was to take effect on the date the application, including the required medical examination, was completed. All of the evidence shows that Charles N. McLean was not insurable at the premium rate applied for. Accordingly, this condition precedent was not complied with. The subsequent issuance of a policy calling for a higher than standard premium constituted, in effect, a rejection of the offer contained in the application and a counter offer by the insurance company. Novellino v. Life Insurance Co. of North America, 216 A.2d 420 (Del.Supr.1966). Because of Charles McLean's death, the counter offer could not be accepted by him. Thus, all of the evidence in this case established that no contract of insurance became effective during the life of Charles N. McLean. Cheek v. Pilot Life Insurance Co., 215 N.C. 36, 1 S.E.2d 115; Gulf Life Insurance Company v. Bohannon, 101 Ga.App. 58, 112 S.E.2d 801; See Annotation, 2 A.L.R.2d 943.

The case of Wright v. Pilot Life Insurance Company, 379 F.2d 409 (4th Cir. 1967), cited and relied on by the plaintiff, is distinguishable from the case before us. In that case Wright had applied for insurance, had paid his first monthly premium, and had been given a "Conditional Receipt" which provided that by making such advance payment the insurance would be placed "immediately in full force and effect" provided he was insurable. Before any medical examination was made and before the insurance company had either approved or declined the application, Wright was killed in an accident. The trial judge dismissed the claim. The Circuit Court reversed and remanded the case for a jury trial on the issue of Wright's insurability on the date of issuance of the conditional receipt. In the case before us a medical examination of the proposed insured was made during his lifetime and it was on the basis of the facts disclosed in this examination that it was determined that the proposed insured was not insurable at standard rates.

The language employed by the defendant insurance company in its "Advanced Payment Receipt" in the present case is, in our opinion, clear and unambiguous. Therefore, we do not find it susceptible to the interpretation, which plaintiff urges, that it provided temporary insurance until the proposed insured receives notice of its acceptance or rejection. The rule of liberal construction of insurance policies does not extend so far as to permit the courts to rewrite them.

Defendant's motions for a directed verdict and for judgment n. o. v. should have been allowed.

Reversed.

MALLARD, C. J., and GRAHAM, J., concur.