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Simpson v. Prudential Insurance Co.

Decided: January 24, 1962.


Appeal from the Circuit Court for Prince George's County; Powers, J.

Brune, C. J., and Henderson, Hammond, Prescott and Sybert, JJ. Brune, C. J., delivered the opinion of the Court.


The plaintiff-appellant, Mrs. Simpson, brought this suit against the defendant-appellee insurance company, Prudential, claiming as the beneficiary of a policy of insurance on the life of her husband, which, she avers, the defendant had contracted to issue. The husband was killed in a motor vehicle accident while his application was pending. The principal question presented is the construction of the husband's application for insurance and of a "conditional receipt" issued by the insurance company upon payment of the first annual premium. At the conclusion of the plaintiff's case the trial court granted the defendant's motion for a directed verdict. The plaintiff appeals from the judgment for the defendant entered thereon.

The material facts as shown by the plaintiff's evidence are substantially as set forth below. The plaintiff and her husband bought a new house at Brentwood, Maryland, in the summer of 1958. At the solicitation of an agent for the insurance company, who pointed out the hazardous nature of the husband's occupation as a truck driver and the wife's need for protection if anything should happen to him, they decided to take out a policy of insurance on the life of the husband to cover the amount of their mortgage, which was then about $12,000. The basic policy was to be for $3,000 with additional, but diminishing term insurance, initially in the amount of $10,000. The

husband executed Part 1 of the application for insurance (the non-medical part) on August 23, 1958, when the insurance agent visited the Simpsons in their home. The agent inquired whether the husband wished to pay the premiums on an annual, semi-annual or quarterly basis, and the husband asked if the agent didn't want to wait until after the medical examination. The agent replied: "No. When you give me the check for a payment on this insurance, you are covered. When I receive your check, you are covered as of then." Mrs. Simpson then drew a check payable to Prudential for $167.69, the amount of the first annual premium of the policy applied for. This check was cashed by Prudential on the next day. On August 31, 1958, a physician selected by the insurance company came to the Simpsons' house, gave Mr. Simpson a physical examination and completed Part 2 of the application, which Mr. Simpson signed. The results of the medical examination were apparently satisfactory in all respects but one. That one, as reported by the examining physician, was a "trace" of sugar in the urine. The application form required, in such a case, that a portion of the urine examined be forwarded to the home office of the company.*fn1 On September 8, 1958, Mr. Simpson was killed in a tractor-trailer accident. On September 19, 1958, a representative of the insurance company visited the plaintiff, offered her a refund of the premium paid, told her that her husband had not passed the physical examination and denied any liability except for return of the premium. At this time the insurance company knew of the death of her husband and no policy on his life was ever issued.

In Part 1 of the application, the husband specified the

kinds and amounts of insurance applied for, named his wife (the plaintiff) as beneficiary, and agreed (among other things) to these provisions: "(2) that no agent has the authority * * * to modify the application, or to bind the Company by making any promise or representation or by giving or receiving any information;" and "(3) that except as may be otherwise provided in the Conditional Receipt Form * * * [issued] for an amount * * * equal to the first full premium on the policy applied for, no insurance shall take effect unless a policy is issued by the Company and delivered to and accepted by the proposed insured * * *."

The Conditional Receipt Form did otherwise provide. It is headed in capitals "THE PRUDENTIAL INSURANCE COMPANY OF AMERICA" and in larger capitals "CONDITIONAL RECEIPT". It is dated August 23, 1958. It acknowledges receipt from the husband of $167.69 "being payment on account of a policy applied for on the life of Homer E. Simpson (Proposed Insured) in THE PRUDENTIAL INSURANCE COMPANY OF AMERICA." Then follow four unnumbered and unlettered paragraphs, which (for convenience) we designate as A, B, C and D, respectively. Paragraph A, after reciting certain conditions which were clearly met, continues as follows:

"and if the required and completed Part 1 and the required and completed Part 2 of the application and such other information as may be required by the Company are received by the Company at one of its Home Offices and if the Company after the receipt thereof determines to its satisfaction that the proposed insured was insurable on the later of the dates of said Parts 1 and 2 on the plan, for the amounts, for the benefits and at the premium rate applied for, the insurance in accordance with and subject to the terms and conditions of the policy applied for shall take effect as of the later of the dates of the required and completed Parts 1 and 2 * * *."

Paragraph B provides for the refund of the premium if

insurance does not take effect in accordance with Paragraph A, unless the Company issues a policy and the proposed insured accepts it, and further provides that any delay in refunding the amount paid "before or after the demise of the proposed insured shall not be construed to create a contract of insurance or any liability on the Company, except for a return of the above payment."

Paragraph C is almost a verbatim repetition of agreement (3) quoted from the application. It negatives the power of any agent to modify any application or to bind the Company by making any promise or ...

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