Life Casualty Ins. Co. of Tenn. v. Jordan

1. The limitation of authority of an insurance agent, which is contained in the policy only, refers to matters which occur subsequently to the issuance and delivery of the policy. 2. The test for the payment of damages and attorney's fees, under the Code, § 56-706, is whether the refusal is frivolous and unfounded. DECIDED FEBRUARY 17, 1943. ADHERED TO ON REHEARING APRIL 2, 1943. This is a suit on a life-insurance policy. A verdict was returned in favor of the beneficiary, the widow of the insured, for the principal amount of the policy, less $1.74 balance on the first premium, together with $250 penalty and $333.33 attorney's fees. The defendant's motion for new trial was overruled and it excepted. To the petition general and special demurrers were filed. Several amendments were offered and allowed, after which the demurrers were overruled. To this judgment exceptions pendente lite were filed, and error is assigned thereon in the bill of exceptions. Boiled down, the allegations of the petition are in essence as follows: An agent of the insurer solicited and procured from the deceased, Oris M. Jordan, an application for a life-insurance policy of $1000, generally known as "travelers and pedestrians" insurance. At the time of the application the agent obtained ten cents as a binder to put the policy in force. A few days afterward, on May 13, 1941, the agent returned and requested an additional sixty-six cents, which the wife paid. The agent stated that this additional amount was necessary to be paid, and a receipt for seventy-six cents was signed by the agent, made out to the insured. A few days thereafter the agent returned with the policy and handed it to the wife; whereupon she went to get the money to pay the remainder of the first premium. She stated to the agent that she had the money and would get it and pay him. The agent replied that she need not do that; that he would go and return within a week, on Saturday, and collect the balance of the premium. He delivered the policy to the wife, who in turn delivered it to her husband on his return from work that evening. On Friday before the Saturday night when the agent was to return, the insured received *Page 288 an injury from which he died on the following Monday. The cause of the death was within the provisions of the policy. The petition does not allege the payment of the first premium in cash, but relies on part payment and a tender of the balance. Recovery is sought for the face of the policy, attorney's fees, and penalty for bad faith. To the petition was attached only the "face" of the policy. The amended answer denied the material allegations of the petition as to the right of recovery, and set up the following provisions of the policy as to payment of premium: "This policy shall not take effect until the first premium shall have been paid in cash and this contract delivered and accepted during the lifetime and good health of the insured. All premiums are payable in advance at the said home office or to an agent of the company, upon delivery, on or before the date due, of a receipt signed by the president, secretary or treasurer of the company and countersigned by said agent. The payment of a premium or installment thereof shall not maintain this policy in force beyond the date when the next installment of premium is payable." The amended answer further alleged that on May 13, 1941, the agent of the insurer took the application on the life of Oris M. Jordan, in which his wife was named as beneficiary. Thereafter, the insurer executed and forwarded to its agent in Savannah a policy to be delivered to the insured on payment in cash, as provided in said policy, of the premium of $2.50 on or before the delivery of the policy to Oris M. Jordan; the payment of said premium being a condition precedent to said policy becoming effective. Neither the Savannah office of the defendant nor the agent of defendant had any right or authority to deliver the policy before payment in full, in cash, of the premium of $2.50. The agent carried said policy to the residence of the insured in Savannah for the purpose of delivering it to the insured on the payment in cash of the premium, the consideration of the policy. The beneficiary was then at home. She stated that her husband was not at home, and that she could not pay the premium. The agent stated to the beneficiary that he would bring the policy back later, but she requested him to leave it with her so that her husband could examine it. The agent left the policy with Mrs. Jordan so that the insured could examine it, but for no other purpose. He did this although he knew it was contrary to the rules of the defendant, *Page 289 and that he had no authority to do so. He retained the official premium receipt which was to be given the insured on payment of the premium. A few days thereafter the insured died without having paid the premium specified in the policy. The premium never was paid to the defendant. Although the agent left the policy with Mrs. Jordan so that the insured might examine it, and for no other purpose, the insurer was not notified that said policy was acceptable to the said insured. The evidence for the plaintiff substantiated the allegations of the petition. The evidence for the defendant sustained the answer. The insurer submitted further testimony to the effect that the payment of the seventy-six cents was for another policy, on the life of the father of the beneficiary, and that this last policy was a different kind of policy, the premium on which was thirty-eight cents per week. This policy on the life of the father of the beneficiary was applied for by the insured, the seventy-six cents paid for two weeks, and the policy was issued by the insurer and forwarded to the soliciting agent, who failed to deliver it. 1. The demurrers general and special, the objections to evidence, the alleged errors of omission and commission regarding the charge of the court, and the assignments of error in the general grounds of the motion for new trial, all crystallize in two issues: (a) Under the pleadings and the facts, was the verdict authorized under the law? (b) If so, under the pleadings and the evidence was that portion of the verdict for the penalty and attorney's fees warranted as a matter of law? (a) We should keep in mind that the application was not made a part of the policy. It is also well to note that the application contained no stipulation with reference to the payment of premiums or the kind of receipt to be issued, as was contained in the policy and pleaded as a defense by the insurer. This court said, in Life Casualty Insurance Co. v. Brockett, 67 Ga. App. 837,843 (21 S.E.2d 510): "It must be kept in mind that it is the law and the policy of this State as to limitations of authority of an insurance agent which are contained in the policy, and where such limitations are contained only in the policy, that the limitations refer to matters which occur subsequently to the issuance and delivery *Page 290 of the policy. See Mechanics Traders Insurance Co. v. Mutualc. Asso., 98 Ga. 262, 266 (25 S.E. 457), and Johnson v.AEtna Insurance Co., 123 Ga. 404 [51 S.E. 339, 107 Am. St. R. 92], . . citing the Mechanics Traders Co. case, supra. . .Interstate Life Accident Co. v. Bess, 35 Ga. App. 723 (134 S.E. 804)." While it is true that the above cases dealt with imputation of knowledge to the insurance company through its soliciting agent, we feel that the same reasoning is with equal force applicable to the situation presented under the facts of this case, at least to the extent of refusing a tender of the first premium, and the kind of receipt required in the policy, and delivering the policy by the soliciting agent. In such event we do not think that the insured, in paying the first premium to the soliciting agent simultaneously with the delivery of the policy, should be held to a strict compliance contained in the policy with reference to the payment of premiums, any more so than an insurance company, by a stipulation in the policy, could relieve itself of knowledge which the agent obtained in the inception of the contract as dealt with in the cases herein before cited. Under the facts of this case, without a stipulation to the contrary in an application, the agent was authorized to deliver the policy while the insured was in good health, and receive the payment of the first premium, without issuing a receipt with all the formalities as prescribed in the policy only. As to subsequent premiums, the rule might be different. Therefore, if in the instant case the agent was authorized to receive the premium and deliver the policy, was he authorized to bind the insurer by a proper tender and refusal of tender of the premium? We think so. The petition alleged that a tender was made. The answer denied it. The answer contended that the policy was left with the insured for his examination only. The jury resolved the issue in favor of the plaintiff. The court, in its charge, fairly and fully presented this issue. Let us next inquire whether there is any authority of law to sustain the validity of such tender. InSouthern Life Insurance Co. v. Kempton, 56 Ga. 339 (3), 343, the Supreme Court said: "The court did not err on the facts herein before stated in declining to charge: `That after the deceased had become seriously ill, it was too late for him to bind the defendant by a tender of the premium, and the defendant was not bound to issue the policy after such a change in the health of the applicant;' nor was *Page 291 it error in the court to charge `that if the deceased made an application for insurance in regular form, and the same was accepted by the defendant, and a policy of insurance was issued and placed in the hands of an agent for delivery to the insured upon payment of the premium, and said premium was paid or tendered by the insured, or any agent for him, the defendant is bound for the amount of the policy, with interest from the time specified in said policy of insurance.' . . It is true that the policy says that the first cash premium must be paid before it takes effect; but the facts here show a waiver of such payment, and an assurance to Scales that he would be insured from the date of the policy `anyhow,' and we hold that this is such a case as demanded the reception of the money and the entire completion of the contract according to equity and good conscience. It would be unjust, we think, to the dead, and to the family he left, not so to hold; and we are gratified that we are enabled by the law and the principles of equity so to hold without doing violence to either." In Mitchiner v. Union Central Life Insurance Co.,185 Ga. 194, 196 (194 S.E. 530), the court held: "Even though, in accordance with the general rule that a proper and continuing tender of the amount of a debt is the equivalent of its payment, a tender of a first premium on a life-insurance policy would ordinarily suffice (Going v. Mutual Benefit Life Ins. Co.,58 S.C. 201, 36 S.E. 556; 37 C. J. 403), yet such a mere tender will not operate as a compliance with an insurance contract, so as to render the policy effective, where, as here, the contract expressly provides that before the insurance shall take effect, the first premium must not only be paid, but be `accepted by the company or its authorized agent.' White v. Metropolitan Life Ins. Co., 63 Utah, 272 (224 P. 1106); 37 C. J. 404." Note the phrase, "a tender of a first premium on a life-insurance policy would ordinarily suffice." We have examined the record in the Mitchiner case, and find that the application, which was made a part of the policy, provided that the first premium must not only be paid in cash, but accepted by the company or its authorized agent. We cite this case for the proposition that a tender of the first premium to an authorized agent and his refusal to accept it constitute a waiver of the cash payment of the premium. As above stated, there is no application in the instant case with any such provisions as appeared in theMitchiner *Page 292 case. See the authorities cited by the court in that case as to tender. This question was again dealt with in McKenzie v.North-western Mutual Life Insurance Co., 26 Ga. App. 225 (105 S.E. 720), thus: "Where a policy of life insurance provides that the application therefor is made a part of the policy, and the application contains the stipulation that it is understood and agreed that if the first premium for the insurance applied for is not paid to the agent at the time of making the application, no liability shall exist until a policy shall have been issued and delivered to the applicant and the first premium thereonactually paid during his life-time, and where it appears that the application for the insurance was signed by the applicant while in a state of good health but that the first premium was not paid at that time, and that a policy of insurance was issued by the insurance company and deposited in the mail, for delivery by a local agent upon the payment of the first premium thereon, and that this premium was never paid, but a tender thereof was made to a local agent (who had authority to collect the first premium on the policy) when the applicant was upon his deathbed and only five or six hours before he died, and that this tender was refused by the agent, and the policy never delivered, either actually or constructively, to the applicant, no liability upon the policy existed. This is true notwithstanding the absence of any stipulation in the policy, or the application therefor, that the applicant must be in a state of good health at the time of the delivery of the policy and the payment of the first premium thereon." It will be noted that the application was made a part of the policy, which distinguishes it from the case at bar. Nevertheless the court strongly intimated that had the applicant not been in extremis at the time of the tender, the tender would have been equivalent to payment. Counsel for the insurer cite Croghan v. New YorkUnderwriters' Agency, 53 Ga. 109, Ramspeck v. Pattillo,104 Ga. 772 (30 S.E. 962, 42 L.R.A. 197, 69 Am. St. R. 197),Phoenix Insurance Co. v. Hamilton Co., 110 Ga. 14 (35 S.E. 305), Murphy Hardware Co. v. Rhode Island Insurance Co.,153 Ga. 273 (111 S.E. 808), and Reserve Loan Insurance Co. v. Phillips, 156 Ga. 372 (119 S.E. 315). All of those decisions dealt with the question of dual agency, and are not applicable to the facts of the case at bar since no such question is here involved. Counsel for the insurer further *Page 293 cite Hutson v. Prudential Insurance Co., 122 Ga. 847 (50 S.E. 1000); Hamilton v. Phoenix Insurance Co., 111 Ga. 875 (36 S.E. 960); Reese v. Fidelity Mutual Life Asso.,111 Ga. 482 (36 S.E. 637); Mutual Reserve Fund Life Asso. v.Stephens, 115 Ga. 192 (41 S.E. 679); Stephenson v. EmpireLife Insurance Co., 139 Ga. 82 (76 S.E. 592). The Hutson decision did not deal with the payment of a first premium. The others were based on the principle announced in Reese v.Fidelity Mutual Life Asso., supra. In that case the stipulation was in the application and the policy. Stephenson v. EmpireLife Insurance Co., supra, which counsel for the insurer very earnestly urges as controlling in his favor, shows, upon an examination of the record in the office of the clerk of the Supreme Court, that the issue so made was based on the stipulation in the application which was made a part of the policy. The facts in these cases distinguish them from the instant case. We find no merit in any assignment of error on the overruling of any of the grounds of the demurrers, or on a failure to charge, or on the charge as given, or on the admission of evidence, or in the general grounds, in so far as the verdict for the face amount of the policy in favor of the beneficiary is concerned. (b) This brings us to consider whether the judgment for attorney's fees and penalty is sustainable. Under the record, we do not think that such a case was presented as would sustain a verdict for attorney's fees and penalty as prescribed under our law. The test is whether the refusal to pay is frivolous and unfounded. We think the facts presented a situation that is somewhat unusual. The plaintiff contended that the policy was delivered to her without her paying the full amount of the first premium, although she tendered it to the agent. The company contended that the policy was left for examination only. This clearly made a question of fact to be determined by a jury. There was evidence to sustain either contention. We do not think the law ever intended to penalize insurance companies for desiring to have such issues of fact as are contained in this record submitted to a jury for determination. We think that portion of the verdict for the $250 penalty and the $333.33 attorney's fees was without authority of law, under the evidence. If the plaintiff will write off from the judgment the penalty and attorney's fees before or at the time the remittitur is *Page 294 made the judgment of the court below, the judgment is affirmed; otherwise it is reversed. Judgment affirmed on condition. MacIntyre, J., concurs. ON REHEARING. It is elementary, and applicable to all contracts alike, that a tender of payment is equivalent to payment. The verdict of the jury established as a fact that seventy-six cents of the $2.50 was paid to the soliciting agent at the time the application was obtained and a receipt for the seventy-six cents was delivered to the insured. Thereafter the soliciting agent returned with the policy in accordance *Page 299 with the application and gave it to the wife of the insured. She took the policy and offered the soliciting agent the balance of the premium, which the agent refused, stating that he would call back for the balance of the premium. At this time the insured was at work and in good health. A few days later the insured was accidentally killed. This happened before the agent returned for the balance of the premium. Since tender of payment is equivalent to payment, we must deal with the situation as though the agent received the balance of the premium from the wife at the time he gave her the policy. The insured had performed everything (tender being performance) required of him under the application and the policy, except that it is contended by the company that a stipulation in the policy required that the soliciting agent countersign and deliver to the insured, along with the policy, what was designated as an "official receipt," and that unless the insured received such receipt the policy was void. Neither the insured nor his agent wife knew anything about this stipulation in the policy. Such stipulation was not contained in the application. The soliciting agent was authorized to take the application; to collect the premium in advance, which he did in part; or to collect the premium at the time he delivered the policy. It was the duty of the agent to deliver the receipt stipulated in the policy along with the policy, or at the time he collected the premium. The company clothed him with this authority. Until after the delivery of the policy, during the inception of the contract, his act was the act of the company. His wrong, if it were wrong, to receive the premium and deliver the policy without delivery of the official receipt, was the company's wrong; and the company will not be allowed to take advantage of its own wrong. A stipulation contained only in a policy, as here involved, refers "to matters occurring subsequently to the issuance of the policy." Interstate Life Accident Co. v. Bess, 35 Ga. App. 723 (134 S.E. 804). Of course the application is material only to the extent that it shows the insured was not required to demand a particular kind of receipt when the policy was delivered to him (through his wife, who was the beneficiary and undisputed agent of the insured). After he accepted the policy which stipulated the particular kind of "official receipt" to be obtained on payment of a premium, as to subsequent payments the stipulation might be applied. See Jones *Page 300 v. Gilbert, 93 Ga. 604 (20 S.E. 48), which dealt with both tender and a reasonable time in which applicant should have to determine the provisions of a policy. A study of that case might be helpful. This court, in Fort Valley Coca-Cola Bottling Co. v.Lumbermen's Mutual Casualty Co., 69 Ga. App. 120 (24 S.E.2d, 846), quoted approvingly from Indiana Mutual Casualty Co.v. Pratt, 177 Minn. 36 (224 N.W. 253). "The conventional and frequently elaborate application for insurance may well control as against a subsequently issued policy differing in terms. . . It is a mere offer. So when a policy is tendered, the applicant may perhaps assume in a proper case that his offer has been accepted according to its terms and that the policy conforms to the application." The application in the instant case specifically sets forth the kind of policy, the principal amount to be paid in case of accidental death, the amount of the annual premium, and detailed information concerning the applicant's age, health, etc., regarding him as an insurable risk. It nowhere mentions any particular kind of receipt which the insured should demand and receive before paying his premium and accepting a delivery of his policy. The principle applied in the instant case is not a new-spun one. In other jurisdictions the same principle has been extended further than our appellate courts have gone. Digest treatises which are generally recognized as high authorities have discussed and annotated many decisions on the question. With the thought that it might be helpful, we call attention to these additional authorities on the question before us. See 29 Am. Jur. 358, par. 426; 85 A.L.R. 750, 751: "When an insurance company delivers a policy to an agent to be delivered to the insured, it clothes such agent with apparent authority to receive payment of at least the first premium." And par. 427: "Payment of an insurance premium to an agent who, by the rules of the insurer or a provision in the policy, has authority to collect the premium when in possession of a special or official receipt only, is invalid where the insured has notice of the limitation upon the agent's authority; but this is a limitation which the insurer may waive or become estopped to set up, and in a number of cases the circumstances have been held to indicate a waiver or estoppel of the insurer. [Manhattan L. Ins. Co. v. Warwick, 20 Grat. (Va.) 614, 3 Am. Rep. 218]. Thus, an insurer which receives and appropriates money intended as the premium on a policy, can *Page 301 not avoid liability on the policy merely on the ground that the policyholder did not receive an official receipt in the form prescribed by the terms of the policy. [Matthews v. Metropolitan L. Ins. Co., 147 N.C. 339, 61 S.E. 192, 18 L.R.A. (N.S.) 1219; Anno. 85 A.L.R. 754; 18 L.R.A. (N.S.) 1219]. Likewise, if the insurer recognizes the regularity of an application solicited by an unauthorized person, it thereby recognizes such person as its agent; the payment of the first advance premium to him is payment to the company, and estops it from denying such payment to the home office, notwithstanding a provision of the policy that insurance shall not take effect until the first advance quarterly premiums shall have been paid at the home office and a receipt given over the name of the president of the company. [Terry v. Provident Fund Soc.,13 Ind. App. 1, 41 N.E. 18, 55 Am. St. Rep. 217. Anno. 85 A.L.R. 753, 754]." Carson v. Jersey City Fire Ins. Co., 14 Vroom, 300 (39 Am.R. 584): "Delivery of a policy to an agent authorized to deliver it to the insured and receive the premium, and his delivery of the policy to the insured and acceptance of a note for the premium and procuring a discount of the same for his own account, without paying the premium to the principal, constitutes a valid insurance, in spite of a provision in the policy that such agent shall be deemed the agent of the insured, and that the insurer shall not be liable until he actually receives the premium. [To same effect, Wooddy v. Old Dominion Ins. Co., 31 Grat. 362, 31 Am. Rep. 732]." 85 A.L.R. 753, 754: "The insurance company recognizes the regularity of an application solicited by an unauthorized person, and does thereby recognize such person as its agent; the payment of the first advance premium to him is payment to the company and estops it from denying the necessity of making said payment to the home office, notwithstanding the provision that the insurance shall not take effect until the first advance quarterly premium shall have been paid to the home office and a receipt given over the name of the president of the company." We make this further comment and citation of authorities as an addition to our original opinion. Judgment adhered to. MacIntyre, J., concurs.