Lentin v. Continental Assurance Co. ( 1951 )

Mr. Justice Tuohy

delivered the opinion of the court.

Plaintiff filed suit in the circuit court of Cook county seeking a judgment declaratory of the effective date of a policy of health and accident insurance which he holds in defendant company and a declaration to the effect that the policy is in full force and effect.

The policy on its face provides that “it takes effect on the 12th day of December, 1945, and continues in effect until the 12th day of December, 1946; . . . Each such renewal shall continue this policy in effect until the expiration of the period for which premium has been paid.” The application, expressly made a part of the policy, provided that the policy should not take effect until it was delivered to the insured while in good health and the first premium paid. The policy was admittedly continued in force until January 12, 1949, when defendant insists that it lapsed on account of nonpayment of premium.

The facts disclose that on December 4,1945, plaintiff made application to defendant for a policy of noncancellable health and accident insurance and a policy of life insurance. The health and accident policy in question was executed by defendant on February 11, 1946. The policies were admittedly delivered “on or before January 4, 1946. ’ ’ The premiums on the policy in question were paid until January 14,1949, and when the plaintiff sought to pay by check on this date the company refused payment, maintaining that the policy had been forfeited for failure to pay within the time provided by the policy, and offered to issue a conditional receipt and application for reinstatement, with which conditions plaintiff refused to comply.

Plaintiff contends that the effective date of the policy was January 6, 1946, and that by the payment of the premiums it was continued from year to year until January 6, 1949, and that he then under the terms of the policy had 31 days’ grace thereafter in which to pay the premium. He further maintains that, even though the effective date be as insisted by defendant, defendant having on prior occasions accepted yearly premiums after the last day of grace, has waived its right to insist upon strict payment within the policy provisions.

• Defendant contends, inasmuch as the effective date appearing on the face of the policy is December 12, 1945, that such date is controlling; that the provisions of the policy in this respect are clear and unambiguous ; and that by failure to pay the premiums within 31 days after December 12, 1948, defendant was entitled to declare the policy lapsed.

Thus, a question is presented as to whether the effective date of the policy was December 12, 1945, as contended by the defendant, or January 6, 1946, as found by the court.

The policy on its face provides:

“It takes effect on the 12th day of December, 1945, and continues in effect until the 12th day of December, 1946; and until the Insured becomes sixty years of age he shall have the right to renew this policy for further consecutive periods by the payment in advance of the Annual renewal premium of $215.16. Each such renewal shall continue this policy in effect until the expiration of the period for which premium has been paid. ’ ’

Attached to the policy was the application for insurance. This application is made a part of the policy in the following language:

“It is understood and agreed that this application ... as amended shall form a part of any policy issued hereunder.”

Then appears the following language under question No. 16 of the application:

“Do you agree that in case no amount has been tendered to the Agent on such premium at the time of this application that such insurance shall not take effect until the application is approved and accepted by the Company at its Home Office and the policies delivered to you while in good health and the first premium thereon have been paid in full?”

In other words, the face of the policy provides, as its effective date, December 12, 1945 — the application, “on date of delivery.”

The law is well settled that where a policy of insurance is susceptible to two constructions that construction will be adopted which is favorable to the insured. Monahan v. Fidelity Mutual Life Insurance Co., 242 Ill. 488; McMaster v. New York Life Ins. Co., 183 U. S. 25. In the Monahan case the court said (pp. 492, 493):

“If, however, the two clauses found in the policy, —that is, the clause which provided if the policy should remain in force ‘ two years from the date hereof, ’ and the clause which provided the policy should not become binding on the company until the first payment should have been made and the policy delivered, — are in confliet with each other and render the time uncertain from which the two years in which the policy might be contested should commence to run, we think the first clause,- — -that is, that the policy should be incontestable if it remained in continuous force after two years from the date thereof, — should be held to control, as that construction would be favorable to the insured, as the rule is that the language of an insurance policy, when uncertain or ambiguous, is always to be construed in favor of the insured and more strongly against the insurance company.”

In the instant case, we are of the opinion that there are two constructions that may be given the provision as to the policy’s effective date: the date December 12th appearing on the face of the policy, and the subsequent provision in the application that such insurance shall not take effect until date of delivery.

It is admitted that the policy was not delivered until the early part of January, and whether it was January 4th or January 6th is immaterial on the question involved here, for in either event the insured would have thirty-one days thereafter within which to pay the premiums, and they were tendered well within thirty-one days immediately following January 4, 1949.

Defendant’s argument is based substantially upon the proposition that there is no ambiguity in the terms of its policy, but that the effective date is clearly set forth. This position entirely disregards the application, which the defendant company elected to make a part of its policy, which denotes an effective date different from that appearing on the face of the policy. The case of Stramaglia v. Conservative Life Ins. Co. of Wheeling, West Virginia, 319 Ill. App. 20, is in point on the issue before us. There the application provided : ‘ ‘ That the insurance hereby applied for shall not take effect unless the first premium is paid and the policy delivered to me during my lifetime and good health.” The payment occurred on April 19, 1940, delivery on May 8, 1940. The policy stated on its face that it became effective April 5, 1940, and was subject to renewal only by payment of the second premium within the grace period after April 5, 1941. The insured died May 20, 1941. The court said at page 27:

“The law is well established that if all the terms have been agreed upon between the parties, the formal delivery of the policy by the insurer and its acceptance by the insured are not essential to its validity, but if the terms have not been agreed upon, or if the application provides, and it is a condition of the policy itself, that it shall not become effective until it is delivered to the applicant, the contract of insurance will not become binding until such delivery. In the instant case the application and the policy constitute the contract between the parties.”

In Ellis v. State Mutual Life Assurance Co., 206 Ill. App. 226, the policy in question had been issued and was in the possession of the local agent at the time the insured was accidentally killed. In denying that the policy was in effect though paid for, the court said at page 230:

“We are of the opinion that the stipulation in the application and policy in question, providing that the policy shall not take effect until actual delivery to the applicant while alive and in the condition of health he was in at the time the application was taken, is a condition precedent and, unless such stipulation has been performed, appellee would not be entitled to recover in this case.”

In Weber v. Prudential Insurance Co., 208 Ill. App. 117, affirmed in 284 Ill. 326, where it was contended by the insurance company that the policy was not in force because it was not delivered, the court, at page 119, said:

“The difficulty which stands in the way of appellant’s recovery on the policy is that the applicant for the insurance expressly stipulated that the policy should never become binding on the company until it had been issued and delivered to him, . . . recovery is sought upon an instrument which, by its terms, was never to become operative until it had been delivered to the insured, while the evidence shows that such delivery never was made. ... In these circumstances, we are compelled to conclude that the policy in question never became a binding contract.”

To the same effect are Midira v. Globe Life Insurance Co. of Illinois, 283 Ill. App. 100; Laughlin v. North America Benefit Corp., 244 Ill. App. 391; Steinsultz v. Illinois Bankers Life Association, 229 Ill. App. 199; Rogers v. Western & Southern Life Ins. Co., 280 Ill. App. 547. In the first three of these cases it was the defendant insurance companies who effectually invoked a strict construction of the delivery provisions and were relieved from liability by their enforcement. In the instant case it is the insured who invokes the delivery provision, and under the authority of these cases we are in accord with his contention.

Defendant relies strongly upon the case of Rose v. Mutual Life Ins. Co., 240 Ill. 45. In the Rose case, however, there is no provision in the policy that it shall not be effective until delivery. The Rose case stresses this fact and the inference may well be drawn from the language of the opinion that the court would have come to a different conclusion had such a provision been contained in the policy, as appears from the following language:

“ The application provided that the insurance should not take effect until the first premium should have been paid and the policy issued, but there was no provision as to delivery. . . . An unqualified acceptance of the application and placing the completed policy in the hands of an agent for delivery, without condition, completes the contract. ... To hold that an insurance policy is not in effect until the date of its delivery, contrary to its own terms, and where there is no agreement of that hind, would throw every case of insurance into doubt. . ...” (Italics ours.)

In the instant case there was a clear provision with reference to delivery. The policy was not placed in the hands of an agent “without condition,” but was placed in the hands of an agent with the very definite condition that it should not be effective until delivery. In the other Illinois cases cited by the defendant no delivery clause is contained.

Counsel relies upon the case of Mutual Life Ins. Co. v. Hurni Packing Co., 263 U. S. 167, as authority for the proposition that parties may agree upon an effective date which is prior to the actual execution of the policy. We recognize this to be a well established rule of law, but the invoking of such rule does not help the defendant in this cause for the reason that it was also clearly specified in the policy in question that it should not become effective until the date of delivery. This same case, in commenting upon inconsistent clauses, states at page 174:

“The rule is settled that in case of ambiguity that construction of the policy will be adopted which is most favorable to the insured; The language employed is that of the company and it is consistent with both reason and justice that any fair doubt as to the meaning of its own words should be resolved against it. ’ ’

We deem it unnecessary to consider the many other cases from foreign jurisdictions cited by defendant. In most of these cases there was no delivery clause contained and others are not in point on the facts, but there are a few cases in foreign jurisdictions contrary to the holding here. Those cases are against the established doctrine in this State and are not accepted by us as precedent.

We do not deem it necessary to discuss the question of waiver raised 'by plaintiff as we are persuaded, for the reasons stated, that the proper conclusion was reached by the Circuit Court of Cook County. The judgment' of the Circuit Court is therefore affirmed.

Affirmed.

Feinberg, J., concurs.

Niemeyer,-. P. J., dissents.