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Goetze v. Franklin Life Ins. Co.

MARCH 6, 1975.

DORIS ANN GOETZE, PLAINTIFF-APPELLEE,

v.

FRANKLIN LIFE INSURANCE CO., DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Du Page County; the Hon. WILLIAM E. BLACK, Judge, presiding.

MR. PRESIDING JUSTICE THOMAS J. MORAN DELIVERED THE OPINION OF THE COURT:

The plaintiff brought this action to recover the proceeds of her husband's life insurance policy plus attorney's fees. The matter came before the trial court upon cross-motions for summary judgment. Summary judgment was entered in plaintiff's favor regarding the proceeds of the life insurance policy, but she was denied recovery of attorney's fees. The parties filed cross-appeals from the order of the trial court.

The issues presented for review are (1) whether summary judgment was properly invoked; (2) whether, under the facts, the conditional premium receipt provided for temporary insurance of the proposed insured as a matter of law; and (3) wheher defendant's refusal to tender plaintiff the proceeds of the life insurance policy was vexatious and without reasonable cause.

The facts are that the defendant's sales agent solicited an application for life insurance from Lorenz F. Goetze (applicant). On November 28, 1970, the agent, while in the home of the applicant's mother, had a phone conversation with the applicant and secured the necessary information to complete the application and a related aviation questionnaire. The agent also secured the express authorization of the applicant to sign the papers for him. The answers to the questions within both the application and related aviation questionnaire reveal that the policy applied for was the Executive Protector Plan; that the amount of insurance sought was $50,000; that the applicant was employed as a commercial pilot for Great Lakes Airlines; that he would not accept a policy with an aviation exclusion clause; and that, if required, he would pay the extra premium for full aviation coverage.

During this telephone conversation, the applicant inquired as to the cost of aviation coverage. The agent, not having been issued a copy of the defendant's rate book covering airline pilots, was unable to give the applicant the exact monthly rate, but did tell him that the rate would be somewhere between $4 and $5 per thousand. In order that there would be no misunderstanding, the agent, three times, explained the requirement of an additional premium for aviation coverage. The applicant stated, "that would be alright," and again stated that he "needed the coverage." As revealed in the agent's letter to defendant concerning the telephone conversation with the applicant, there was no doubt in the agent's mind that the extra premium would be paid by the applicant but, not knowing the proper amount, the agent referred to his rate book and requested the sum of $13, that being the regular rate charged without aviation coverage. Thereupon, the applicant's mother gave the agent a check in the amount of $13 and, in exchange, the agent detached and tendered to her a "Conditional Premium Receipt." The check was subsequently cashed by defendant.

On December 3, 1970, the applicant underwent a physical examination by one of defendant's examining physicians. A mercantile investigation of the applicant was also conducted at this time on behalf of the defendant. According to the defendant's senior chief underwriter, who subsequently reviewed the reports, the applicant was in all respects an acceptable risk for a policy with full aviation coverage at a premium rate of $31.50 per month.

On December 10, 1970, the applicant died in a plane crash. A claim was made with the defendant for the proceeds of the insurance policy. On December 18, 1970, the defendant rejected the claim in a letter to the plaintiff, stating in relevant part:

"We are sorry to have to tell you that the life insurance applied for did not become effective on Mr. Goetze's life. The reason is that his job as a pilot for Great Lakes Airlines would have required us to charge an extra premium of $4.30 per thousand and the policy that we would have issued, if he had lived, would have been offered to him on this basis and would have become effective at the time he accepted the policy and paid the additional premium. Of course, he would have had the right to reject our counter offer of a policy with an extra premium which means there was no meeting of the minds and no contract of insurance in effect when your husband died.

The terms of the agreement are set forth in the Conditional Premium Receipt, which is attached to the application and given to the applicant at the time he fills out the application, providing he submits a premium with the application. We received a premium of $13.00, which was the correct premium for the plan of insurance applied for, at a standard rate of premium. The policy that we would have issued, if he had lived, would have required a monthly premium of $31.50 rather than $13.00. Since the insurance did not become effective, our check for $13.00 refunding the conditional premium is enclosed."

Thereafter, the plaintiff filed the instant cause of action claiming that, as beneficiary of her husband's life insurance policy with the defendant, she was entitled to the proceeds under the terms of the "Conditional Premium Receipt." *fn1

The trial court found that there was no genuine issue of material fact in dispute, that the words of the receipt were ambiguous as applied in this particular case and that in construing the ambiguity against the insurer, the plaintiff was entitled to summary judgment as a matter of law.

• 1 A summary judgment shall be entered if the pleadings, depositions, admissions and affidavits, if any, disclose no genuine issue of material fact. (Ill. Rev. Stat. 1971, ch. 110, § 57(3).) The uncontradicted facts are that the applicant applied for a life insurance policy which included full aviation coverage; that he tendered the amount requested ($13) which did not equal or exceed the amount of the monthly premium of the policy applied for; that he was insurable both in terms of his health and past history; and that he was entitled to protection under the defendant's rules and standards to insurance under the Executive Protector Plan with aviation coverage for the amount of $50,000 had the $31.50 premium been tendered. These facts are not in dispute. This conclusion is supported in the fact that defendant filed a cross-motion for summary judgment claiming there were no material questions of fact in issue. On this basis, we hold that the trial court properly invoked its summary judgment powers.

The question arises as to whether the trial judge correctly applied the facts to the terms of the contract in accordance with the law, i.e., whether the conditional premium receipt provided temporary insurance for the proposed insured as a matter of law.

The defendant's position is that it intended by the terms of the conditional premium receipt to be bound to a contract of temporary life insurance only if, (1) the amount tendered equaled or exceeded the monthly premium of the policy applied for, and (2) the applicant was insurable and entitled to insurance on the plan, for the amount, and at the rate of premium applied for. Defendant claims that the applicant's ...


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