APPEAL from the Circuit Court of Cook County; the Hon.
REGINALD J. HOLZER, Judge, presiding.
MR. PRESIDING JUSTICE STAMOS DELIVERED THE OPINION OF THE COURT:
This appeal arises out of an action brought by Elaine Quarles (plaintiff) as beneficiary of a $25,000 life insurance contract allegedly entered into by defendant Nationwide Insurance Company (Nationwide) through its agent, defendant Robbie Penrod (Penrod). The case proceeded to jury trial on plaintiff's second amended complaint in three counts, alleging breach of contract and negligence and seeking a declaratory judgment, respectively. At the conclusion of the evidence, the trial court granted plaintiff's motion for directed verdict as to Nationwide's liability for breach of contract. The court also entered a default judgment against Penrod for his failure to appear at trial. The jury thereupon assessed damages against defendants in the amount of $25,000. Defendants appeal from the granting of plaintiff's motion for directed verdict and from the denial of Nationwide's motion for directed verdict. Defendants also appeal from the denial of their motion for a continuance and from the entry of a default judgment against Penrod. Plaintiff cross-appeals from the denial of her motion for directed verdict as to defendants' negligence, from the dismissal of her declaratory judgment action, and from the finding of the court that Nationwide's refusal to pay the claim was not vexatious or without reasonable cause.
On January 3, 1974, defendant Penrod, representing Nationwide, came to plaintiff's house at her request to discuss the possible purchase of insurance on the life of her husband, Jerrell Quarles, who was then 33 years old and in good health. Plaintiff decided to purchase a $25,000 policy. Penrod then asked plaintiff a series of questions from Nationwide's insurance application form, checking off the appropriate boxes as she replied. Plaintiff gave Penrod a check, which was later cashed by Nationwide, in the amount of the first quarterly premium, $25.22. Penrod gave plaintiff a receipt and left with her, for her husband to sign, a copy of the completed application including a form authorizing Nationwide to obtain the applicant's medical records. Plaintiff testified that Penrod told her to leave the signed application in the mailbox for him to pick up the next day, which she did.
The application signed by the proposed insured contained, inter alia, the following provisions:
"2. This application, the reports of medical examinations required by the Company's published underwriting rules because of the age of the insured or the amount of insurance applied for and any policy issued in reliance thereon shall constitute the entire contract of insurance. * * *
3. No agent or other person except the President, Secretary or Treasurer has the power to make or modify any contract or waive any of the Company's rights or requirements, and then only in writing.
4. The insurance hereby applied for shall not be considered in force unless a policy shall have been issued by the Company, received and accepted by me, and the first full premium paid thereon during the lifetime and continued insurability of the Proposed Insured * * *; except that if the first full premium * * * is paid to an authorized agent of the Company on the date this application is signed and the receipt attached to this application * * * is delivered and if the following acts are completed, (a) receipt by the Company of a fully completed applications which includes fully completed medical examinations, and (b) completion of all further investigation and the Company is satisfied that the Proposed Insured * * * is insurable and qualified under the Company's rules, limits and standards on the plan and for the amount applied for and at the premium specified herein, the said insurance shall take effect and be in force from the date of the last medical examination, or if no medical examination is required, on the application date * * *."
The application also contained, inter alia, the following two questions, both of which had been checked "Yes" by Penrod:
"5. a. Have you been informed that medical examination(s) is required for this application?
b. Do you understand that the Company has the right to require medical examination(s) in which event this application is not complete until such medical examination(s) is made?"
The receipt which Penrod detached from the application in exchange for plaintiff's check in the amount of the first full premium bore the following legend:
"CONDITIONAL FIRST LIFE PREMIUM RECEIPT: NO INSURANCE WILL BECOME EFFECTIVE PRIOR TO POLICY DELIVERY UNLESS THE ACTS REQUIRED BY THIS RECEIPT ARE COMPLETED. NO AGENT OF THE COMPANY IS AUTHORIZED TO CHANGE ANY ACT REQUIRED."
The receipt then contained a paragraph identical to paragraph 4 of the application, set out above, except that the reference to medical examinations in subparagraph (a) was qualified by the phrase "if any required by the Company's published underwriting rules * * *." The receipt also provided: "If the application is declined, the amount evidenced by this receipt shall be refunded."
On the back of the receipt the following language appeared:
The Company reserves the right to require a medical examination. Until you can provide proof that you are insurable, ...