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Armstrong v. United Insurance Co. of America





APPEAL from the Circuit Court of Cook County; the Hon. SIDNEY A. JONES, Judge, presiding.


Plaintiff's husband, Curtis Armstrong, applied for a life insurance policy from Michael Yarbrough, a licensed insurance agent of defendant United Insurance Company of America (United — insurer), paid the first premium and received a conditional receipt. He died that night in an automobile accident. There has been no suggestion that the applicant's physical condition contributed in any way either to the accident or to his death. The insurance company denied liability, contending at trial that the agent had no authority to bind coverage, or to waive any provisions in the application; that the application provided that the policy had to be issued during the lifetime of the applicant; that the insurance company required a medical examination; and that at no time was there a completed contract between the applicant and the insurance company. After hearing the evidence, the trial court found that there had been a binding contract of insurance in effect at the time of the applicant's death. Specifically, the trial court made the following findings among others:

1. the conditional receipt was issued with the full authority and consent of United;

2. prior to the accident in question, applicant was in excellent health;

3. United made no attempt of any kind to check applicant's medical history and background although it had a duty to do so and could have done so;

4. applicant was regularly employed and scheduled to report to play professional football within two weeks of his death. His wife was employed and applicant's past work record demonstrated an ability to pay for insurance in the future;

5. there was nothing in the application which would disqualify applicant from being insured by United;

6. applicant changed his position by taking this insurance and not seeking insurance elsewhere as he had planned to do.

United has appealed contending that there is no insurance because the application was never accepted or approved by United, and because applicant was not insurable under United's ordinary underwriting rules, since he was unemployed and there was no medical examination. United further contends that most of the court's findings of facts are unsupported by the evidence. We find no error and affirm.

The application dated March 1, 1973, revealed that Curtis Armstrong was 24 years of age, 6 feet 2 inches tall and weighed 195 pounds. He had had no serious illnesses, and the health of his parents, brothers and sisters was all good. He had never been refused insurance. His occupation was listed as "training for pro football player." The agent added that Curtis had not turned professional and wanted to get his insurance at a standard price. The application further provided that "Except as may be provided in a Conditional Receipt bearing the same date as this application, the Company shall incur no liability under this application until it has been (a) received in and approved by the Home Office and (b) a policy has been issued and delivered to me [applicant] and the full first premium has been paid by me and accepted by the Company during my lifetime and my continued insurability, according to the Company rules." Unlike many applications, there was no non-waiver provision in this application limiting the agent's authority either to make explanations or to waive any provisions of the application.

The conditional receipt provided in relevant part:

"(1) If the application is not accepted by the Company and a policy not issued and delivered, the above amount will be returned to the applicant.

(2) If the above amount equals the full first premium as specified in the application and is received with the application and the application is approved as submitted, the policy applied for shall be in force from the date of the application."

At trial, Michael Yarbrough, the plaintiff, and Julius Collier, called under section 60, testified for the plaintiff. Andrew Davis, Iler Brady and Julius Collier, all employees or former employees of United, testified for the defendant.

Yarbrough was the agent who took the application. He started working with United in 1969 and was terminated in April 1973 for unspecified reasons. In 1973 his manager was Andrew Davis.

When Yarbrough started working at United he underwent training which included viewing movies and attending meetings. At times the managers would go out with him to see how he approached people, how he "sold" them after having an interview, and to see "he was doing the right thing." There were weekly meetings at the office where sales techniques were discussed. As part of the sales talk they were instructed to tell prospective purchasers of insurance that there would be immediate coverage upon the payment of the first month's premium and the issuance of a conditional receipt. Both Davis and Collier told him this. Prior to March 1, 1973, Yarbrough had used this technique in making other sales. Yarbrough added that at no time did the company refuse an application he had taken.

Yarbrough saw the Armstrongs while he, Yarbrough, was in the hospital on March 1, 1973, at about 3 p.m. It was a pre-arranged meeting. The meeting lasted about 45 minutes to 1 hour. Yarbrough had an application and the rate book with him. One reason Yarbrough wanted to see the Armstrongs was that the applicant was getting ready to go south somewhere to play professional football. Yarbrough expressed to him the importance of taking out insurance before he turned professional because, so Yarbrough claimed, as a professional the premiums were higher. Furthermore, the insurance was important because applicant was a married man and his wife was pregnant.

Applicant on March 1 appeared to Yarbrough to be very strong and in good health. Based on his knowledge of applicant and his physical condition and how United operated and issued policies, he believed a policy would have been issued and that "the only time they did not approve is when they found out the man was dead." Yarbrough agreed that when the application was taken applicant was not employed but was getting ready to go to Denver to play football for the Denver Broncos. He was also playing semi-pro ball. Yarbrough denied that he was familiar with any rule that United would not issue $20,000 life insurance to persons who were unemployed. He also stated that as far as he knew there were no non-medical limits on ordinary life insurance although there were on industrial insurance. He sold the applicant ordinary life insurance. On cross-examination, when he was confronted with the bulletin setting forth the limits of insurance that would be issued without a medical examination ($15,000), he claimed he could have written two applications. However he did not.

After Yarbrough explained to the Armstrongs the amount of coverage applicant was taking and the immediate coverage he was going to have, they decided to take the insurance. In answer to counsel's question as to what he meant by "the immediate coverage he was going to have," Yarbrough testified: "Ordinarily in insurance, if you talk to a client and get the client to buy the insurance, they agree to buy the insurance from you and pay the one month premium, you in turn give them a conditional receipt and they are covered at that point. And that's what I explained to him before he left." He told them they would be covered for anything except illness. Yarbrough read the conditional receipt to them and told them what it meant — that they would have insurance immediately if they did not have any illnesses. He also read parts of the application to them, ...

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