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Garde v. American Family Life Ins. Co.

OPINION FILED SEPTEMBER 19, 1986.

MICHAEL GARDE ET AL., PLAINTIFFS-APPELLANTS,

v.

AMERICAN FAMILY LIFE INSURANCE COMPANY, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Morgan County; the Hon. Gordon D. Seator, Judge, presiding.

PRESIDING JUSTICE MCCULLOUGH DELIVERED THE OPINION OF THE COURT:

On January 13, 1983, Joseph Garde, decedent, applied for life insurance with defendant, American Family Life Insurance Company (American), tendered an initial premium payment, and received a binding receipt. As a result of the physical examination, conducted at the insurer's request and the results of an electrocardiogram, American sent a letter dated February 16, 1983, to Henry Coop, its agent. The letter stated that American could not insure decedent as requested and offered to insure him at a 75% increase in premium.

Decedent died on February 25, 1983, before Coop contacted him about the changed terms. Subsequently, decedent's beneficiaries brought a declaratory judgment action. The trial court granted American's summary judgment motion finding that any coverage provided by the receipt terminated under the express language of the receipt and that decedent made material misrepresentations in his application for insurance.

Plaintiffs appeal. We affirm.

Michael Buchweitz, the underwriter who received decedent's application, stated in his affidavit that he reviewed the application on January 24, 1983, and ordered a medical examination. On January 28, 1983, he reviewed the results of the examination and referred the application to American's medical director. On the basis of the medical director's recommendation, he dictated the February 16, 1983, letter to Coop. American offered decedent insurance but only at a 75% increase in premium. The policy requested by the decedent was not issued. The Table C rated policy application was not signed, filled in, and returned to the insurer.

Coop, in his affidavit, stated decedent came to his office and completed an application for life insurance on January 13, 1983. Later, decedent returned with a premium check. Coop correctly recorded decedent's answers and gave the completed form to him. Decedent read and initialed the form. Coop then gave him a conditional receipt and made decedent an appointment with the medical examiner. On February 22, 1983, Coop received a letter, dated February 16, 1983, from Buchweitz and a rated policy and amended application form. Coop reviewed the letter on February 24, 1983, and on February 25, 1983, called Buchweitz to determine if he could offer the decedent insurance at a lesser amount of coverage but for the same premium. Coop planned to see the decedent the next week but learned that he died on February 25, 1983. Coop never presented the insurer's offer to the decedent nor did the decedent sign the amended application.

Initially, plaintiffs argue that the trial court erred in granting summary judgment based upon the language of the conditional receipt. Plaintiffs argue that a policy was issued and at minimum the language of the receipt was ambiguous. Therefore, the receipt should be interpreted in favor of insurability. American argues the terms of the receipt are not ambiguous and no coverage was in effect.

The conditional receipt states:

"CONDITIONAL RECEIPT — VOID IF ALTERED OR MODIFIED

* * * This payment is made and accepted on the following terms, and shall cause insurance to take effect only under the exact conditions stated in this Receipt.

If insurance does not take effect under the exact conditions stated in this Receipt, this payment will be returned. * * *

CONDITIONS UNDER WHICH THIS PAYMENT SHALL CAUSE INSURANCE TO TAKE EFFECT

CONDITIONS WHICH MUST PRECEDE COVERAGE:

1) IF the Proposed Insured is in good health, and upon the date(s) of receipt by the Company of the application and any further information regarding insurability required by the Company, is determined by the Company at its Home Office according to its rules and practices, to be insurable ...


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