Peoples Life Insurance v. Medairy

Barnes, J., delivered the opinion of the Court. The principal question in this appeal is whether or not the Circuit Court for Frederick County erred in denying the motion of the appellant, Peoples Life Insurance Company, the defendant below (Peoples), to direct a verdict in its favor because the appellee, Jeannette E. Medairy, the plaintiff below, presented no evidence that the proposed insured, Paige T. Medairy, husband of the plaintiff, met any objective standard of insurability, the proposed insured having paid the original premium, received a “satisfaction” receipt but having died the day after the receipt was issued. The proposed insured on October 11, 1967, made two applications to Peoples for two policies of life insurance, totalling $15,000.00. At the time of completing these applications, a check was given to Peoples in the amount of $25.85, representing the full first premium required under the mode of premium (monthly payment) selected by the applicant for the insurance for which application was made.

The agent of Peoples, E. E. Pur key, ⁵³⁶ had come to the Medairy home, at the suggestion of Mrs. Medairy, the plaintiff, to discuss the acquisition of some additional life insurance, Mr. Medairy having recently changed his employment and not being covered by the group insurance program of his former employer. Mr. Medairy, the proposed insured, filled out Part 1 of the respective applications (one for $10,000.00, the other for $5,000.00 of life insurance), Part 1 being the standard type used in the life insurance business to acquire non-medical information. Upon receiving the check for the original premium, Mr. Purkey then gave Mrs. Medairy — the intended beneficiary if living at Mr. Medairy’s death, otherwise to the two daughters of the Medairys— a receipt which provided in relevant part, as follows: “ ‘RECEIPT’ ” “‘THIS RECEIPT MUST NOT BE DETACHED UNLESS THE FULL FIRST PREMIUM HAS BEEN DEPOSITED AT THE TIME OF APPLICATION AND IT SHALL OPERATE AS A CONDITIONAL RECEIPT ONLY UNDER THE CONDITIONS HEREAFTER SET FORTH UNDER PARAGRAPH ❖ * * “ ‘A. If the above payment is made at the time of signing Part 1 of the application and is equal to the full first premium in accordance with the mode of payment selected and the published rates of the Company for the form of policy applied for in Question No. 4, and if Part 2 of the application is duly completed (Part 2 shall be deemed to include medical examination if such examination is required by the Company), then the insurance applied for shall be in force as of the date hereof or of Part 2 —Medical Examination, whichever date is the later, provided that the Company is satisfied that on the later of such dates the applicant is ⁵³⁷ a risk acceptable to the Company tinder its rales, limits and standards on the plan and for the amount of insurance applied for and at the rate of premium declared paid, such insurance being in accordance with and subject to the terms and conditions of the policy contract applied for and in use by the Company at said date; * * *’ ” (Emphasis supplied.) “ ‘B. If a policy differing in form, amount, or premium from that applied for is offered, no insurance shall be in force under the application herein referred to unless and until the first premium Is paid and a policy actually delivered to and accepted by the applicant during the continued insurability of the applicant as stipulated by the terms of the agreement appearing on the reverse side hereof.’ ” “(Reverse)” “ ‘A. This application consisting of Part 1 and Part 2 (including a Part 2 medical examination which will be promptly completed if required by the Company) and any policy or policies issued in consequence thereof shall constitute the entire contract of insurance, and the Company shall not be bound in any way by any statements, promises or information made or given by or to any agent or other person at any time unless the same be reduced to writing, submitted to the Company at its Home Office, and made part of such contract. The agent has no authority to waive the answer to any question in the application, to modify the application, or bind the Company by making any promise or representation.’ ” Mr. Medairy was examined for Peoples by Dr. Mc-Kendree Boyer the evening of October 16, 1967, who filled out Part 2 of the application (Medical Information).

The information obtained relevant to this case, ⁵³⁸ was as follows: Mr. Medairy was 45 years of age, had a height of five feet, five inches in his shoes and weighed in his ordinary clothing 170 pounds, with no change of weight during the past year. His blood pressure readings were done at rest and indicated a pulse rate of 72, with no irregularities, with a systolic pressure of 140 over a diastolic pressure of 88. The pulse rate returned to 80 immediately after exercise and was again 72 three minutes after exercise. In regard to the applicant’s heart, there was no hypertrophy present; and Dr. Boyer in the blank entitled “Diagnosis of the heart condition” wrote “Normal heart.” Under the heading of “Family Record,” it was stated that both parents lived to the age of 72, the mother having died of heart disease.

A sister of the applicant died after open heart surgery. Doctor Boyer completed Part 2, the Medical Information Form, the same evening of the examination, October 16, put it in an envelope addressed to Peoples, stamped the envelope and mailed it the next morning at around 9:30 A.M., there being no mail collection or delivery the evening of October 16. Mr. Medairy had been previously treated by Dr. Boyer as a private patient on two occasions, but not in connection with any difficulty with the patient’s heart. The patient had apparently enjoyed good health throughout his life.

In the afternoon of the following day, October 17, however, while seated at the telephone, he suffered a heart attack from which he died. The death certificate, signed by Dr. John G. Ball, indicated the cause of death as “Coronary Insufficiency, acute.” The deceased had a $3,000.00 life insurance policy with Peoples issued in 1950. About two weeks after the decedent’s death, Mr. Purkey came to see Mrs. Medairy with two checks, one for the proceeds for the $3,000.00 policy and one for a return of premium paid on October 11, 1967. He also had a paper to sign.

Mrs. Medairy declined to accept the check for the return of premium and to sign the paper. She demanded the payment of $15,000 ⁵³⁹ from Peoples and after Peoples declined to pay, filed an action in the Circuit Court for Frederick County to recover that sum alleging, inter alia, in the declaration filed by her, that her deceased husband had “passed” his medical examination on October 16, and that the plaintiff “contends that at the time of the application for the aforesaid insurance policies the first premium required under the mode of premiums selected by the applicant for the policies was deposited in exchange for a receipt bearing the same date, and that the liability of the Defendant Corporation attached upon the acceptance of the payment aforesaid, and the completion of the medical examination required by the Defendant, absent evidence of fraud, deceit, or concealment on the part of the deceased.” After general issue pleas were filed by Peoples, the case came on for trial before Chief Judge Schnauffer and a jury on December 19,1968. At the trial, by stipulation between the parties, Part 1 of the two applications, Nos. 54-80-42 and 54-80-43 for $5,000.00 and $10,000 respectively, Part 2 (the Medical Information), the receipt of October 11, the $25.85 first premium check (which had been deposited in the Western Maryland Trust Company of Frederick to the account of Peoples) and the death certificate of October 17, 1967, were introduced into evidence as exhibits for the plaintiff. It was also stipulated that the applications were numbered for convenience only and did not constitute policies.

Dr. Boyer testified for the plaintiff, indicating that he made the examination of October 16 for Peoples and that he had completed Part 2 of the applications. After describing in detail the various entries made by him, he testified over objection that, in his opinion, the applicant “was insurable,” but immediately qualified his answer as follows: “But I would like to qualify that by saying this, that all an examiner does is to state the facts on the medical examination. Then the insurance company itself, the medical depart ⁵⁴⁰ ment, reviews any abnormal findings and then using their tables, actuarial mortality tables and so on, then they draw their own conclusions.” Later in his testimony, he also stated: “One point only, that he tended to be overweight. His weight was 17Ó pounds, and according to the tables that are issued by numerous life insurance companies — I didn’t have one from Peoples, but I do have one from a number of other companies — 152 pounds would be — -so he was approximately 18 pounds overweight.

I mentioned that to him that night and since he was one of my patients I suggested he come back and go on a weight-reducing program.” On cross-examination, Dr. Boyer stated that he was employed by Peoples “to collect medical facts” and “not to determine insurability.” He stated that he had never done any underwriting and was quite aware that “there is a difference between clinical medicine and insurance medicine.” The second and only other witness for the plaintiff was Mrs. Medairy, herself. She testified that Mr. Turkey came to her home some two weeks after her husband’s death and the following occurred: “Q. [on direct examination] What happened when he came to your house; tell us the details ? A. Well, he came in; he brought the check and he had a paper for me to sign. “Q. The check — that was for the policy that he had some years ago? A. Yes, that was taken out about 1950.

And I said — and he had some papers on the table with him — and I said, ‘Now this paper I am signing doesn’t have anything pertaining to the new policy, does it?’ He said ‘No.’ I said, ‘Well, I just won’t sign anything yet.’ He said this was for the old policy. And he ⁵⁴¹ had a paper on the table in front of him, and I hadn’t gotten anything or heard anything on the other insurance, and he had a paper there and he had several names on it ■ — ■ he had my husband’s name on it — it had ‘Paige Medairy issued’ — and I said to Purkey — I said, ‘There, it has my husband’s name on that, issued,’ and he said, ‘Yes,’ something about ‘your husband died, I can’t give you — I can’t tell you any answers,’ or something to that effect; and I kidded him and I told him I didn’t want — he had given me the refund check and I told him I wasn’t accepting it, that it had on there ‘Paige Medairy issued.’ So 1 gave him back the premium slip that I had — I mean the check that he gave me. “Q. Did you ask him about ‘issued’ •— what that ‘issued’ on the paper meant? A. Well, he said he couldn’t — he wasn’t- — I don’t know how he had it — not qualified — but he couldn’t tell me anything; in fact he said he didn’t know — I mean he couldn’t tell — -the agent. “Q. Did he say anything about a policy of insurance with respect to that ‘issued’ — the word ‘issued’? A. No, that is what I asked him, if it was issued and he said it was, but 1 mean my husband died in the meantime. “Q. He said it was issued, but your husband had died in the meantime?

A. Yes, but I had never received any other policy. “Q. Then you say you returned that? A. I gave him — I first told him no, and I mean, you know, I took the check, and the more I thought about it I thought no, I am not going to accept the premium back, and I gave him the check back. “Q. When you gave him the check back what did he say, if anything? A. I don’t remember.” On cross examination, Mrs. Medairy testified: ⁵⁴² “Q. Mrs. Medairy, when Mr. Purkey came to see you did he have two checks ? A. Two checks. “Q. You said he gave you a check for the old policy then?

A. He brought me my policy that I had, you know, ever since about 1950. “Q. And he gave you a refund check for the premium which had been— A. Well, I say I think he had it that night. I either got it in the mail from Mr. White the same day, because I gave it back to Purkey. “Q. But he didn’t at any time tell you there was any policy? A. No, he didn’t say, but there was a paper; he had a paper with him that I saw my husband’s name on it. “Q. But he never told you there was any policy, is that correct? A. No, the paper was there with his name on it and it said ‘issued’, and that is when I said something to Purkey about it. “Q. My question was, did Mr. Purkey - ever tell you a policy had been issued?

A. Yes, I said to him it said ‘issued’, and he said yes, but my husband died, he couldn’t tell me anything; he said T am not authorized to tell you anything,’ or something like that, you know, ‘to tell you anything’.” The unnegotiated check for the return premium, payable to Mrs. Medairy, is dated November 6. At the conclusion of the plaintiff’s case, Peoples, the defendant, filed a motion for a directed verdict. The trial court reserved its ruling and Peoples then offered four documentary exhibits and the testimony of R. B. Carter, the vice-president of Peoples in charge of new business. Mr. Carter testified in regard to the underwriting routine of Peoples to ascertain whether the applicant