Penn Security Life Insurance v. Rising

Opinion

The appeal before us was taken by plaintiff Penn Security Life Insurance Company (“Penn Security”) from an adverse judgment in its declaratory relief action against defendant John S. Rising, Jr. (“Rising”), and others.

The issue in the superior court was. whether a valid contract of credit life insurance on the life of one David L. Morris, M.D., ever came into existence between Penn Security and Rising. The trial court concluded that such a valid contract had come into existence.

Under this test, the record establishes the following.

“Credit life insurance” means insurance on the life of a debtor for the security of his creditor pursuant to or in connection with a loan or other credit transaction. (See Ins. Code, § 779.2, subd. (1).)

Although greater amounts were often applied for, a life insurance company, for statutory or other reasons, could not write more than $10,000 of such insurance on any one risk.

Penn Security was a life insurance company which, among other things, issued policies of credit life insurance. Its general agent was Compucar Financial, Inc. (“Compucar”), with authority to act for Penn Security in such matters as are here at issue.

Reliance Standard Life Insurance Company (“Reliance Standard”) also issued policies of credit life insurance. Its general agent was Gordon Company (“Gordon”), with authority similar to that of Compucar.

A general agent may “go out and appoint agents.” Compucar had, on behalf of its “lead” company, Penn Security, entered into a subagency agreement with Gordon, which on behalf of Reliable Standard had entered into a like relationship with Compucar; they had “just traded subagreements.” There was no agreement in writing, the general agents

The relationship was particularly active in the field of credit life insurance, for which Penn Security and Reliable Standard often had applications for amounts greater than they individually were permitted to write. Each had “written a number of excess policies” with the other. This excess credit life insurance (over the allowed $10,000 for one company) was allocated in permitted amounts to companies having the relationship here described between Penn Security and Reliable Standard. It appears that in this fashion Reliable Standard and Gordon had allocated an average of about eight such excess coverages each month to Penn Security and Compucar.

Credit life insurance required no physical examination. “[T]he theory of credit life is that they charge a lesser rate, and take everybody, and there’s no underwriting.” The agents and companies “do not have the power to say no, we don’t want this one, we don’t want that one. Credit life has to be offered and written on anybody who wants it, and the only underwriting guides are that the man or lady has to be eighteen years old, and no older than sixty-five, and up to last year you could only place $10,000 in one company on one life.” Conforming applications were always accepted by the respective general agents and companies of this case.

It was the practice for each general agent to encourage and accept credit life insurance applications, regardless of amount, for its lead company, Penn Security or Reliable Standard. That company would write $10,000 or less of the application and parcel out the remainder, if any, with checks for the premiums, to other companies with which it had the above-described relationship. There were often, of course, delays attending the writing of these policies, but when written their coverage and the premium charge therefor were made retroactive to the date of application to the lead company. These allocations from the lead company were always accepted, as long as the interagency relationship existed.

The described practices appear to have been the custom and practice of the credit life insurance business, known to all of the above-described parties and defendant Rising.

Unknown to all of the affected parties, until after Rising’s credit life insurance transaction had been completed, Dr. Morris had died Januaiy 1, 1974, in a boating accident. (There is no contention of fraud, or concealment or bad faith on the part of anyone, in relation to any aspect of the transaction.)

Penn Security thereafter disclaimed liability to Rising under its policy. The disclaimer led to the instant declaratoiy relief action, and to the judgment here under appeal.

The superior court, among other things, found: “That a valid contract of credit life insurance came into existance between plaintiff, Penn Security Life Insurance and defendant, John S. Rising, Jr. prior to the death of David L. Morris, M.D. on Januaiy 1, 1974, when defendant John S. Rising, Jr. placed his check for the payment of the premium of said credit life insurance and had the completed application ... in the mail on December 24, 1973.”

Penn Security’s only appellate contention is that this finding was unsupported by evidence and by the law. We consider the evidence, and reasonable inferences therefrom, tending to support the trial court’s finding. That contraiy evidence and inferences might, as argued by Penn Security, have been found is of no consequence. (See Nestle v. City of Santa Monica, supra, 6 Cal.3d 920 , 925; Green Trees Enterprises, Inc. v. Palm Springs Alpine Estates, Inc., supra, 66 Cal.2d 782 , 784.)

Further, evidence was admitted, without objection, of a custom and practice of making the excess credit life insurance policy’s coverage retroactive to the date of the application to the lead company, regardless of the insured’s death before the excess policy could be written. The remaining companies, which had written excess coverage on Dr. Morris’ life and Rising’s application, had affirmed this custom and practice by payment to Rising in accordance with their policies’ terms.

We have closely considered Penn Security’s insistence that Gordon, in its discretion and following Dr. Morris’ unnoticed death, might not have selected it to share the excess coverage. But we are concerned with the parties’ contractual intent, as reasonably inferred from the evidence. We think the more reasonable inference, presumably drawn by the trial court, was that a good faith selection of the excess insurance carriers after, but before knowledge of, the insured’s death would be respected. The alternative inference, that in such an event the parties intended no insurance coverage, was properly rejected by the trial court as unreasonable.

From all of the foregoing it will be seen that “a valid contract of credit life insurance” between Penn Security and Rising had come into existence, as found by the superior court.

This conclusion is amply supported by the law. An agreement may be established by the acts and conduct of the parties and all of the circumstances of the case. (Civ. Code, § 1621; Desny v. Wilder, 46 Cal.2d 715 , 735-736 [ 299 P.2d 257 ]; Silva v. Providence Hospital of Oakland, 14 Cal.2d 762 , 773 [ 97 P.2d 798 ]; Minniear v. Tors, 266 Cal.App.2d 495 , 503 [ 72 Cal.Rptr. 287 ]; Bush v. Lane, 161 Cal.App.2d 278 , 279-280 [ 326 P.2d 640 ].) “[GJeneral custom or usage must be considered in determining the intent of the parties, and are in effect a part of the contract unless the contract manifests a contrary intention .. ..” (Miller v. Germain Seed etc. Co., 193 Cal. 62 , 77 [ 222 P. 817 , 32 A.L.R. 1215 ]; see also Civ. Code, § 1655; As so. Lathing etc. Co. v. Louis C. Dunn, Inc., 135 Cal.App.2d 40 , 48-49 [ 286 P.2d 825 ]; Todd v. Meserve, 93 Cal.App. 370 , 380 [ 269 P. 710 ].) And where such an agreement is subject to different inferences or interpretations, that which is the more reasonable must be drawn. (Cohn v. Cohn, 20 Cal.2d 65 , 70 [ 123 P.2d 833 ]; In re Marriage of Williams, 29 Cal.App.3d 368 , 380 [ 105 Cal.Rptr. 406 ].)

Relevant also is the public policy of this state as disclosed (1) by Insurance Code section 10115, q.v., stating in effect that the tardy writing of a life insurance policy should not deprive the insured of intended coverage, and (2) certain language of Granco Steel, Inc. v. Workmen’s Comp. App. Bd, 68 Cal.2d 191 , 198 [ 65 Cal.Rptr. 287 , 436 P.2d 287 ]: “ ‘Some difficulty on the score of the identity of the insurer exists where, as is often the case, an agent represents more than one insurance company. The element of identity is satisfied where the agent, being authorized to do so, designates the company which is to carry the risk.’... [1] It is clear that ‘designation’ does not imply a meeting of the minds of the insured, the agent, and the insurer. ‘When the agent represents several companies and selects certain [or one] of them to be bound by the risk, he is contracting for undisclosed principals. Each of the

The judgment is affirmed.

Molinari, P. J., and Sims, J., concurred.