Argued May 27, 1936. On June 28, 1927, appellee applied to appellant for an insurance policy containing provisions for death benefits, with a double indemnity feature, and annuity payments for disability. On the same day he was examined by appellant's physician, and paid his first premium as estimated by the agent. The latter gave appellee a receipt reciting that if he was then an insurable risk for the insurance applied for in the opinion of appellant's agents at the home office, it would be effective as of the date of the receipt. Appellee on or about June 30th sustained severe injuries to his hands, resulting in his total disability. Because of his employment in a coal mine, appellant's home office wrote his policy at an increased premium rate for death and disability and declined to incorporate therein the double indemnity feature. The total amount of the first premium upon the policy was $12.39 less than the payment made by appellee. The policy was dated July 6, 1927, and was delivered to appellee with a check for $12.39 on July 11th. The balance of his first payment was applied to cover the adjusted premium. Appellee and his wife repeatedly notified appellant's local agency of his injury. Appellant denied liability on the grounds that appellee was not insured at the time of the accident, and that proof of loss *Page 100 was not properly made within the sixty-day period prescribed in the policy. A jury trial resulted in a verdict for appellee, and from the refusal of the court below to grant appellant's motion for judgment n. o. v., this appeal is taken.
The receipt issued to appellee when he paid his first premium and signed his application was as follows:
"L 137671
"Received of Peter Stonsz the sum of Two hundred twenty-three and 19/100 ($223.19) Dollars for the first semi-annual premium on proposed insurance for $10,000 on the life of Peter Stonsz, for which an application bearing a corresponding number as above is this day made to the Equitable Life Assurance Society of the United States. Insurance subject to the terms andconditions of the policy contract, shall take effect as of thedate of this receipt, provided the applicant is on this day, inthe opinion of the Society's authorized officers in New York,an insurable risk under its rules, and the application isotherwise acceptable on the plan and for the amount and at therate of premium applied for; otherwise the payment evidenced bythis receipt shall be returned on demand and surrender of thisreceipt.
"Dated at Pittsburgh, June 28, 1927.
"(Signed) CALVIN S. BOLSTER, Agent."
This receipt, incorporated by reference in the application, determines the liability, if any, of appellant. It is in form a typical "binder," or "binding receipt" familiar in both fire and life insurance transactions. There is a great confusion of authority as to the effect to be given to such receipts. Because of the similarity of wording usually found in them, attempts have been made to generalize their operation. If these apparently conflicting authorities are examined, however, it becomes clear that these receipts are not capable of general treatment, but must be individually interpreted to give them the effect which the parties intended them to have in each case. The fundamental question is, what was *Page 101 their intention? See Reynolds v. Northwestern Mut. L. Ins. Co., 189 Io. 76; New York Life Ins. Co. v. Babcock, 104 Ga. 67.
The purpose of this clause, "insurance . . . shall take effect as of the date of this receipt" was to provide an inducement for the payment by appellee of the first premium in advance and to give preliminary protection to the insured until the issuance of the policy. Generally speaking an insurance contract is effective as of the date of its issuance unless a contrary agreement is made by the parties. As the insured should pay only for protection he actually receives, the first premium would be due as of the date that the protection commences. There is, however, a necessary delay from the time of the application to the time of the issuance of the policy. It is of advantage to the insured to be protected during that period, and to the insurer, not only to have the use of the first premium before it would be normally entitled to receive it, but also to secure definitely a client. It is usually customary for the parties to enter into a preliminary agreement looking toward the attainment of these objects for their mutual benefit. The insured believes that this binder is valid if he is an insurable risk. Sometimes it takes the form of a temporary contract of insurance, binding upon the parties until the carrier acts upon the application, whether it is accepted or rejected. See Rossi v. Firemen's Ins. Co., 310 Pa. 242;Queen's Ins. Co. v. Hartwell Ice, etc., Co., 7 Ga. App. 787;Hubbard v. Insurance Co., 129 Io. 13. If clearly established, such an agreement is favorably regarded by the courts whether oral or written. Reynolds v. Northwestern Mut. L. Ins. Co., supra; Cooksey v. Mutual L. Ins. Co., 73 Ark. 117. In De Cesarev. Metropolitan L. Ins. Co., 278 Mass. 401, it was held that the distinction sometimes drawn between the respective authority of fire and life insurance agents to bind their companies to such contracts did not exist where the applicant had passed his medical examination successfully, and where *Page 102 the receipt given by the agent showed an intention to effect present insurance pending action by the carrier upon the application. If the parties so intend, therefore, an interim contract of life insurance may be made in this manner, which will be valid and binding on the carrier: See Reynolds v.Northwestern Mut. L. Ins. Co., supra; Hart v. Traveler's Ins.Co., 236 App. Div. (N.Y.) 309; Albers v. Security Mutual LifeIns. Co., 170 N.W. 159 (S.D.); Starr v. Mutual Life Ins. Co.,41 Wn. 228.
This question confronts us in the present case: Does the language of this receipt indicate an intention to create a temporary insurance for the time during which the approval of the application was pending? Two conditions are imposed upon which the insurance was to become effective as of June 28, 1927. The first is that the applicant must be, on that day, an insurable risk in the opinion of the home office; the second, that the "application is otherwise acceptable on the plan and for the amount and at the rate of premium applied for." The cases previously cited indicate a trend in the courts to construe the conditions liberally, and to treat receipts similar in wording to the one before us as binding during the interim regardless of the ultimate action of the carrier on the application. These decisions are based upon the assumption that if the receipt meant anything, no other result could have been intended by the parties, for unless the insured was to beprotected against injury or death during the interim period there would be no advantage to him in paying his premium in advance. As was said in Albers v. Security Mutual Life Ins.Co., supra: "If the company did not intend that there should be insurance effective pending the date of the application and the date of the approval of the risk and the issuance of the policy, then the company would be charging and obtaining the full amount of the premium for one year, while the period of actual insurance would be as many days less than one year as there were days intervening between the date of the application and the *Page 103 approval." In other words, the insured would be paying for something which he did not receive.
Thus in De Cesare v. Metropolitan Life Ins. Co., supra, although the application expressly stated: "no obligation is to be assumed by the company unless and until such application is so approved," the court said: ". . . the agreement in the receipt, when construed with the application, created a valid contract for temporary insurance effective upon acceptance of the application . . . and the fact that the agreement did not contemplate that any obligation would be assumed by the company unless and until the application should be approved does not require a different conclusion."
In Hart v. Travelers' Insurance Co., supra, the receipt read, in part: "The Company shall have the right to disapprove such application and shall incur no liability thereunder until and unless received and approved by the Company at the Home Office . . ." No policy was ever issued to the applicant during his life. Nevertheless the court held: "He [the insured] undoubtedly thought he was getting some advantage by making this full payment at this time. He did not believe that by furnishing the premium in full in advance he was doing something to his disadvantage — paying money for a period when he was not insured at all . . . if the construction to be placed upon this binding receipt is not that Levy was thereby insured from the date of the binder until a formal policy was issued or the risk declined by the defendant, then it must be said that this binding receipt is at least ambiguous, and, if so, it should be construed against the company, it having been drawn up by the agent of the company upon its printed form."
In Starr v. Mutual L. Ins. Co., supra, it was stated: "If there was to be no contract of insurance in any event until the application was approved . . . and a policy issued, it would seem entirely immaterial to the insured whether the contract related back to the date of the *Page 104 application or not. If he lived until the application was approved and a policy issued, it would seem a matter of indifference to him whether he had been insured during the interim between the date of the application and the date of the issuance of the policy. On the other hand, if he died before the application was approved and the policy issued, his beneficiaries would derive no benefit from the issuance. The chief object of the provision would therefore seem to be to enable the insurance company to collect premiums for a period during which there was in fact no insurance, and consequently no risk."
The same thought is expressed in Albers v. Security Mut. L.Ins. Co., supra, and Reynolds v. Northwestern Mut. L. Ins. Co., supra. In the former case, recovery was permitted though the insured died before his application had been acted upon.
Under these authorities, the conditions imposed in this receipt would be treated as conditions subsequent. The company was bound to act either affirmatively or negatively on the application. The insured if an acceptable risk was entitled to a policy. If he was not acceptable appellant was required to so notify him, under the last clause of the receipt, in order that he could demand a return of his money. He was not notified, his application was accepted in a modified form, his money was retained, except for a portion of it that was returned as overpayment. These facts all indicate that the company had accepted the risk or at least that the liability for insurance created by the preliminary agreement had not been divested by rejection.
There are, of course, authorities which take the opposite position on this interesting question, and these will be referred to hereafter. It is not necessary to the decision of this case to pass upon this broader phase of the problem, for the suit is not upon the receipt, but upon the policy that was issued to appellee. The receipt is here considered only as it shows the terms of that policy relating to its effective date. *Page 105
If this clause of the receipt was not intended to provide interim insurance to appellee as a separate and distinct contract from the policy to be issued, what is its effect? It is certainly not a mere nullity. By reason of it the insured was induced to pay his premium in advance. The intention may have been that it was to operate as a binder giving temporary insurance on the terms of the contemplated policy against injury or death as of June 28th, but only if the conditions mentioned were fulfilled. In other words, that they were conditions precedent to liability on the binder. This construction is sometimes given these receipts. See Grier v.Mutual Life Ins. Co., 132 N.C. 542; Insurance Co. v. Young'sAdmr., 23 Wall. (U.S.) 85; Gardner v. North State Mut. L. Ins.Co., 163 N.C. 367; Steinle v. New York Life Ins. Co., 81 Fed. 489. Secondly, it might be interpreted to be a preliminary agreement that the insurance policy when issued should be antedated to take effect as of June 28th: New York LifeInsurance Co. v. Abromietes, 254 Mich. 622. The rules of offer and acceptance must provide the solution.
Appellee's application, considered with the receipt which it incorporates by reference, made this offer: (1) Appellant should insure appellee (a) against death, (b) with double indemnity if its cause should be accidental, and (c) against total disability; (2) the insurance should be effective as of June 28, 1927; (3) appellee should pay 20 annual premiums at the regular rate for such coverage, the first premium being estimated at $223.19.
Appellant contends that its refusal to issue a policy providing for double death indemnity, and its alteration of the estimated premium rate because of the hazardous occupation of the applicant, constituted a rejection of the offer in the application. It is urged a counter-offer was created in the policy delivered to the insured dated July 6, 1927, and until its acceptance July 11th, no contract of insurance existed. The offer was for a contract *Page 106 of insurance with severable provisions for death, accidental death, and disability. The testimony discloses that in computing the premium, appellant treated the disability provision as one distinct item for which a certain amount was due; death benefits as another item to be paid for at a different rate, and double liability, a third item with a separate purchase value. These three items added together determined the total premium to be paid. There was no flat rate upon the policy as an entirety, but rather a combination of charges for three different forms of insurance coverage which it embraced.
In determining whether or not appellee is entitled to recover upon this claim, we need not concern ourselves with the provisions for death benefits, or the refusal of the company to provide double indemnity for death from accidental causes. Appellee claims $100 per month during the continuance of any total disability. The policy issued to him contains provision for disability exactly as applied for. The only apparent change was in relation to the rate. The premiums to be paid for the disability feature were "rated up" 37 1/2%, but this did not constitute a variance of the terms of the offer, because it was testified by the agent Bolster that at the time the application was made it was understood that the occupation of appellee might make a difference with respect to the disability and double indemnity features of the policy. The sum paid was merely an estimated premium. The rate was not fixed at the figure submitted. The payment was tentative, it being understood that the rate was to be appellant's regular charge for contracts of that sort with persons in appellee's occupational class. The offer reserved the right to adjust the ultimate premium rate. The difference in rate from the application was not a variance of its terms. Appellant issued to appellee the disability insurance he applied for, it was accepted by him, and under the agreement made between them its effective date was June 28, 1927. *Page 107
A condition of the receipt was that appellee be an insurable risk at the time the receipt was issued. Although he was not accepted as insurable for double indemnity, he was never rejected for disability coverage. The company by issuing the policy expressed its acceptance of appellee as insurableagainst disability on the terms therein contained. Appellant retained a portion of his original payment as the first premium, although if he was not insurable he was entitled to its return. It does not attempt to deny its present obligationto the insured under the policy as issued. It merely denies that the contract was effective on June 28th. If appellee was insurable for the purpose of a policy effective July 11th, he was also insurable for the purpose of the same policy, issued on the same date, but to take effect June 28th by agreement. Appellee had passed the examination by the insurer's physician, and no contention is made that the results of that examination were incomplete or unfair. If there was any rejection involved as to disability insurance it was a rejection of the estimated premium rate and not of the appellee as a bad insurance risk.
Even if we resolved the doubt as to the condition of appellee's offer relating to premiums in favor of the insurance carrier, which would be contrary to every rule of law in this Commonwealth, the conclusion is inescapable that the policy was in effect at the time of his injury. It must be remembered that every term of the contract made by the company was included in the original offer. Let us assume that appellee offered to contract only upon the rate for disability coverage estimated by the agent Bolster. The increase of that premium would then effect a change in a material element of the offer and make the issuance of the altered policy by appellant a counter-offer, which appellee could accept or reject in his turn. His acceptance is evidenced by his taking the policy as delivered and cashing the refund check forwarded to him without demanding the return *Page 108 of the balance of his payment. Under our present assumption, which the appellant contends is correct, there was thereby created a new contract.
But when was this contract effective? It could not take effect on July 6th, the date appearing on the policy, for this was not stated to be the effective date, and the contract had not yet been formed by the appellee's acceptance. Did it become operative on July 11th, the date upon which he signified his assent? Ordinarily, if the parties had not expressed their intention otherwise as to the point, this would be the time:Insurance Co. v. Young's Admr., supra. But it must be noted that the original offer here named June 28th as the date at which the coverage should commence. Where a counter-offer is made, changing some of the terms of the original offer, those terms which are not expressly altered are presumed to be the same: See Gray v. Foster and Mahon, 10 Watts 280; Cosgrove v.Woodward, 49 Pa. Super. 228. Therefore the alleged counter-offer made by appellant and accepted by appellee, since it did not provide a new effective date, adopted the date of the previous offer by incorporation. If the carrier desired to change two terms of appellee's offer, both price and date, it should have informed the offeror of both changes, not merely of the increase in the premium rate. Nothing in fact was said on July 11th to appellee to indicate that the policy for disability was not to be effective as of June 28th, and it was not until more than one year after his injury that this position was taken. If there was doubt as to this point, which even appellant concedes, since it attempts to invoke a legal presumption to supply the intention of the parties as to the date, that doubt must be resolved in favor of appellee: WesternIns. Co. v. Cropper, 32 Pa. 351; Hillman Transportation Co. v.Home Ins. Co., 268 Pa. 547. There is here, however, no necessity to apply legal rules of construction, for the intention of the parties that the contract should take effect on June 28th had been expressed. *Page 109
The decisions most strongly relied upon by appellant differ from the present case in that in each of those cases the applicant for insurance died before the policy was delivered to him. Under those circumstances, of course, no contract was ever formed because the counter-offer had never been accepted. SeeInsurance Co. v. Young's Admr., supra; Northwestern Mutual LifeIns. Co. v. Neafus, 145 Ky. 563; Mohrstadt v. Mutual Life Ins.Co., 115 Fed. 81; State ex rel. Equitable Life Assurance Soc.v. Robertson, 191 S.W. 989. Here appellee had accepted the policy as issued and the contract by its terms then related back to June 28th.
Our conclusion on this point is further substantiated by the clause in the application itself wherein the insured agrees "That the policy issued hereon shall not take effect until the first premium has been paid during my good health; . . ." This is incorporated in the policy by specific reference: "This policy, and the application therefor, a copy of which is endorsed hereon or attached hereto, constitute the entire contract between the parties." It is the only provision therein referring to the effective date. Since, therefore, the first premium was paid on June 28th, during the good health of appellee, this clause affords another indication of the intention of the parties that the contract should become operative as of that date.
Appellant's second basis for refusing to pay this claim is the failure of appellee to give satisfactory proof of loss within sixty days as required. Appellee testified that the agent Bolster was apprised of the condition of his hands at the time that he delivered the policy, July 11th. This appellant denies, insisting that the extent of the injury was not made known to Bolster, and further, that he was not a proper agent to receive notice of loss. After the expiration of the notice period, appellee's wife on several occasions went to appellant's branch office at Pittsburgh, and spoke not only to Bolster but also to the divisional claims agent, Boyle, respecting the *Page 110 payment of the disability annuities. At no time did either agent inform her or appellee that oral notice was insufficient, or that the period for making proof of loss had expired. There can be no doubt that Boyle should have explained the manner in which proof was to be made, since both appellee and his wife were of foreign birth, and are unfamiliar with our language. It is the duty of an insurance carrier, upon receipt of defective notice of loss, to point out that it is insufficient. SeeJenkins v. Franklin Fire Ins. Co., 282 Pa. 380; Arlotte v. Nat.Liberty Ins. Co., 312 Pa. 442. The printed endorsement on the back of this policy instructed claimants to communicate at once with the nearest agency of the company concerning losses. Boyle, as divisional claims agent, was a proper official to receive such notice, and his failure to instruct appellee, who was obviously attempting to make a claim, that formal proof was required, lulled him into a false security. Appellant answers that Boyle believed that appellee was not totally disabled within the meaning of the policy, but this does not explain his neglect to indicate the formal insufficiency of the notice. Nothing in the contract requires proof to be made in writing.
More decisive of waiver, however, is the action of the company's agents in furnishing to appellee's attorney its official form adopted for such proofs. This form was supplied in July, 1928, appellant having knowledge that the claim was for an injury which had occurred in June, 1927. Several forms were executed, received by appellant's home office and returned for further information or correction. At no time during the course of these transactions did appellant's agents suggest that the claim was invalid because of noncompliance with its formal requisites. This is indisputable evidence of waiver. The company compelled appellee through his attorney to procure certain required statements from physicians who had examined him, and itself conducted an investigation. Appellee was put to trouble and the *Page 111 expense of services of counsel, which could have been avoided, if appellant had intended to treat the delay in making claim as a breach. Regardless of the provision in the policy that all waivers must be made in writing, there can be no other construction placed upon appellant's acts: See McFarland v.Insurance Co., 134 Pa. 590; William Zoller Co. v. Hartford FireIns. Co., 272 Pa. 386; Coursin v. Pennsylvania Insurance Co.,46 Pa. 323.
Judgment affirmed.