BEBBINGTON v. CALIFORNIA WESTERN STATES LIFE INS CO (1946)

In a trial to a jury on a policy of life insurance plaintiff, as beneficiary, had a verdict for the full amount of the policy. The facts relating to the issuance of the policy are not in material dispute. The plaintiff and her minor son talked to the resident agent of the insurer on January 10, 1941, explaining that the son intended to make aviation his career. At the agent's suggestion the son filled out an aviation questionnaire which was filed with his application for insurance. At the same time the agent submitted to the insurer a question as to which of four specified types of such coverage the insurer would be willing to make. On January 13th the insurer rejected all types except ‘standard policy with aviation waiver.’

On January 14th the insurer, at its home office in Sacramento, signed a policy of life insurance to which was attached a rider reading: ‘Notwithstanding anything to the contrary in this policy or the riders attached hereto, it is agreed, that in the event of the death, dismemberment, blinding, or total disabling of the insured resulting directly or indirectly from service or travel, or while in, on, or near, as a passenger or otherwise, any vehicle or mechanical device for aerial flight or ascension, except as a fare-payment passenger in a licensed passenger aircraft provided by an incorporated passenger carrier and operated by a licensed passenger pilot on a regular scheduled passenger flight over a regularly established air route between definitely established air-ports, the liability of the Company shall be limited to the reserve of this policy as of the then current policy year, less any indebtedness thereon.’

This ‘Supplemental Agreement’ was signed by the insured and his mother, plaintiff herein, on February 7, 1941, at the time the policy was delivered to them by the agent of the insurer.

The plaintiff testified that she paid to the agent the full year's premium at the time the application was made and took a receipt from the agent. She was unable to produce the receipt. The agent testified that she paid for only one quarter. The application contained a form of receipt on the bottom which was to be filled in if the full premium was prepaid. This form was blank. The policy contained a provision reading in part: ‘Provided, however, that if the applicant, at the time of making this application, pays the agent in actual cash the full amount of the first premium * * * and so declares in this application and receives from the agent a receipt therefor on the receipt form which is attached hereto * * * then said insurance shall take effect * * * from and after the date * * * of the non-medical examination * * * whether the policies be delivered to and received by the applicant or not.’ (Emphasis ours.) Though there is a contradiction in the evidence as to whether the full premium was paid with the application, there is full agreement that the insured did not so declare in his application and that the attached receipt form was blank.

The plaintiff testified that a short time after the application was signed her son received a letter from the company stating that they ‘were glad to welcome him as a policy holder.’ She also testified that she and her son did not understand the terms of the exclusion rider which they signed upon delivery of the policy, and that the agent informed them it meant that the double indemnity clause would not apply in case of death while riding in other than a commercial plane as a fare-paying passenger.

The son was later inducted into the air service of the United States and while stationed at the government bombing range at Avon Park, Florida, was killed in a collision of aircraft on August 31, 1943. In due time the plaintiff made proof of death to the insurer, submitting a newspaper clipping, a telegram and letter from the commanding officer of the Avon Park field. When these documents were offered in evidence by defendant they were excluded on the objection of plaintiff.

From the foregoing these facts stand out as indisputable: The policy of insurance was signed on January 14, 1941, but was not delivered until February 7th, at which time the insured and his mother signed the waiver as a part of the contract of insurance; the insured did not declare on the face of the application that he had paid in cash the full year's premium, and hence did not avail himself of the opportunity to make the policy date from the time of the application.

For these reasons we must hold that there was but one contract and that was the policy delivered on February 7th with the exclusion rider made an integral part of it. To recover on such policy it was necessary to prove that the beneficiary came within the express terms of the policy. She sued to recover on the policy—including the rider—and cannot recover if the rider excludes the liability. Thus when suing upon the policy she must take the contract as a whole. Viewing the case in this light we find that the contract of insurance became effective on its delivery February 7th; that the insurer's agreement to make it effective as of the date of the application provided the full year's premium was paid in advance and provided the insured ‘so declares in this application’ and provided receipt thereof was entered on the face of the application was not accepted by the insured; and that no agreement or representation by the agent could vary these conditions, or result in a waiver by the insured—at least without proof of knowledge on the insurer's part. No such proof was made. Evidence of a different kind of receipt from a ‘little book’ furnished the agent by the insurer was beside the issues. That the agent was without authority to alter the terms of the policy, or to waive its express conditions, is settled in Linnastruth v. Mut. Benefit, etc. Ass'n, 22 Cal.2d 216, 218, 137 P.2d 833.

If the respondent designed to attack the policy on the ground that the execution of the rider was procured through the fraud or misrepresentation of the agent, it would seem that a plea to reform the contract on that ground would have been the appropriate procedure. Here she sued on the contract of insurance excluding the rider which was an integral part of the contract. When the rider was pleaded in the answer respondent filed an affidavit charging that its terms had been misrepresented by the agent. Assuming that the question was properly at issue the evidence offered by respondent tended to show no more than that the agent represented that the rider did not mean what it said in plain language, but that it referred only to ‘double indemnity.’ The policy stipulated in plain language that the double indemnity benefits should not be payable if death resulted from accident while the insured was riding ‘as a fare-paying passenger’ on a licensed passenger aircraft operated between established commercial airports. The rider went further and denied all liability if the injuries incurred while the insured was riding in an aircraft which was not of the commercial passenger type. If the agent represented that the rider did not mean what appeared there in plain language it may have been a fraud upon the insured, but it was not a contract of insurance covering accidents in non-commercial aircraft. The applicable rule is stated in the Linnastruth case (22 Cal.2d at page 219, 137 P.2d at page 834) where the court said: ‘An application for insurance is a proposal. A meeting of the minds is essential. And the proposal is not a completed contract until it is accepted by the insurer in the same terms in which the offer was made. If the acceptance modifies or alters any of the terms of the proposal, it must then in turn be accepted by the applicant to be effective as a contract. Burch v. Hartford Fire Ins. Co., 85 Cal.App. 542, 552, 259 P. 1108, and cases cited; Beswick v. National Casualty Co., 206 Mo.App. 67, 226 S.W. 1031.’

Though we are satisfied from our review of the evidence that it does not fairly support respondent's theory that she held a contract of insurance exclusive of the aviation rider, nevertheless that was an issue of fact tendered to the jury and the jury might have found in her favor. On the other hand the jury might have found that the rider was fairly executed and became a part of the policy and then found that appellant had failed to prove that death occurred under the circumstances included in the rider. This possibility emphasizes the error to be hereafter discussed.

The picture of the trial of the case as we view it is this: Plaintiff sued on a portion of the contract only; defendant tendered the entire contract as a defense and pleaded that death occurred within the terms of the aviation rider; plaintiff countered with a charge that the rider was procured by fraud. Plaintiff went to the jury on these two issues—that the rider was inoperative, and that death under its terms was not proved. The jury might have held against the plaintiff on the first issue and with her on the second. The relevancy of defendant's proof of the circumstances of the death thus became the core of the defense to the action, and if that evidence was admissible its rejection was error of a type so prejudicial as to deny defendant a fair trial of the issues.

As we have concluded that the judgment must be reversed on this ground we will confine the discussion to that issue. The appellant has raised twenty grounds, or points, for a reversal of the judgment some of which are more or less academic and technical. It should not be implied from the fact that we do not discuss those grounds that we either approve or reject the arguments made for or against them. We merely hold that since the judgment must be reversed upon the grounds stated in the opinion we find it unnecessary to pass on others.

On the issue of the exclusion of appellant's evidence of proof of the circumstances of the insured's death: A short time after the policy was issued the insured was inducted into the aircraft service and at the time of his death was a first lieutenant stationed at the A. A. F., Avon Park Bombing range, Avon Park, Florida. On August 31, 1943, respondent received a telegram from an officer of the squadron informing her of the death of her son ‘as a result of an aircraft accident.’ On September 2d she received a letter of condolence from the captain commanding the aircorps stating that her son was ‘engaged in training pilots and their crews for combat duty at the time of his death.’ At the request of the court preceding the trial of the case the Secretary of War issued his certificate on April 27, 1945, certifying these facts: That on August 31, 1943, orders were issued by assistant operations officer commanding the 480 Bombing squardron to depart on ‘a bombing mission with fighter interception.’ The insured and six others were named in the order. On the same day the authorities reported that the plane was struck by a fighter ship and that the injuries to the entire personnel (listing by name the insured and six others) were fatal. On September 4, 1943, service headquarters at Atlanta, Georgia, reported to the war department that the insured met death on August 31st as a result of an ‘aircraft accident,’ that he ‘was on a duty status at time of death,’ and that ‘death was incurred in line of duty.’ The appellant also tendered the certificate of the City Clerk of Orlando, Florida, showing that the insured met his death ‘on a wooded area’ as a result of a ‘plane crash.’

All this evidence was rejected on the ground it was hearsay. The error of the ruling is apparent and its prejudicial effect cannot be questioned. Section 1953f of the Code of Civil Procedure provides: ‘A record of an act, condition or event, shall, in so far as relevant, be competent evidence if the custodian or other qualified witness testifies to its identity and the mode of its preparation, and if it was made in the regular course of business, at or near the time of the act, condition or event, and if, in the opinion of the court, the sources of information, method and time of preparation were such as to justify its admission.’ Section 1953e defines ‘business' as including ‘* * * every kind of * * * operation of institutions, whether carried on for profit or not.’ Section 1953g provides that the article shall be so construed as to effectuate ‘its general purpose to make uniform the law of those States which enact it.’

In Loper v. Morrison, 23 Cal.2d 600, 608, 145 P.2d 155, the Supreme Court, in reviewing this legislation, said: ‘The purpose of this act is to enlarge the operation of the business records exception to the hearsay evidence rule. The common law exception is based on the assumption that records kept in the general course of business usually are accurate, and may be used, in case of necessity, as evidence of the matter recorded. Hale, Hospital Records as Evidence, 14 So.Cal.L.Rev. 99, 100. But the exception has been hedged about with so many burdensome restrictions that legislation has been necessary to secure widespread use of such records. Speaking of the desirability of similar legislation, the United States Supreme Court, in the recent case of Palmer v. Hoffman, 318 U.S. 109, 63 S.Ct. 477, 481, 87 L.Ed. 645, 144 A.L.R. 719, stated: ‘The several hundred years of history behind the Act (Wigmore, supra, §§ 1517–1520) indicate the nature of the reforms which it was designed to effect. It should of course be liberally interpreted so as to do away with the anachronistic rules which gave rise to its need and at which it was aimed.’'

In a similar case the District Court of Appeal held that such evidence was admissible under these code sections and that the objection that it was hearsay was unsound. We quote from Gunter v. Claggett, 65 Cal.App.2d 636, 643, 644, 151 P.2d 271, 274: ‘So far as the contention that the certificate was inadmissible because of the hearsay rule is concerned, it is also without merit. No objection was made to the certificate on the ground that it was not properly authenticated. Aside from materiality, the sole objection was that the certificate was hearsay. Under the Uniform Business Records as Evidence Act passed in 1941 and incorporated in §§ 1953e to 1953h of the Code of Civil Procedure, the document was admissible. Loper v. Morrison, 23 Cal.2d 600, 145 P.2d 1.’

The records of the war department were all made in the performance of official duty. The certificate of the Secretary of War that they were copies of official records of his department was all that was necessary to prove their authenticity. See Wigmore on Evidence, 3d Ed., sec. 1675a. How far these documents went to prove the defense is not the question before us. The error of the trial judge in excluding all these documents completely foreclosed the appellant from making its defense.

Judgment reversed.

NOURSE, Presiding Justice.

GOODELL and DOOLING, JJ., concur.