ROBINSON, Chief Justice.
This is a suit to recover on a life insurance policy. Decedent was an agent of the insurer, and had submitted an application on himself. The company rejected him as a standard risk and offered him a rated-up policy. After some delay he tendered the additional premium, accepting the counteroffer on the day before his death. Between the date of the initial application and the date of acceptance of the counteroffer, decedent learned that he suffered from severe coronary artery disease, which was the eventual cause of death. Decedent's widow brought suit on the policy when the insurer denied liability. A jury returned a verdict for decedent's widow, and the insurer has appealed. Reversed and rendered.
Walter Coulson was a life insurance agent for the defendant, United Savings Life Insurance Company, from 1968 until he died on July 6, 1970. On March 15, 1970, Coulson applied for a $50,000 insurance policy on his own life with his company. The company's application form included a receipt which offered immediate coverage if several conditions were fulfilled. If the agent received the first premium at the time of the application, he was to deliver the conditional receipt to the applicant. The company received Coulson's application with the receipt already removed and with a check for the first premium at the rate for a standard risk. When Coulson made this application he knew that he suffered from high blood pressure. He had been taking medication for this condition for several years. His wife testified that Coulson knew his application would not be accepted as a standard risk because of the high blood pressure. Coulson had applied for a policy with United Savings Life during 1969 and at that time the company refused to write a standard policy because of the high blood pressure. Coulson did not accept the rated-up policy in 1969. There is no evidence that his condition had improved when he made the March, 1970, application.
On May 26, 1970, Coulson first visited Dr. Roy Sheffield in Lubbock. He complained to Doctor Sheffield of chest pains and heart palpitations. Doctor Sheffield performed an electrocardiogram which showed a positive finding of coronary artery disease. On this first visit, Doctor Sheffield told Coulson that he had a serious disease. The doctor said in his deposition, "I don't know that I used those words exactly, but I indicated to him that he had heart trouble and he was taking nitroglycerin for that purpose."
On June 8, 1970, a rated-up policy was prepared by United Savings and forwarded to Coulson with a notice that the contract had been rated up. The notice requested that the agent (Coulson) collect an additional premium of $289.00 when he delivered the policy. Coulson did not immediately accept the policy.
Coulson returned to Doctor Sheffield on June 12 for further examination. At this time Coulson was taking blood pressure medication (which he had been taking for
Doctor Sheffield saw Coulson again on June 26, 1970. Coulson related two episodes of anginal pains both of which awakened him from his sleep. Doctor Sheffield testified that heart disease is getting quite serious when one has pains while asleep or resting.
On July 5, 1970, Coulson mailed a check dated July 6, 1970 in the amount of the full additional premium ($289.00), together with the signed delivery receipt. Coulson died of a heart attack on July 6, 1970.
Plaintiff brought suit on the policy alleging that it was effective March 15, 1970, when Coulson made application and submitted the first premium. The policy provided:
(Emphasis added). The binding receipt provided:
Defendant denied that a conditional receipt was issued, and further contended that even if issuance was proved, the conditions of the receipt were not met because Coulson was not insurable at the class of risk applied for on March 15, 1970. Defendant alleged that the heart condition rendered Coulson uninsurable at any rate, and that Coulson, as both agent of the company and insured, breached his duty to advise defendant of the change in his health.
The jury findings in response to the special issues submitted were:
1. There was not such a change in the physical condition of Walter Coulson from March 15, 1970 (application submitted) to June 8, 1970 (mailing of rated-up policy) as to affect his insurability.
The court denied defendant's motion for judgment notwithstanding the verdict and granted judgment for plaintiff on the verdict. Plaintiff was awarded the face amount of the policy, a 12% statutory penalty, interest from the date of death, and attorney's fees.
At the outset, it is apparent that, as a matter of law, Condition C of the conditional receipt was not fulfilled. Considering the evidence in the light most favorable to plaintiff's position, there is no evidence that at any material time Coulson was insurable at the class of risk applied for in his March 15, 1970, application.
The application submitted by agent Walter Coulson on his own life, dated March 15, 1970, was rejected by United Savings Life Insurance by their counteroffer of a rated-up policy sent to Coulson on June 8, 1970. Where a party applies for insurance, and there is an acceptance upon different terms from those offered, it results in a rejection of the offer, but operates as a counteroffer, which must be accepted by the insured in order to render the insurance effective. Springfield Fire & Marine Ins. Co. v. Hubbs-Johnson Motor Co., 42 S.W.2d 248 (Tex.Comm'n App.1931). The Texas Supreme Court has applied this principle to life insurance:
Republic National Life Insurance Co. v. Hall, 149 Tex. 297, 232 S.W.2d 697, 699 (1950).
Therefore, the final power of acceptance rested with Coulson. He mailed the insurer the additional premium on the day before his death. Where payment by mail is authorized, performance is completed when a letter containing the remittance, properly addressed, is deposited in the mail. Lawrence v. Continental Fire and Casualty Insurance Corp., 203 S.W.2d 967, 969 (Tex. Civ.App.-Dallas 1947, no writ). Prior to his death Coulson accepted the rated-up policy on his life.
The effect of Coulson's acceptance of the rated-up policy was to discontinue the temporary coverage which the receipt provided, if he had met the "insurability" provision of the receipt. Such temporary insurance coverage is only effective until the application is rejected or superseded by the issuance of a policy. Colorado Life Co. v. Teague, 117 S.W.2d 849, 853 (Tex.Civ. App.-Eastland 1938, writ dism'd). In the instant case, there was no policy in effect before July 5, when Coulson accepted the policy by remitting the additional premium and the delivery receipt. Therefore, any rights of Coulson's widow are governed by the policy itself.
The policy states that it will be effective as soon as it has been delivered and the first premium has been paid during the lifetime and continued insurability of the proposed insured. Such a provision is known as a "good health" clause, common in most life insurance policies.
A good health clause is valid and prevents the policy from becoming effective if the insured, at the time of delivery, is afflicted with a disease or infirmity which increases the risk under the policy. Great National Life Insurance Co. v. Hulme, 134 Tex. 539, 136 S.W.2d 602 (Tex.Comm'n App. 1940, opinion adopted). The burden is on the insurer to prove that the prospective insured was not in good health at the time of delivery of the policy. In the instant situation, involving a rated-up policy, acceptance and delivery did not occur until the time that Coulson tendered the additional premium and the delivery receipt on July 5, 1970.
Appellant company sustained its burden of proof by securing jury findings to the effect that Coulson was aware that there had been a material change in his physical condition between the application and the delivery of the policy on July 5, 1970, and that United Savings Life Insurance Company would not have written a policy on Coulson had it been informed of that change.
One who submits an application to an insurance company has a duty to inform that company of any changes in his health between the time he makes application and the date of delivery and acceptance.
Stipcich v. Metropolitan Life Insurance Co., 277 U.S. 311, 317, 48 S.Ct. 512, 513, 72 L.Ed. 895 (1927).
The holding of Stipcich v. Metropolitan Life Insurance Co. has been applied in Texas. Forrester v. Southland Life Ins. Co., 43 S.W.2d 127 (Tex.Civ.App.-Amarillo 1931, writ ref'd). In Aetna Life Insurance Co. v. Shipley, 134 S.W.2d 342 (Tex.Civ. App.-Fort Worth 1939, writ dism'd jdgmt cor.), the court extended the reasoning of Stipcich:
Id. at 347.
The Stipcich holding was also followed in Moore v. American Home Mutual Life Insurance Co., 174 S.W.2d 788 (Tex.Civ.App.-Dallas 1943, writ ref'd w. o. m.), wherein an insurance agent applied for a policy on his daughter. In considering the agent's duty to his company, the Court stated:
We conclude that the conditions under which the policy in question would have become effective were not fulfilled.
The judgment of the trial court is reversed and judgment here rendered that plaintiff take nothing.
DODSON, J., not participating.