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MALTA LIFE INSURANCE CO. v. THE ESTATE OF GEORGE WAYNE WASHINGTON

SEPTEMBER 20, 1989

MALTA LIFE INSURANCE CO.
v.
THE ESTATE OF GEORGE WAYNE WASHINGTON, DECEASED



EN BANC

ANDERSON, JUSTICE, FOR THE COURT:

On August 10, 1982, George Wayne Washington, age 56, obtained from First National Bank of Pontotoc a loan in the amount of $53,048.16, including interest and credit life insurance premium. Eddie Ray, the bank officer who handled the loan, issued a credit life policy for this amount through Malta Life Insurance Company, for which the bank was an authorized agent. On April 13, 1983, Washington obtained another loan from First National Bank in the amount of $41,946.24. The proceeds of this loan were used to pay installments and interest on pre-existing loans, including the loan of August 10, 1982. Eddie Ray also handled this loan, and issued a policy of credit life insurance through Malta in the amount of $42,100.00, effective April 15, 1983. *fn1 A copy of the certificate of insurance was given to Mr. Washington. A premium of $353.64 was charged for the credit life insurance, this amount being included in the amount of the loan. The bank received a 50% commission of the gross premium.

Mr. Washington died on May 2, 1983, seventeen days after the effective date of the policy. At the time of his death, the balance of the August 10, 1982 loan was $31,282.58. This amount was paid by Malta to First National Bank. Malta's Master Policy with First National Bank contained a provision limiting the total

 amount of coverage on any one debtor, ages 17 through 59, to $50,000.00. Based on this provision, Malta refused to pay an amount in excess of $50,000.00, but did pay $18,717.42 - the difference between $50,000.00 and the balance of the August, 1982 loan - on the April, 1983 loan. (Malta also paid $50,000.00 to the Bank of Pontotoc under a credit life policy issued by that bank to Washington under the name" G. W. Washington. ") First National Bank subsequently brought suit against Washington's estate, claiming right under a security agreement to certain articles of personal property used to secure the April, 1983 loan. Washington's estate cross-claimed against the bank as agent of Malta Life Insurance Company and joined Malta as a cross-defendant. The Estate alleged that the policy of insurance issued effective April 15, 1983, was in full force and effect at the time of Washington's death, and that the cross-defendants were jointly and severally liable for the balance on the April, 1983 loan, which at the time of trial was $30,894.07, including accumulated interest. After a full trial, the chancellor dismissed the estate's cross-claim against the bank. As to the cross-claim against Malta, however, the trial court found in favor of Washington's estate and ordered Malta to pay the loan balance of $30,894.07. From that judgment, Malta appeals.

 I. DID THE TRIAL COURT DISREGARD THE PLAIN LANGUAGE OF THE MASTER POLICY?

 On appeal, Malta argues that the trial court's decision was contrary to the plain language of the master policy and the certificates of insurance, which both provide for a $50,000.00 limit on coverage.

 Although the master policy does provide in the" Amount of Insurance "paragraph that" [i]n no event shall total insurance in force as to any one debtor exceed a maximum of $50,000.00 of insurance, "it is clear that that clause is rendered virtually meaningless by other language in the policy. In a subsequent paragraph, the master policy provides as follows:

 The Company shall have the right to cancel any insurance on the life of the Debtor in excess of those amounts listed in the Amount of Insurance paragraph contained in this Policy, within thirty days after receipt at the Home Office of the Company, Jackson, Mississippi, of written notice of the granting of such insurance. Such cancellation shall be given by written notice to the Creditor.

 (R. 116) (Emphasis added.) The language of this paragraph clearly contemplates that policies may be written for amounts in excess of $50,000.00. Furthermore, Eddie Ray, the bank officer

 who issued the policy in question to Mr. Washington, testified that he had issued credit life policies in excess of $50,000.00 with Malta" a few times "in the past. Mr. Washington himself had previously been issued a single policy in excess of $50,000.00. There is simply no merit to the appellant's argument that the provision limiting coverage on any one debtor to $50,000.00 was an absolute limitation.

 It should al so be noted that the master policy provides not that the Company may reject the excess coverage, but that it may cancel the excess coverage within thirty days after receipt of notice of the granting of the insurance. The use of the word" cancel "clearly contemplates a policy that has already become effective.

 In National Life and Accident Insurance Company v. Miller, 484 So. 2d 329 (Miss. 1985), appeal dismissed, U.S., 108 S. Ct. 2007, 100 L.Ed.2d 596 (1988), this Court stated that" an insurance company, like other principals, is bound by knowledge of, or notice to, its agent within the general scope of his authority, notwithstanding a contrary provision in the application or policy. "Id. at 334-35, quoting 32 C.J. 1069 (emphasis added). The Court further stated that" a policy delivered with full knowledge [by the agent] of a state of facts which under its written stipulations, would render the insurance void should be binding upon the company. "Id. at 335, quoting Big Creek Drua Co. v. Stuyvesant Insurance Co., 115 Miss. 333, 75 So. 768 (1917). In the instant case, First National Bank delivered a certificate of insurance to Washington for an amount, which when coupled with other existing coverage, exceeded the limit specified in the master policy. Because the bank was an agent of Malta, authorized to issue policies of credit life insurance, Malta should be bound by the policy issued to Washington, even if under the stipulations of the master policy, the insurance would exceed the $50,000 limitation placed upon its agent, Eddie Ray.

 II. DID THE TRIAL COURT ERR IN DISREGARDING MALTA'S CLAIM THAT COVERAGE WAS ONLY TENTATIVE UNTIL APPROVAL BY MALTA ITSELF?

 Malta argues, in essence, that credit life coverage on the April, 1983 loan was tentative, that Ray made it clear to Washington that he would not be covered until Ray could get approval from Malta for the excess amount of coverage. Ray testified at trial that he discussed with Washington that there would be some difficulty in getting coverage on the loan. According to Ray, Malta would have to be offered some" enticements "before they would place the coverage. *fn2 The fallacy of the argument that coverage was only tentative is

 obvious, in view of the fact that a certificate of insurance was issued to Washington. This certificate was not merely a conditional receipt. It was a policy of insurance. It stated:

 In consideration of premiums received, MALTA LIFE INSURANCE COMPANY hereby certifies that under and subject to the terms and conditions of a Master Creditor-Debtor Insurance Policy issued to the Creditor named herein, the above named are insured against death.

 Although under the terms of the policy Malta had the right to cancel the policy within thirty days after written notice of the granting of the insurance, Washington was covered until such time as the policy was cancelled. Malta did not cancel the policy prior to Washington's death. It attempted to deny coverage, however, after his death. The chancellor correctly found that Malta could not cancel the policy after Washington's death. As this Court stated in Gulf Guaranty Life Insurance Company v. Middleton, 361 So. 2d 1377 (Miss. 1978):

 To relieve [the insurer] of liability on this policy would equate the facts hereof to a life insurance policy good and enforceable if the insured ...


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