## Facts

- On May 29, 1890, Forrest L. Kendall applied for a $10,000 life-insurance policy from Pacific Mutual Life Insurance Company through its local soliciting agent in Grand Island, Nebraska, Limback.
- Limback was authorized to solicit applications and collect premiums, but had no authority to make or agree to make contracts of insurance for Pacific Mutual.
- Kendall’s written application stated that only home-office officers could decide whether to issue a policy and that no statements or information given to or by the soliciting agent would bind the company unless reduced to writing in the application and presented to the home office.
- The application further provided that there would be no contract of insurance until (1) a policy was issued, (2) delivered by the company, and (3) the first premium was paid, all while Kendall was living and in the same health described in the application.
- Limback agreed to accept $10 of the first quarterly premium in trade at Kendall’s store; Kendall agreed to pay the remaining $59.90 when the policy was delivered.
- On June 3, 1890, Kendall drowned and died.
- Pacific Mutual’s home office received the application on June 6, 1890.
- On June 7, 1890, Pacific Mutual’s medical director approved the application without knowledge of Kendall’s death.
- On June 9, 1890, after learning Kendall had died, Pacific Mutual refused to issue a policy; no policy was issued or delivered.
- On June 30, 1890, Paine, as representative of Kendall’s estate, tendered the remaining $59.90 to Limback; Limback refused, offering instead to return $10, which Paine refused.
- Paine filed a bill in equity seeking specific performance of the alleged insurance contract and recovery of the $10,000 amount; the circuit court dismissed the bill, and Paine appealed.

## Issues

1. Whether a contract of life insurance arose when the application stated there would be no contract until a policy was issued and delivered and the first premium paid while the applicant was alive and in the same health.
2. Whether Pacific Mutual’s internal approval of the application at the home office, without issuance or delivery of a policy and without premium payment during Kendall’s life, constituted acceptance creating a binding contract.
3. Whether the local soliciting agent’s arrangements about premium payment (including accepting part in trade) could bind the insurer despite express written limits on the agent’s authority.

## Decision

- The Eighth Circuit affirmed the dismissal of the bill.
- No contract of insurance was made because the application’s stated conditions—policy issuance, delivery, and payment of the first premium during Kendall’s life and continued good health—never occurred.
- Home-office medical approval, without issuance or delivery of a policy and without satisfaction of the stated payment-and-life conditions, did not create coverage.
- The soliciting agent’s side arrangements could not create a contract contrary to the application’s express limits on agent authority and on when coverage would begin.

## Legal Principles

- When an insurance application provides that no contract exists until a policy is issued and delivered and the first premium is paid while the applicant is living and in the stated health, those terms are conditions that must occur before coverage begins.
- An insurer’s internal review or medical approval of an application is not, by itself, a completed contract when the parties have made issuance and delivery of a policy and premium payment prerequisites to any insurance obligation.
- A soliciting agent who lacks authority to make insurance contracts cannot bind the insurer by oral assurances or payment arrangements that conflict with express written terms signed by the applicant, especially where the application states such statements are not binding unless included in the written application submitted to the home office.
- Equity will not decree specific performance where the evidence shows no insurance contract was formed under the parties’ written conditions.

## Conclusion

Because Kendall’s application stated that no insurance contract would exist until Pacific Mutual issued and delivered a policy and Kendall paid the first premium while alive and in the same health, and Kendall died before any policy issuance, delivery, or qualifying premium payment occurred, the court held there was no contract to enforce and affirmed dismissal of Paine’s suit for specific performance.


Paine v. Pacific Mutual Life Insurance Co., 51 F. 689 (1892)