## Facts

- On September 13, 1969, Larry L. Talbot submitted a written application for life insurance to Roy Melody, an agent for Country Life Insurance Company.
- Talbot sought a $15,000 policy on his life and named his wife, Suzanne Talbot, as beneficiary.
- Talbot paid the first premium at the time he applied.
- The amended complaint alleged that Talbot was in good health when he applied, remained in good health until his death, and was an insurable risk during the time the application was pending.
- Country Life received the application and premium but did not issue a policy, reject the application, or notify Talbot of any decision before he died.
- On February 19, 1970, Talbot died while the application remained unacted upon.
- On February 21, 1970, Country Life returned the premium and did not issue the policy.
- Suzanne Talbot sued Country Life and Melody in the circuit court, alleging that their unreasonable delay and failure to provide timely notice prevented Talbot from obtaining comparable coverage from another insurer.
- The circuit court dismissed the amended complaint for failure to state a cause of action, and Suzanne Talbot appealed.

## Issues

1. Whether an insurer that accepts a life-insurance application and first premium can be liable in tort for unreasonably delaying action on the application and failing to notify the applicant within a reasonable time, where the delay allegedly caused loss of the opportunity to obtain other insurance.
2. Whether a captive soliciting agent for the insurer can also be liable in tort for negligent delay in handling or transmitting the application when that delay allegedly contributed to the same loss.

## Decision

- The appellate court reversed the dismissal and remanded for further proceedings.
- The court held that the amended complaint stated a negligence claim against the insurer based on an alleged duty to act on the application, or reject it and give notice, within a reasonable time after receiving the application and premium.
- The court held that the amended complaint also stated a negligence claim against the agent, as pleaded, because an agent who undertakes to handle an application may be liable for misfeasance in performing that task, including unreasonable delay.
- The court accepted, at the pleading stage, the allegations that Talbot was insurable and that the delay and lack of notice caused harm by preventing him from seeking other coverage.
- The court rejected the idea that the absence of an issued policy automatically barred recovery, reasoning that the claim sounded in tort for negligent performance of an undertaking rather than in contract on an unaccepted offer.

## Legal Principles

- An insurance application is generally an offer; without acceptance, no insurance contract arises, but that contract rule does not foreclose tort liability for negligent handling of the application process.
- When an insurer accepts an application and premium, it undertakes a service to the applicant and must use reasonable care to act on the application (or reject it) and to notify the applicant within a reasonable time.
- Unreasonable delay and failure to provide notice can be negligent when it is foreseeable that delay may leave an applicant without protection or cause prejudicial delay in obtaining coverage elsewhere.
- A soliciting agent who is acting as the insurer’s agent (not as an independent broker for the applicant) may be liable for misfeasance in carrying out the tasks the agent undertook, including negligent delay in processing, transmitting, or following up on an application.
- A negligence claim based on such delay may proceed even though the applicant died before the insurer acted, where the pleading alleges resulting loss to the intended beneficiary tied to the defendants’ conduct.

## Conclusion

Talbot held that a widow’s amended complaint stated negligence claims against both a life insurer and its captive agent where they allegedly accepted an application and first premium, then unreasonably failed to act or give notice before the applicant died, thereby preventing him from seeking other insurance; the dismissal was reversed and the case remanded.


Talbot v. Country Life Insurance Company, 8 Ill. App. 3d 1062, 291 N.E.2d 830 (1973)