COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 59408 : ANTOINETTE J. MCKAY : : JOURNAL ENTRY Plaintiff-Appellant : : and -vs- : : OPINION : PRUDENTIAL INSURANCE CO. OF AMERICA: : Defendant-Appellee : : DATE OF ANNOUNCEMENT NOVEMBER 27, 1991 OF DECISION: CHARACTER OF PROCEEDING: Civil appeal from Common Pleas Court Case No. 162938 JUDGMENT: Reversed and Remanded. DATE OF JOURNALIZATION: __________________________ APPEARANCES: FOR PLAINTIFF-APPELLANT: FOR DEFENDANT-APPELLEE: ALAN J. RAPOPORT HOWARD E. COBURN 716 Keith Building 900 Park Place Cleveland, Ohio 44115 1111 Chester Avenue Cleveland, Ohio 44114-3516 -2- PATRICIA A. BLACKMON, J.: Antoinette McKay, plaintiff-appellant, timely appeals the granting of summary judgment by the trial court in favor of the Prudential Insurance Company of America, defendant-appellee. We reverse this decision based on the existence, as a matter of law, of genuine issues of material fact when viewing the evidence in a light most favorable to the appellant. Appellant, on or about August 1, 1988, received an application for reinstatement of her husband's, James McKay, Jr.'s, life insurance policy. The policy had lapsed for non- payment of premiums in December of 1987. As of the date of this policy lapse and thereafter, appellant lived separate and apart from James McKay, Jr. and was legally divorced from him. On August 9, 1988, Jim completed his part of the application for reinstatement and signed it. In the application, Jim included his annual physical examination of July, 1988, which was required by his employer. The results of the examination revealed that Jim's overall health condition was good. The record reflects that sometime between August 9, 1988 and August 12, 1988, appellant attempted to return the application for reinstatement along with a payment of back premium. Appellee, however, refused to accept the application at this time because appellant did not have all of the back premium owed. She was approximately Ninety-Nine Dollars and Sixty-Five Cents ($99.65) short of the premium owed. -3- On August 13, 1988 without appellant's knowledge, James McKay, Jr. was examined by another physician who recommended x- rays. The x-rays were taken on the same day, August 13, 1988. The results clearly suggested the possibility that James might have cancer. There is a conflict in the record as to when the application for reinstatement was returned to appellee. Appellant takes the position that the application was returned to appellee on August 23, 1988, along with the correct premium amount. Appellee states that the application and premium were received on August 25, 1988. Also, on August 25, 1988, James McKay, Jr. was examined by a Dr. Kilroy who ordered his admission into the hospital for additional diagnostic testing. On August 27, 1988, Mr. McKay was admitted to the hospital. The results of the diagnostic testing revealed that he was suffering from terminal brain and lung cancer. Appellant learns of the cancer on August 29, 1988. Mr. McKay was discharged from the hospital on September 7, 1988. On September 22, 1988, Mr. McKay was notified that he was to undergo an examination at the request of appellee. An examination was conducted on October 6, 1988 and Mr. McKay informed the examining physician of his terminal illness. Appellee notified both James McKay, Jr. and appellant in writing on November 23, 1988 that the application for reinstate- ment was rejected. Subsequently, appellee attempted to return -4- all of the monies tendered in connection with the application for reinstatement. Appellant has refused to accept the refund. On October 1, 1989, James McKay, Jr. died of cancer. On November 6, 1989, an application for payment of benefits was submitted to appellee by appellant. Appellee has refused payment based on a determination that the policy lapsed December 28, 1987 and was never reinstated. The underlying lawsuit followed, wherein appellant sued appellee requesting a declaratory judgment that the policy was in full force and effect. Appellant's first and second assignments of error state: IT WAS REVERSIBLE ERROR FOR THE TRIAL COURT TO GRANT SUMMARY JUDGMENT AGAINST THE OWNER OF A LIFE INSURANCE POLICY WHEN THE INSURANCE COMPANY WAS BOUND BY THE TERMS OF ITS CONTRACT WITH THAT OWNER TO MAKE A FAVOR- ABLE DETERMINATION OF INSURABILITY FOR PURPOSES OF REINSTATEMENT BASED SOLELY UPON THE REPRESENTATIONS CONTAINED IN THAT COMPANY'S OWN APPLICATION FORM. EVEN IF "GOOD HEALTH" IS A LEGITIMATE LEGAL ISSUE, IT WAS REVERSIBLE ERROR FOR THE TRIAL COURT TO GRANT SUMMARY JUDGMENT WHEN THE EXISTENCE OR NON-EXISTENCE OF "GOOD HEALTH" REMAINED AN ISSUE OF FACT WHICH COULD NOT THEN BE DECIDED. The original contract of life insurance in this case enumerated certain express conditions that had to be met for reinstatement. They are as follows: Reinstatement. -- You may reinstate this contract after the days of grace of a premium in default. All these conditions must be met: 1. Premium payments must not be in default more than three years. -5- 2. You must not have surrendered the contract to us for its cash value. 3. You must give us any facts we need to satisfy us that the insured is insurable for the contract. 4. We must be paid all premiums in arrears with compound interest at 6% a year. We may set a lower rate for any period in which there are arrears. 5. Any contract debt must be restored or paid back with interest to date at the rate or rates which we state for reinstatement under Loan Interest Rates. If that debt with interest would exceed the loan value of the reinstated contract, the excess must be paid to us before reinstatement. Example: Suppose a premium due May 1st is not paid on time. The contract will stay in force until June 1st whether the premium is paid or not. If the premium is not paid by June 1st, you must meet all the above conditions if you want to reinstate the contract. Reinstatement of the contract will reinstate the Economatic Benefit. But this will be so only if both of these statements apply: (1) You have not surrendered any dividend additions. (2) The Benefit was in effect all through the days of grace of the premium in default. Embodied in the actual application form for reinstatement, there is some additional language that states: The contract will not be reinstated until: (1) we are paid the full amount needed to do so; and (2) we approve this application. If we do not approve the application, any payment made with it will be returned. But if it is approved, the application will become incontestable at the end of the same period after reinstatement and with the same conditions and exceptions stated in the contract. The contract, at issue in this case, poses several problems with respect to definiteness or certainty. Based on our review of the contract and the surrounding circumstances, we must conclude as a matter of law that genuine issues of material fact -6- exist as to what constitutes approval of the application for reinstatement, especially when viewing the evidence in a light most favorable to the appellant. If the terms employed by the parties, though intended for a contract, are so incomplete or ambiguous that, after applying to them all the help which the rules of interpretation afford and permit, they are still so uncertain that what the parties mutually assented to can not be ascertained, the consequence is the same as when there is no assent; there is no contract. Monnett v. Monnett (1888), 46 Ohio St. 30. One of the most satisfactory tests for the ascertainment of the true meaning of a contract is for the court to place itself in the position of the contracting parties and view all the facts and circumstances surrounding them to determine what was meant by the phrases and words of the instrument. Peebles v. Prudential Insurance Co. (1940), 110 F.2d 76. A fundamental and frequently applied general rule of construction is that if there is doubt or ambiguity in the language of a contract the document is to be construed strictly against the party who prepared it or selected its language and in favor of the party who took no part in its preparation or in the selection of its language. He who speaks should speak plainly or the other party may explain to his own advantage. McKay Machine Co. v. Rodman (1967), 11 Ohio St. 2d 77; 18 O. Jur 3d Section 149. -7- The contract or application for reinstatement contained certain enumerated express conditions that had to be met for reinstatement. Appellant clearly met conditions one, two, four, and five. Condition three, by its express terms, clearly refers to facts in the knowledge and possession of the applicant. Based on the record, this condition was complied with by appellant. Appellant was not aware of the x-ray results when she returned the application for reinstatement and the premium to appellee. The interpretive notes of the x-rays suggest that if Mr. McKay's condition did not resolve, that additional testing may be necessary to exclude lung cancer. Appellant raises a valid argument as to the ambiguity of the term insurable. Does the term insurable mean in good health, or more specifically, good health at the time the application for reinstatement is submitted or at the time it is approved? In viewing of the surrounding circumstances, appellant gave them all of the facts within the knowledge of her and Mr. McKay, at the time the application was submitted. Further, the insured person, Mr. McKay, had every reason to believe that he was in "good health" at the time the application was submitted. The application was submitted to appellee on either August 25, 1988 or August 27, 1988, depending on which party is believed. Mr. McKay did not go to the doctor again until August 25, 1988 and was not diagnosed with cancer until August 27, 1988. -8- Because of the ambiguity and lack of certainty as to the meaning of "insurability", we are bound to interpret the term most favorably to appellant. In so doing, we must find that the appellant and Mr. McKay gave appellee all the facts in their possession to satisfy appellee that the insured was insurable for the contract. Consistent with the rule of construction regarding inter- pretation most favorable to appellant, there is no express language of "good health" contained in the contract that would make good health a condition precedent to insurability. Therefore, if we interpret insurable to mean "good health", we must conclude that at the time of the submission of the applica- tion that Mr. McKay was in "good health", and thus insurable at the time. This raises the second issue of ambiguity in the contract requiring us to interpret the terms defining approval of the application in a light most favorable to appellant. There are two conditions on the face of the application that had to be fulfilled prior to the contract being reinstated. The first is that the appellee be paid the full amount to do so. The second is that appellee approve the application. The ambiguity is embodied in the fact that acceptance of the application and the back premiums, according to appellee, are merely a conditional receipt, contingent upon the satisfaction of other conditions, for example an independent medical examination. The contract is void of any such conditional receipt language. -9- Furthermore, the record is void of any evidence that such a conditional receipt was tendered to the appellant at the time that the money and the application were accepted. It thus becomes a genuine issue of material fact as to whether appellee's acceptance of the premium and the application, constitutes approval of the application for reinstatement and, therefore, the responsibility of coverage for the life of James McKay, Jr. Appellee can argue that the application was merely accepted and not approved. Appellant can argue that all of the conditions expressed in the contract were met and that she was never informed that the receipt of the application and her premium were conditional. Appellant's argument is especially persuasive when, as a matter of law, a court is bound to construe such an ambiguity in favor of the appellant. Appellee failed to clearly and expressly include in the contract the conditional receipt of the premium and application for reinstatement. The term "we approve the application" is vague, indefinite, and ambiguous and, there- fore, appellant is entitled as a matter of law to the more favorable construction. We, therefore, hold that where the following facts are present: 1) the insurance company accepts the delinquent premium payments, 2) accepts the application for reinstatement, 3) the insurance company retains the delinquent premium payments and interest for two months, 4) the contract provisions contain no -10- language that the receipt of the delinquent premiums and the application are conditional and do not constitute approval of the application for reinstatement, 5) there is no conditional receipt given to the applicant upon acceptance of the back premiums and the application for reinstatement, a genuine issue of material fact exists, which is whether the insurance company approved the application, especially where the court is duty bound as a matter of law to construe the ambiguity in a light most favorable to the applicant who is the non-drafting party. The same rationale applies to the ambiguity associated with the term insurable, or good health, which appellee would argue. The term is not expressly defined within the contract. A genuine issue of material fact exists because the issue is whether good health is either synonymous with or a condition precedent to liability. Because this ambiguity was not created by appellant, a court is duty bound, as a matter of law, to construe the ambiguity most favorable to the non drafting party, appellant. Accordingly, this cause is remanded to the trial court for further proceedings consistent with this opinion. Judgment reversed and remanded. -11- This cause is reversed and remanded. It is, therefore, considered that said appellant recover of said appellee her costs herein. It is ordered that a special mandate be sent to said Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions. FRANCIS E. SWEENEY, J., CONCURS.; KRUPANSKY, C.J., DISSENTS. (SEE ATTACHED DISSENTING OPINION) PATRICIA A. BLACKMON JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof this document will be stamped to indicate journaliza- tion, at which time it will become the judgment and order of the court and time period for review will begin to run. COURT OF APPEALS OF OHIO EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 59408 : ANTOINETTE J. McKAY : : : D I S S E N T I N G Plaintiff-Appellant : : O P I N I O N vs. : : PRUDENTIAL INSURANCE COMPANY : OF AMERICA : : : Defendant-Appellee : : DATE: NOVEMBER 27, 1991 KRUPANSKY, C.J., DISSENTS: I respectfully dissent from the majority opinion for the following two reasons: (1) the majority opinion fails to address the first argument raised by appellant, and, therefore, fails to resolve the issue involved; and (2) the majority opinion "creates" ambiguity in the contract where there is none. In her first assignment of error, which is not adequately addressed by the majority opinion, plaintiff argues the trial court erred in granting summary judgment for defendant because defendant was bound by the terms of the insurance policy and R.C. 3911.06 to grant the reinstatement. This argument is not persuasive. In the case sub judice, the trial court ruled pursuant to Civ. R. 56, which states in relevant part: -2- (C) Motion and Proceedings Thereon. *** Summary judgment shall be rendered forthwith if the pleading, depositions, answers to interroga- tories, written admissions, affidavits, tran- scripts of evidence in the pending case, and written stipulations of fact, if any, timely filed in the action, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. No evidence or stipulation may be considered except as stated in this rule. A summary judgment shall not be rendered unless it appears from such evidence or stipulation and only therefrom, that reasonable minds can come to but one conclusion and that conclusion is adverse to the party against whom the motion for summary judgment is made, such party being entitled to have the evidence or stipulation construed most strongly in his favor. (Emphasis added.) Plaintiff argues Prudential was bound as a matter of law to make its determination of insurability based solely upon the answers given by decedent in decedent's application for reinstatement. She argues this based upon the language of R.C. 3915.05(D) and R.C. 3911.06. R.C. 3915.05 states in pertinent part the following: 3915.05 Policy provisions to be included. No policy of life insurance shall be issued or delivered in this state or be issued by a life insurance company organized under the laws of this state unless such policy contains: (D) A provision that all statements made by the insured in the application shall, in the absence of fraud, be deemed representations and not warranties; Further, R.C. 3911.06 provides the following: 3911.06 False answer. No answer to any interrogatory made by an applicant in his application for a policy shall bar the right to recover upon any policy issued -3- thereon, or be used in evidence at any trial to recover upon such policy, unless it is clearly proved that such answer is willfully false, that it was fraudulently made, that it is material, and that it induced the company to issue the policy, that but for such answer the policy would not have been issued, and that the agent or company had no knowledge of the falsity or fraud of such answer. (Emphasis added.) This court must initially note R.C. 3911.06 has no applica- tion to the case sub judice since Prudential never "issued the policy" within the meaning of the statute. Rather, Prudential expressly rejected the application for reinstatement. Plaintiff contends the language of R.C. 3915.05(D) and R.C. 3911.06, read together, create a duty on the part of the insurance company to base its determination of eligibility solely on the applicant's answers in the application. This court should not accept such a contorted interpretation. Plaintiff cites Rohde v. Massachusetts Mutual Life Ins. Co. (6th Cir. 1980), 632 F. 2d 667, in support of her contention. However, her reliance on that case is misplaced. The insured in Rohde received a "conditional receipt" from the insurance company; in reversing a lower court verdict for the company, the court of appeals noted the following: *** The defendant's liability under the contract represented by the conditional receipt does not depend on the defendant's subjective approval. Rather, the defendant promised to be liable for a covered loss if the application was qualified on the date his application was completed." 632 F.2d at 669. (Emphasis added.) In Rohde the issue determined by the court hinged on the company's bad faith. Therefore, since the company's actions -4- indicated bad faith, the parties had a contract on the date of the application; the express language of the contract was then controlling. This court, however, should refuse to extend the contract provision in the Rohde case to "stand for the proposi- tion that an application [for life insurance] is perfected when it is submitted," as plaintiff asserts. The other cases cited by plaintiff in support of her argument are similarly distinguishable from the case sub judice. A review of the policy reveals there is no clause in Prudential's application for reinstatement which automatically creates a contract between the parties as soon as the application is submitted to Prudential with the appropriate payment; in any case, plaintiff did not initially have the appropriate payment. Neither do the statutes cited by plaintiff cause this to occur. Metropolitan Life Ins. Co. v. Howle (1900), 62 Ohio St. 204. Rather, the express terms of the application for reinstatement are as follows: The contract will not be reinstated until: (1) we are paid the full amount needed to do so; and (2) we approve this application. If we do not approve the application, any payment made with it will be returned. But if it is approved, the application will become incontestable at the end of the same period after reinstatement and with the same con- ditions and exceptions stated in the contract. (Emphasis added.) Furthermore, plaintiff was put on notice Prudential might require more information regarding the insured's health before approving the application; decedent signed a medical authoriza- tion which appeared below the contract clause requiring approval -5- of the application before reinstatement and which stated the following: To: Any licensed physician, medical practitioner, hospital, clinic or like facility, insurance company or the Medical information Bureau, Inc. or other organization, institution or person. To determine eligibility for life insurance coverage, I authorize you to give the Company checked above and, through it, the Medical information Bureau, any data or records you may have about me or my mental or physical health. This also applies to any child on whom insurance is to be reinstated. (Emphasis added.) In making her argument based on R.C. 3911.06 and R.C. 3915.05(D), plaintiff ignores R.C. 3915.05(J), which is directly applicable to the case sub judice and states the following: No policy of life insurance shall be issued *** unless such policy contains: (J) A provision that if, in the event of default in premium payments, the value of the policy is applied to the purchase of other insurance, and if such insurance is in force and the original policy has not been surrendered to the company and canceled, the policy may be reinstated within three years from such default, upon evidence of insurability satisfactory to the company and payment of arrears of premiums with interest; Consequently, the original policy, pursuant to R.C. 3915.05(J), stated the following: Reinstatement. -- You may reinstate this contract after the days of grace of a premium in default. All these conditions must be met: 1. Premium payment must not be in default more than three years. 3. You must give us any facts we need to satisfy us that the insured is insurable for the contract. (Emphasis added.) -6- Thus, it can be seen Prudential could properly inquire into decedent's health before approving the application. The statute contains the discretionary words "the policy may be reinstated." Furthermore, the policy itself requires the insured to furnish facts to satisfy Prudential concerning his "insurability." Therefore, Prudential was not bound by the terms of its contract with the insured to make a favorable determination of insurability for purposes of reinstatement based solely upon the representations made in the application form. Thus, summary judgment was properly granted for Prudential on this issue. Metropolitan Life Ins. Co. v. Howle, supra. For the foregoing reasons, plaintiff's first assignment of error lacks merit and should be overruled. With regard to the majority opinion's view that an ambiguity existed in the language of the contract regarding the term "insurable," plaintiff raised that issue in her second assignment of error, which is expressed as follows: WHETHER SUMMARY JUDGMENT AGAINST PLAINTIFF- APPELLANT WAS CORRECTLY GRANTED WHEN A FACTUAL ISSUE EXISTED AS TO THE EXISTENCE OR NON-EXISTENCE OF "GOOD HEALTH" OF AN INSURED WITH RESPECT TO REINSTATEMENT OF A LIFE INSURANCE POLICY. Plaintiff argues the trial court erroneously determined decedent's "health" as a matter of law by granting summary judgment for Prudential. She contends the existence of "good health" cannot be determined as a matter of law. -7- In making this argument, plaintiff claims she has raised a genuine issue of material fact, viz., decedent's "good health" at some point in time. The majority opinion apparently accepts her argument. However, I do not find her argument persuasive. The standard for review of the granting of a motion for summary judgment was stated by the court in Petrey v. Simon (1984), 19 Ohio App. 3d 285: *** In reviewing a summary judgment, the inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion, and if when so viewed reasonable minds can come to differing conclusions the motion should be overruled. The reviewing court must follow the standard set forth in Civ. R. 56(C), which specifically provides that before summary judgment may be granted, it must be determined that: (1) No genuine issue as to any material fact remains to be litigated; (2) the moving party is entitled to judgment as a matter of law; and (3) it appears from the evidence that reasonable minds can come to but one conclusion, and viewing such evidence most strongly in favor of the party against whom the motion for summary judgment is made, that conclusion is adverse to that party. [Citations omitted.] (Emphasis added.) Civ. R. 56(C) permits the court to base its ruling on the stipulations of the parties. In the case sub judice, the majority ignores the record, wherein prior to the ruling on Prudential's motion for summary judgment, the parties stipulated the admissibility into evidence of the following items: (1) the original life insurance policy purchased by the decedent; (2) the fact of and date of the policy's lapse; (3) the date the application for reinstatement was submitted to Prudential which -8- was August 25, 1988; (4) the dates of decedent's medical visits regarding his terminal condition which began on August 13, 1988. Thus, the following facts were proven by Prudential, viz., (1) the policy required decedent furnish facts to satisfy the company he was insurable as a condition precedent to reinstatement of the contract; (2) the application for reinstatement had to be approved by Prudential before the renewed contract would take effect; (3) Prudential could obtain medical reports to determine eligibility for life insurance coverage; (4) decedent was aware of a problem with his health before the application for reinstatement was submitted to Prudential with the proper fee; (5) decedent was diagnosed with terminal cancer before his application for reinstatement was approved by Prudential. These facts were thus no longer in dispute. The majority opinion is correct when it asserts courts have strictly construed language in an insurance policy against the insurer. See, e.g., Gomolka v. State Auto Mutual Ins. Co. (1982), 70 Ohio St. 2d 166. However, the Ohio Supreme Court has also held that where a contractual term is not otherwise defined in the insurance policy and where no evidence is introduced to show the intended meaning of the term, the court will use the term's common, ordinary meaning. Olmstead v. Lumbermen's Mutual Ins. Co. (1970), 22 Ohio St. 2d 212. The common, ordinary meaning of the term "insurable" in a life insurance policy, as found in Webster's Third New Inter- national Dictionary, is "capable of being or proper to be -9- insured against death; affording a sufficient ground for insurance." In Ballentine's Law Dictionary, "insurability" as a condition of the reinstatement of a life insurance policy is defined as "good health; good health plus circumstances rendering the risk desirable from the standpoint of the insurance company." Further, "eligibility" is defined in Webster's Third New International Dictionary as "fitness, suitability, qualification." From the foregoing analysis, it is obvious Prudential could consider decedent "not insurable" prior to accepting the application for reinstatement because he was not in "good health." The courts have defined the term "sound health" as "the absence of disease that has direct tendency to shorten life." Washington Fidelity Natl. Ins. Co. v. Lacey (1933), 45 Ohio App. 104. Decedent's terminal cancer obviously did not meet the definition of "insurability." The evidence before the trial court in the case sub judice thus conclusively provide decedent was not in good or sound health before, during and after the application for reinstatement was submitted to Prudential. Prudential therefore had a con- tractual right to refuse to reinstate decedent's life insurance policy, which it exercised. There was thus no further contract between the parties once the policy originally lapsed for nonpayment of premiums. Accordingly, plaintiff's second assignment of error also lacks merit and should be overruled. -10- Based upon the uncontroverted evidence, there remained no genuine issue as to any material fact in the case sub judice. The trial court, therefore, properly granted summary judgment for Prudential. I would affirm the judgment of the trial court. .