Megee v. United States Fidelity And Guaranty Company

391 A.2d 189 (1978)

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Nature of the Case

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Facts

On May 14, P, a self-employed contractor, filed an application for disability income insurance with D. The agent was Chandler T. McEvilly (D), an agent ofVertex Insurance Agency, Inc. (D). P choose not to remit the premium at the time because Vertex (D) could not assure P that he would qualify for coverage at the desired level under D's standard of eligibility. P preferred to withhold the first premium until he knew the specific amount of benefits provided by the policy. The application stated that the policy was only effective, by its terms, when the policy was issued, and the first premium was paid, or if the premium was paid with the application. D received the application on May 20 and forwarded it to its home office in Baltimore where it was received on May 21. A credit investigation was completed on May 25 and a physical examination of P was conducted on June 1. A policy was issued, dated June 1. The policy was sent from the Baltimore office to the Philadelphia office on June 2 and received there on June 4. It was received by Vertex (D) in Newark on Saturday, June 5. On that same day, P was accidently injured and has been unable to work ever since. Upon learning on Monday, June 7, that P was injured, McEvilly (D) asked D for instructions. D directed McEvilly (D) not to deliver the policy and not to accept the first premium. On June 10, P mailed a check for the first premium, but it was returned uncashed on June 30, with a letter declining coverage. P sued D for breach of contract and negligent failure to deliver the policy and included an action against Vertex (D) and McEvilly (D) for negligent failure to forward the application to D and negligent failure to deliver the policy to P. The court granted Ds' motion for summary judgment holding that, as a matter of law, no contract existed and there was no negligence on the part of the defendants. P appealed.