The South Carolina Court of Appeals has concluded that an authorization to an insurance company to draft premium amounts from a checking account was insufficient consideration to form a contract for life insurance. Boyd v. Liberty Life Insurance Company and SelectQuote Insurance Services (Ct. App. Op. 4985, June 13, 2012)
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Boyd sued SelectQuote and Liberty Life for breach of contract, bad faith and negligent representation. The Court of Appeals affirmed the circuit court’s grant of summary judgment to Liberty Life and SelectQuote on the ground that no valuable consideration existed to form a contract because Boyd had not paid the premium. Boyd contended the tender of a voided check and written authorization to draft his checking account was sufficient. The record did not contain any evidence that Liberty Life’s approval of Boyd’s insurance application constituted an agreement by Liberty Life to accept the tender of the voided check and authorization to draft his checking account as absolute payment of the premium. In the absence of an express or implied agreement to the contrary, a check does not constitute payment unless it produces payment in cash. Additionally, Boyd had submitted the voided check and bank authorization as part of the application process two months before the premium amount was finalized. As a result, neither specified the amount of the premium. The court cited Holmes’ Appleman on Insurance for the proposition that the insured’s authorization of his bank to deduct the amount of the premium from the account does not satisfy the insured’s obligation where no payment was actually made by the bank to the insurer. The Court also referred to Alabama case law, Haupt v Midland Nat’l Life Ins Co 567 So.2d 319 (1990) for a holding that an appellant’s choice of the automatic withdrawal method of payment did not relieve him of his duty to pay the premium.
Boyd also argued the SelectQuote agents misquote of the $417.00 was binding on Liberty Life because SelectQuote acted as Liberty Life’s agent. The Court of Appeals rejected the argument, holding that communicating a premium amount to a prospective insured does not convert an insurance broker into an insurance agent. Moreover, Liberty Life did not approve Boyd for the non-smoker rate mistakenly quoted by the agent. An insurance broker cannot be converted into an agent of the insurer without evidence creating an inference that he was acting at the “instance or request” of the company.