Penn Mut. Life Ins. Co. v. Fiquett

BROWN, Justice. This is an action of assumpsit by the beneficiary named in an “ordinary life policy, annual dividend,'” issued by the defendant tp William Fiquett, on the 18th of September, 1916, in consideration of a premium of $57.90 paid on the date of the issuance of the policy, and an agreement to pay a like sum on each anniversary of the policy. The evidence is without dispute that the annual premiums were paid on the policy up to and including the premium due September 18, 1926, but the insured failed to pay the premium due September 18, 1927. On the date of the default in payment of the last-mentioned premium, there was an indebtedness of $26S.S4 due from the insured to the insurer, advanced as a loan under the loan clause of the policy. The policy had a cash surrender value, as of said last-mentioned date, of $365.34, and had accredited to it a dividend of $17.54, making the total cash value of the policy $382.88. The policy contained the following stipulations: “VI. Loans. After three full years’ premiums have been paid, the Company, at anytime while this policy is in force, will advance, on proper assignment and delivery of this policy and on the sole security thereof, and in accordance with Sections VIII and IX hereof, a sum which, with interest thereon to the end of the current policy-year, shall be equal to, or at the option of the owner less than, the cash value at the end of the said year, which cash value shall be the full reserve on this policy and on any dividend additions thereto according to the American Experience Table of Mortality with interest at 3 per cent. The amount of such advance shall be reduced by any existing indebtedness on this policy and any unpaid balance of the current policy-year’s premium. Interest on the advance will be at the rate of 6 per cent, per annum and shall be payable at the end of each policy-year, and this interest, if not paid when due, shall be added to the existing indebtedness, provided the total indebtedness would not then exceed the cash value, and the indebtedness thus created shall bear interest at the same rate. The indebtedness or any part thereof may be repaid ,to the Company at any time. Failure to repay any such advance or to pay interest thereon shall not void this Policy unless the total indebtedness hereon with interest shall equal or exceed the cash value at the time of such failure, in which case there shall be no liability under this Policy; provided, however that no such termination shall he effective until one month after notice shall have heen mailed hy the Company to the last-known address of the insured and of the assignee, if any, of record at the Some Office of the Company. All indebtedness on account of this Policy, with ac *205 crued interest, shall he deducted from any settlement hereunder. [Italics supplied.] “VII. Non-Forfeiture. If this Policy shall lapse through non-payment of premium after three years’ premiums have been paid, the Company will secure to the owner thereof a form of insurance, the net value of which shall be equal to the full reserve on this Policy and on any dividend additions thereto at the date of default, according to the American Experience Table of Mortality, with interest at 3 per cent., less any existing indebtedness to the Company on this Policy. At the end of the third and succeeding years the cash value is the full reserve, and the paid-up and extension values are the equivalents thereof. The .stipulated values of this Policy shall be correspondingly increased for any fractional portion of a year’s premium which has been paid. This nonforfeiture value shall be secured to the owner of this Policy through one of the following provisions: “First: — The automatic extension without participation of the net amount insured by this Policy for the number of years and days stated below, at the expiration of which time the insurance shall cease; or, “Second: — The issue of paid-up participating insurance payable at death for the sum provided for below upon written application therefor by the owner of this Policy and the legal surrender of all claims hereunder to the Company at its Home Office within one month after lapse; or, “Third: — The payment, in accordance with Sections VIII and IX hereof, of the cash surrender value provided for below on surrender of this Policy and all claims hereunder to the Company within one month from the date, of lapse. * * * “Should any indebtedness exist, it shall be deducted from the cash value of this Policy; the amount of the paid-up insurance shall be reduced in the same proportion as the cash value is reduced; or in case of lapse the extended insurance shall be for the face of this Policy less the indebtedness and for such a term as said reduced cash value will provide. “The cash value of any paid-up or extension granted upon the lapse of this Policy will be the full reserve at the time of surrender, less any indebtedness to the Company under this Policy, and will be paid to the owner thereof upon proper release.” The insured did not make written application for “paid-up insurance” under option “Second,” nor for payment of the cash surrender value as provided in option “Third.” The insurer, however, credited the cash value of the policy with the indebtedness, leaving a balance of $114.84 to be applied under option “First” to extended insurance. If, under 'the facts of this case, the stipulations of paragraphs VII and IX are applicable, the effect of these provisions, in the absence of efficacious exercising of one of the other options, was to automatically extend the insurance for a’ term of five years and twenty-six days, up to and including October 14, 1932. The insured died on April 28, 1933. Appellant’s contention is that under the facts of this case, as shown by the undisputed evidence, the policy lapsed on September 18, 1927, because of the failure of the insured to pay the annual premium then due, and in the absence of an election by the insured to exercise one of the other options, the stipulations contained in the first option automatically extended the insurance for the term of five years and twenty-six days, at the expiration of which the insurance under the policy ceased. The appellee, on the other hand, contends that under the terms of the contract expressed in paragraph VI, governing loans, that paragraph having been put in operation by the loan obtained thereunder by the insured, the insurance could not be terminated “until one month after notice shall have been mailed by the company,” as provided for in the italicized proviso -of paragraph VI, citing in support of this contention, Protective Life Ins. Co. v. Thomas, 223 Ala. 106, 134 So. 488. The cited case involved a paid-up policy, and the controlling question presented in that case was whether or not the insurer could successfully claim a forfeiture of the insurance without strict compliance with the loan agreement under which it claimed such forfeiture. The question of the lapse of the policy for nonpayment of premiums was not there involved. The notice stipulated for in the loan clause of the policy there, as here, related to the condition when the loan with accrued interest equals or exceeds the cash surrender value, and that situation is not presented in this case. The next contention of the appellee is that there is in the policy contract no provision for its termination in the event of nonpayment of premiums, and therefore paragraphs VII and IX were inoperative. This contention ignores the stipulation in the *206 “First” option, “at the expiration of which time the insurance shall 'cease.” (Italics supplied.) This stipulation is, of course, as much a part of the policy contract as is the agreement to pay the insurance, on due proof of death, and all that was necessary to put it in operation was the nonpayment of the annual premium when due and the failure of the insured to elect a settlement under one of the other options, within the time provided for such election. Meridian Life Ins. Co. v. Hobbs, 200 Ala. 487, 76 So. 429, L. R. A. 1918A, 904; Scheuer, Wise & Co. v. New York Life Ins. Co., 203 Ala. 127, 82 So. 157. In the absence of statute, stipulation in the policy contract, or established course of dealing, the insurer is under no obligation to give notice of lapse of the policy on nonpayment of premiums. Alabama National Life Ins. Co. v. Smith, 214 Ala. 585, 108 So. 524; Bach v. Western States Life Ins. Co. (C. C. A.) 51 F.(2d) 191. The next contention of appellee is that there was in the hands of appellant, after paying the loan, the sum of $114.84, available for the payment of premiums on the policy, and it was the duty of the insurer to apply this to the payment of premiums and prevent a lapse of the policy. To support this contention Equitable Life Assur. Soc. of United States v. Roberts, 226 Ala. 11, 145 So. 157, is cited. It is a sufficient answer to this contention that such application would have carried the policy for less than two years, and the death of the insured occurred in the sixth year after he failed to pay the premium due September 18, 1927. Another answer to this contention is, in the absence of an election by the insured to settle under the second and third options, the first option automatically applied the surplus of the cash surrender value to extended insurance, and this kept the policy alive, up to and including October 14,1932, when, according to the express provisions of the policy, it terminated. The death of the insured not having occurred within the life of the policy, the plaintiff was not entitled to recover, and the court erred in giving the affirmative charge in his favor, and in refusing a like charge requested by the defendant. For these errors the judgment is reversed, and the cause is remanded. Reversed and remanded. ANDERSON, O. J., and THOMAS and KNIGHT, JJ., concur. Footnotes [1] <&wkey;For other oases see same topic and KEY NUMBER in al'l Key Number Digests and Indexes