Farmers' & Merchants' Bank v. Metropolitan Life Insurance

The opinion of the Court was delivered by Mr. Chief Justice Watts. This is an action on two life insurance policies, and grows out of the following undisputed facts: The insurance company issued to one Brown Pressley on April 24, 1922, two policies of insurance on his life for $1,000 each. The policies were immediately transferred and assigned to the plaintiff bank with the company’s consent indorsed upon each policy. The first premium and all other premiums were paid by the bank. In fact, the bank took the policies on the life of Brown Pressley and handled the matter from the beginning with the company. *94 The annual premiums were due on April. 24 of each year, and the policies provided for 31 days of grace. The premiums were always paid by plaintiff promptly, within the days of grace, until T926. When the premium was due in 1926, the cashier of the bank happened to be away, and it was not forwarded until May 27, 1926, two days after the grace period had expired, or three days counting the 27th of May, on which day the bank sent checks to the defendant to pay the premiums. No receipt was forwarded to plaintiff for the payment, and on June 11, 1924, the bank wrote the defendant inquiring for the receipts. The defendant answered this letter on June 14, as follows, still retaining the checks: “In response to your letter of June 11th, we beg to advise that we received the premiums after the grace period expired, and it was necessary for us to get a health certificate completed by the insured. We sent the certificates to him but he failed to return them to us. We are sending same to you, and will thank you to have him answer questions 1, 2, 3, 4 and 5, sign and have his signature witnessed and return them to us.” It will be noticed that the defendant required Pressley only to sign the certificates; no examination was requited. The plaintiff then looked for Pressley, the insured, to comply with the request, and continued its search up until July 7, 1926, when it received the following letter: “Some time ago you sent us two checks for $53..90 each in payment of the April 24th premium on the above-numbered policies. As the grace period had expired on these policies, it is necessary that we get satisfactory health certificates completed by the insured, but up to the present we have been unable to get them. We sent to the insured but he failed to complete and return them, and we also sent two of these forms to you and you have not returned them to us either. As we cannot revive these policies until we get the health certificates completed, we are returning the checks to you herewith. As soon as you are able to get these forms completed, return them to us with the checks.” This letter, while returning the *95 checks, advised plaintiff to return them with the certificate as soon as it was completed. Nearly three months had expired from the due date, April 24th to July 7th, when this letter was written returning the checks. The plaintiff continued its search and had the agent of the insurance company assist. The record shows a continuous search from that time up until October, when it was learned that Pressley had died. Proof of death was made, and the company refused to pay, except $331.72 which it tendered in full satisfaction. Four premiums had been paid, and under the terms of the policy extended insurance for the full amount attached for three years and two months from April 24, 1926. Pressley died within six months. He had three months after lapse to elect, and failing, the • company claimed the right to elect for him, under the following provision: “If the owner shall not, within three months from due date of premium in default, surrender this Policy to the Company at its Home Office, for a cash surrender value or for endorsement for paid-up insurance, or term insurance as provided in the above options, the policy shall be continued for a reduced amount of paid-up insurance as provided in the second option.” The plaintiff contended that the company, in effect, extended this time for'election by its actions, until it was determined whether Pressley could be reinstated, and misled plaintiff until the period for election had expired. Or, in legal terms, waived the provision as to election, and was es-topped by its conduct from taking advantage of it. The jury solved these issues in favor of plaintiff and rendered a verdict for plaintiff for the amount due on the policies. From this judgment the defendant appeals on several exceptions, alleging error: First, in failure to direct verdict in its favor; second, in the charge as to waiver; third, as to the admission of testimony, and, fourth, as to the refusal of new trial. We do not see any error in not directing a verdict for appellant, as complained of by the exceptions. The appellant *96 knew the respondent held an assignment of the policies; they had made the proper assignments on the policy. The respondent gave a check for the insurance and asked for receipts ; the appellant did not answer these requests for some time; notified the insured and did not notify the respondent, although they knew the respondent owned the policies and was trying to locate the insured. The action of the appellant misled the respondent, and for that reason the respondent did not select and exercise the option allowed by the policy within three months; his Honor was clearly right in leaving the jury to find whether or not this was waiver. It can be inferred from the evidence that no option was to be exercised until reinstatement was passed upon. We see no1 error as made by the exceptions. The facts of this case show clearly that the position of the insurance company, in undertaking to reduce its policy by reason of a condition which it brought about itself, is one that ought not to be countenanced by the Court. It is undertaking to destroy its contract, after it led the bank into a position where it did not exercise its rights under the policy. This was caused, as is shown clearly by the record, by the conduct of the company. Its purpose at the time was good and fair, but in the end it used it to defeat the very purpose which both parties had in view. Exceptions are overruled, and judgment affirmed. Messrs. Justices Beease, Stabler and Carter concur.