Rhodes v. Royal Union Mutual Life Insurance

Opinion by Rice, P. J., The first question to be considered is as to the effect of the giving and acceptance of, and the failure to pay at maturity, the thirty days’ note for the third annual premium which fell due on March 18, 1909. The note contained the express agreement that time of payment was of the essence of the contract, that the note was to be accounted simply as an extension of time for payment of the third annual premium, and that if the note was not paid at maturity, with interest, all liability under the policy by reason of the note should cease. The application for the policy contained a similar agreement on the part of the insured as to any note or obligation given for premiums, and the policy declared that it was issued in consideration of the declarations, answers, and agreements made in the application, and of the payment of the premium on March 18 of each year, and that a failure to make such premium payment should work a forfeiture of all insurance and right under the policy. In view of these agreements the question above stated is free from difficulty. The time for payment of the premium was extended by the giving and acceptance of the note, but liability on the policy ceased, without any affirmative action on the part of the insurance company, upon the failure to pay the note at maturity. This was the express and unambiguous agreement of the parties, and such agreements have been sustained and enforced in numerous cases: Kerns, Ad — 239 — ministratrix, v. N. J. Mut. Life Ins. Co., 86 Pa. 171; Seeley v. Union Central Life Ins. Co., 10 Pa. Superior Ct. 270; Thompson v. Knickerbocker Life Ins. Co., 104 U. S. 252; Iowa Life Ins. Co. v. Lewis, 187 U. S. 335; Hudson v. Knickerbocker Life Ins. Co., 28 N. J. Eq. 167; Baker v. Union Mut., 43 N. Y. 283; Holly v. Metropolitan Life Ins. Co., 105 N. Y. 437. Allusion is made by appellant’s counsel to the evidence that when the policy was delivered (May 3, 1907) the insured gave his note, payable in three months, for the first premium, which was protested for nonpayment at maturity, and subsequently paid. The time and circumstances of payment are not stated. It may be assumed, however, that there was a waiver of forfeiture for nonpayment of that premium on the maturity of the note. But a single unexplained instance of acceptance of premium after it is due is insufficient to establish a “course of dealing” which justifies the insured in believing that the strict terms of the policy will not be insisted on in the future and therefore estops the company from taking advantage of subsequent defaults. The following extract from the opinion of Justice Bradley, in Thompson v. Knickerbocker Life Ins. Co., 104 U. S. 252, was cited with approval in Lantz v. Vermont Life Ins. Co., 139 Pa. 546, and may be pertinently quoted here: “The assured had no right, without some agreement to that effect, to rest on such voluntary indulgence shown on one occasion, or on a number of occasions, as a ground for claiming it on all occasions. If it were otherwise, an insurance company could never waive a forfeiture on an occasion of a particular lapse, without endangering its right to enforce it on occasion of a subsequent lapse. Such a consequence would be injurious to them and to the public.” See also Sydnor v. Metropolitan Life Ins. Co., 26 Pa. Superior Ct. 521. Moreover, the insured in the present case was notified on April 12, 1909, in writing, that the note would be due on April 18, 1909, and “to prevent lapse — 240 — of policy should be paid on or before that date;” also, that “the acceptance of any premium by the company after it becomes due .... is not to be construed as a waiver of the conditions of the policy as to future payments, nor as establishing a course of dealing between the company and the holder of the policy.” It is to be borne in mind, as was said in Holly v. Metropolitan Life Ins. Co., 105 N. Y. 437, and Seeley v. Union Central Life Ins. Co., 10 Pa. Superior Ct. 270, that, while courts do not favor forfeitures, they cannot avoid enforcing them when the party by whose default they are incurred cannot show some good and stable ground in the conduct of the other party on which to base a reasonable excuse for the default. Enough has been said to show that the default of the insured in the present case was not excused by a previous course of dealing. Keeping in view the terms of the note, application for insurance, and policy, which are above referred to, it is clear that the mere retention of the premium note after default in payment does not furnish ground for presuming or inferring a waiver of the conditions upon which it was given and accepted. Even the Kentucky cases, which go as far as any in that direction, do not go to the full extent, for in the case of Union Central Life Ins. Co. v. Spinks, 26 Kentucky L. R. 1205, s. c., 69 L. R. A. 264, where the earlier cases are cited, it was conceded by the court that the company may retain the note as evidence of its nonpayment. This, in our judgment, is all that can be inferred from the mere retention of the note. But it appears by the receipt of the local agent, dated April 26, 1909, that there was paid to him “five dollars ás part payment on his life insurance policy.” This money was remitted by the agent to the company, and the following indorsement was made on the note: “Extended sixty days. $5.00. May 10, 1909. “ Paid Four and 75-100 dollars and 25c int.” On June 7, 1909, the company gave the insured — 241 — written notice that his premium note would be due on June 18, 1909, “and to prevent lapse of policy should be paid on or before that date.” If the insured had died between the time of the above payment and June 18, the company’s indorsement on the note and the notice would be evidence against the company that the time for payment had been extended to the latter date. But the insured did not die until December following, and it is contended by appellant’s counsel that he had no knowledge of the indorsement on the note and therefore ought not to be affected by it. Let this be granted, still the plaintiff proved no agreement for any extension of time whatever, and the company’s notice of June 7 plainly informed him that the company claimed that there had been no extension beyond June 18. This being so, the plaintiff was not in position to ask the jury to infer that there was an extension beyond June 18. The insured had no right to act on the assumption that the mere payment of $5.00 to the agent had extended the time for payment of his premium indefinitely, in the face of the notice of June 7 and of the provision of the policy that agents “have no power to waive, alter, change or modify any of the conditions of this policy contract.” The testimony as to what occurred after June 18, 1909, remains to be considered. Mrs. Rhodes testified that in September Mr. Lynn, the agent through whom the insurance was effected, called at their home and said to her, her husband being absent: “I have a note which the company is dissatisfied with, and I want Mr. Rhodes to fix it up.” She says he also asked her whether she could fix it up, that is, pay it. To which she replied: “No, I could not now. Had you come to me first I could have paid it. After Mr. Rhodes comes home I will pay it, — fix it up.”- She also testified to the contents of a lost letter received by her husband in November, in which Mr. Lynn said: “The company is dissatisfied, and you will have to fix it up.” Being asked as to 'the contents of the company’s letter to — 242 — Mr. Lynn, which was inclosed in his letter to Mr. Rhodes, she testified: “They just notified Mr. Lynn, and he sent that notice; they notified him that they were dissatisfied! . . . They were dissatisfied with that note he had given. . . . Because they said it was not paid promptly.” Reference is also made by appellant’s counsel to the company’s letter written after proofs of death were furnished, as containing pertinent admissions. The material part of it is as follows: “The policy was issued March 18, 1907. The premium due 1908 was fully paid and receipt issued. For the 1909 premium the insured used coupon of $10.44, and gave his note for the net of $41.76. On May 10, 1909, $4.75 was paid by the insured on the principal and 25c paid on interest, and the balance of the note, $37.01, extended to June 18, 1909. No further payment was ever made on account of this note, and after repeated efforts to have the same paid and policy reinstated, the note was returned to this office and is now in our possession, same being unpaid, and by reason of this nonpayment, policy was lapsed.” It is argued correctly, that the foregoing evidence would sustain a finding by the jury that even after June 18 the company made repeated efforts, that is, repeated demands and requests, to have the note paid. But we are unable to agree with counsel that such finding would support the further inference that the company waived its right to insist on the conditions expressed in the note, application, and policy, or that the insured had- just and reasonable ground to believe they would not be insisted on. It is true, there are some cases in other jurisdictions which have gone so far as to hold that unsuccessful demand by the insurer that an insurance premium or a note given therefor be paid, is sufficient to waive the provision that the policy should be avoided for its nonpayment. But there are many other well-considered cases which hold that such unsuccessful demand will not waive the forfeiture of the — 243 — policy. The cases pro and con are cited in the note to lies, Admr., v. Mut. Reserve Life Ins. Co., 18 L. R. A. (N. S.) 902. They are too numerous to be reviewed here. But after deliberate consideration our judgment is that the latter is the better view. The insured was not put in any less advantageous position by these demands and requests for payment. No waiver or promise to waive was expressed, and the strongest inference he was justified in drawing from what was expressed was that, if he paid, the policy would be reinstated. He had no just and reasonable ground for inferring that it had been reinstated and would be in full force until the next annual premium fell due. Comment is made on the omission to prove that'he was notified that a forfeiture had taken place, and on the omission from the conditions of an express provision that the policy should become void upon nonpayment of the note at maturity. But neither of these things was essential. To agree that all liability under the policy shall cease or that the policy shall cease and determine, is quite as effective as to agree that the policy shall become void. Where either of these forms of expression is used, no affirmative action on the part of the company is necessary to give effect to the act or omission which it is agreed shall terminate its liability. This question was quite elaborately considered in Iowa Life Ins. Co. v. Lewis, 187 U. S. 335, and the doctrine there enunciated is recognized in some of the other cases above cited. The principle which we think applicable to this case is thus expressed in Lantz v. Vermont Life Ins. Co., 139 Pa. 546: "The consequence of a default in the payment of the premium is defined in the policy itself. It declares that, if not paid on the days named and in the lifetime of the insured, the policy should 'cease and determine.’ By this I understand that it is suspended; it ceases to bind the company and to protect the assured, and this without any act or declaration on the part of the former. It does not require a formal for — 244 — feiture. This term is often used, and I think, inaccurately, in such cases. Nor, is the policy void in the general sense of that term. It is voidable at the election of the company, and that election can be exercised without notice to the assured, for the reason that the policy itself is notice that his rights cease with the nonpayment of the premium. As to him it is a dead policy. It is true it may be restored to life, by the subsequent payment of the premium and its acceptance by the company. This, however, is a new contract by which the company agrees in consideration of the premium to continue in force a policy which had previously expired; in other words, it is a new assurance, though under the former policy: Want v. Blunt, 12 East, 183.” There remains to be noticed the letter of January 13, 1910, which was received after the death of the insured, in which the reinstatement department of the company said: “Don’t delay your intention of re-instating your policy. A sudden change of health might render it impossible for you to pass the medical examination. You will never be able to buy insurance at so low a cost as you can revive the policy you have just lapsed.” The insured died on December 20 preceding, and we cannot agree with counsel that the words, “the policy you have just lapsed,” amounted to an admission by the company that it was in force at his death. The judgment is affirmed.