Patterson v. Equitable Life Assurance Society

Wood, J., (after stating the facts). The court did not err in directing a verdict for the amount mentioned in the statement. The facts as set forth in the agreed statement are undisputed. Under the provisions of the contract of insurance, upon the failure of Patterson to pay the premium within the time allowed, his contract of insurance was not wholly forfeited, but he had the following rights, towit: (a) To have the policy reinstated at any time upon evidence of good health satisfactory to appellee, and by paying any indebtedness due the company, with interest thereon at 5 per cent; (b) to surrender the policy for its cash value, $426, which was the amount of his loan; (c) to have a paid-up term policy for the full amount thereof (subject to be reduced by any indebtedness due the company), for a period of twelve years and eight months, upon satisfactory evidence of good health; or, (d) to have a paid-up policy without any action whatever on his part, in the sum of $900, subject to the loan. He did not avail himself of any of the rights that he had which required affirmative action on his part, and therefore at his death the only right remaining was that by which, without any action on his part, and by virtue of the automatic or self-executing provision of the policy, he was to receive paid-up insurance, which, under the table of values made a part of the policy, amounted to the sum of $900, out of which, under the terms of the policy, the loan from the company to him had to be paid. Appellant contends that the letters written by the appellee on July 10 and July 23; 1912 (notifying the insured that unless the loan was paid, the policy would be entered upon its records as a purchased policy, and the cash value applied in payment of the loan, and that in default of payment of the loan after notice, that the policy had been entered on the records as a purchased policy),' were sufficient to warrant the jury in finding that the payment of the premium had been waived, and that the policy was in full force at the time of the assured’s death for the full amount thereof. But this contention can not be sustained for several reasons. Even if the insured had been alive, as appellee supposed he was at the time these letters were written, there is nothing in the letters that tends to show, or that would warrant a jury in finding, that the appellee at that time was recognizing the contract of insurance as in force for the full amount thereof. These letters were in regard to the payment of the loan from appellee to the insured, which was then past due. The letters had no reference whatever to the restoration and continuing of the policy of insurance for the full amount thereof, but they only had reference to the payment of the loan by applying thereto the cash value of the policy. This, under the terms of the insurance contract, the appellee had the right to do. The appellee had already notified the insured, as the letters in the agreed statement of facts show, that the policy and all payments thereon had become forfeited and void, except as to a surrender or paid-up value. The letters written after the assured’s death had reference only to the paid-up or cash value of the policy, a value which it had, even after the right to recover the full amount thereof had been forfeited on account of the nonpayment of premiums. These letters did not disclose any intention on the part of the appellee to treat the policy of insurance as in force for the full amount thereof notwithstanding the failure upon the part of the insured to pay the premium. Furthermore, the death of Patterson fixed the rights of the parties to the insurance contract as they existed at that time, and any letter written by the appellee after Patterson’s death, and without knowledge thereof, and addressed to him as though he were living, could not be considered as a waiver of appellee’s rights under the insurance contract as they existed at the time of Patterson’s death. At the time of the death of the insured, by reason of the nonpayment of the premium, the policy had lapsed and he had been advised thereof, and only certain rights which involved affirmative action on his part remained to him, and of which he had not availed himself, and his death left only the right, by the very terms of the contract, to a paid-up policy of insurance for $900. The appellee, at the time of writing the letters, being ignorant of the death of Patterson, could not waive its rights fixed by his death, even if the letters would have otherwise constituted a waiver. There can be no .such thing as a waiver of rights without knowledge of the facts upon which such rights are based. As was said by us in Planters Mutual Ins. Co. v. Loyd, 67 Ark. 588, “When the insurer, with knowledge of any act on the part of the assured which works a forfeiture, enters into negotiations with him which recognize the continued validity of the policy, * * * the forfeiture is waived. But, if, at the time of such negotiations, the insurer is ignorant of the forfeiture and of the misstatement which causes it, no waiver can be implied.” Capital Fire Ins. Go. v. Shear-wood, 87 Ark. 326. After the death of the insured, waiver of the rights of appellee had passed, except such as might have been made based upon a knowledge of his death. There is no fact in the agreed statement of facts that would constitute a waiver of the right which appellee had under the provisions of the policy to declare that the policy and all payments thereon had lapsed and forfeited to the appellee except the right to a paid-up policy for a certain amount, which was fixed by the terms of the policy. Where a policy contains a mandatory provision for forfeiture and the insured has failed to comply with it, a forfeiture of the rights based upon such compliance results, and the courts must so declare. It is not within their province to make contracts for parties. The rule of law, based on such mandatory provision in a policy, is stated by Mr. Cooley in his Briefs on the Law of Insurance, vol. 3, p. 2277, as follows: “As a general rule, an insurance company is not required to declare a forfeiture on an insured’s failure to comply with a provision making a policy void on insured’s failure to pay a premium or premium note when due in order that the forfeiture shall he available to the company.” This court has invariably followed that rule, and it is the prevailing rule generally in this country. Jefferson Mutual Ins. Co. v. Murry, 74 Ark. 507; Fidelity Mutual Ins. Co. v. Bussell, 75 Ark. 25; Aetna Life Ins. Co. v. Ricks, 79 Ark. 38; Wells v. Union Central Life Ins. Co., 81 Ark. 145-7; American Ins. Co. v. Hornbarger, 85 Ark. 337; Citizens National Life Ins. Co. v. Morris, 104 Ark. 288; Lenon v. Mut. Life Ins. Co., 80 Ark. 563. See, also, the authorities from other jurisdictions cited in the brief of counsel for the appellee. The rule is different, however, “where the policy merely provides that on insured’s failure to pay the premium within a specified time after it becomes payable, the company shall be at liberty to cancel it without further notice.” In such cases “the policy does not become void merely by nonpayment of the premium, but remains in force until affirmative action is taken by the company to cancel it.” Cooley’s Briefs on the Law of Insurance, vol. 3, p. 2278, and cases cited. See Lenon v. Ins. Co., supra. The latter doctrine has no application to the facts of this record, for here the policy contained the mandatory provision, “This policy shall lapse, and, together with all premiums paid thereon, shall forfeit to the society on the nonpayment of any premium due, except,” etc. Upon the nonpayment of the premium, under the above provision of the policy, the same ipso facto became forfeited except as therein provided. The court did not err in directing a verdict. The judgment based thereon is affirmed.