Equitable Life Ins. v. Germantown Trust Co.

THOMPSON, Circuit Judge. This is an appeal from a judgment of the District Court for the Eastern District of Pennsylvania. The appellee is the Germantown Trust Company, trustee under an insurance trust agreement of Pratt Thompson. The appellant is the Equitable Life Insurance Company of Iowa. In 1928 the appellant issued a policy insuring the life of Pratt Thompson in the sum of $5,-000. Premiums were paid annually until May 6, 1934, when the insured was in default. On June 29, 1934, fifty-three days after default, the insured died. The appellee brought suit to recover the face value of the policy. The appellant in its affidavit of defense denied that it was liable for the face amount of the policy. It alleged that on June 5, 1934, after the premiums were in default, the insured sent a written request to the appellant’s local office for the cash surrender value of the policy and it contended that this amounted to an election under the third option of the nonforfeiture provisions of the policy which are set out in full in the margin.1 The court below [899] held that this defense was not properly-pleaded in that the affidavit of defense set out the evidence which the appellant intended to produce and not facts. Thereupon, the appellant, in an amended and substituted affidavit of defense alleged that: “ * * * On or about the 5th day of June, 1934, the said insured, Pratt Thompson, executed a written request for the cash surrender value of said policy of life insurance and delivered the same to the office of the general agent for the defendant in Philadelphia, Pennsylvania, notifying the defendant that he desired to elect the option provided for in the non-forfeiture provisions of said policy to surrender the policy and receive the cash value thereof, less any existing indebtedness to the company on account of said policy. That the defendant is unable to set out a copy of said writing because the same has been lost or destroyed, but the said writing contained the request of the insured for the cash surrender value of said policy, as stated above.” The amended and substituted affidavit of defense was likewise deemed inadequate by the court below, which entered judgment for want of a sufficient affidavit of defense. The question is whether a written request, without more, amounts to an election of one of the options in accordance with the requirements of the policy to be construed. Omitting such portion of the nonforfeiture provisions as are irrelevant to this discussion, they read: “ * * * The insured may, upon written request, * * * elect * * * to have the policy continued as paid-up nonparticipating insurance of a reduced amount payable in one sum at the same time and under the same conditions as this policy. * * *” Option I. “ * * * Thg insured may, upon written request, * * * elect * * * to have the policy continued as non-participating paid-up term insurance for the face amount of the policy. * * *” Option II. “ * * * The insured may, upon written request, * * * elect * * * to surrender the policy and with die consent of any assignee and of any beneficiary whose interest is irrevocable, receive the cash value. * * * ” Option III. It will be noted that, whereas in the first two options the only requirement for the exercise of any election is that the insured send a written request, the third option includes, inter alia, the requirement that the insured surrender the policy. The affidavit of defense does not aver the surrender of the policy. Lipman v. Equitable Life Assur. Soc. of the United States, 4 Cir., 58 F.2d 15 and Pacific States Life Ins. Co. v. Bryce, 10 Cir., 67 F.2d 710, 91 A.L.R. 1446, relied upon by the appellant, are clearly distinguishable because the insured in those cases did, in fact, surrender the policy and do all that was rtecessary to elect the cash surrender value. In the instant case, under the averments of the pleadings, he did not complete his election because he never surrendered his policy. In our opinion the District Court correctly ruled that the pleadings did not set forth an election. As an alternative defense the appellant pleaded that if no election was made by the insured within sixty days from the date of default the policy was automatically continued as reduced paid-up insurance under option I. The nonforfeiture provisions contained in this policy are substantially the same as those in Jeske, Adm’x v. Metropolitan Life Ins. Co., 113 Pa.Super. 118, 172 A. 172, where the Pennsylvania appellate court applied the rights granted by the term insurance option. The court below, following the reasoning and conclusions in the Jeske Case, supra, held that the insured had sixty days after default within which to make the election; that the automatic continuance under option I did not take effect until after the expiration of the sixty days; that in the absence of an election and of the automatic continuance [900] under option I the court will apply the option most favorable to the insured or his beneficiary; and that term insurance for the face value of the policy under option II was the most favorable option in the instant case. We think the District Court properly followed the reasoning and conclusions of the Jeske Case, supra, and that it did not err in entering judgment for the appellee. The judgment is affirmed. Footnotes [1] Non-forfeiture Provisions After the payment of premiums for three full years, the insured may, upon written request, at any time before default in the payment of premium or within sixty days after such default, elect one of the following options: (I) Reduced Paid-up Insurance To have the policy continued as paid-up non-participating insurance of a reduced amount payable in one sum at the same time and under the same conditions as this policy. Such paid-up policy may be surrendered for its cash value, which shall be the full reserve at time of surrender less any indebtedness to the Company on account of such paid-up policy. (II) Extended Term Insurance To have the policy continued as non-participating paid-up term insurance for the face amount of the policy and any outstanding paid-up additions thereto less any indebtedness hereon to the Company, counting from the due date of the premium in default but without the right to loans. (III) Cash Surrender To surrender the policy and with the consent of any assignee and of any beneficiary whose interest is irrevocable, receive the cash value hereof together with the value of any existing paid-up addi [899] tions and less any existing indebtedness to the Company on account of this policy. In event of default in payment of premium if the insured elects none of the above options, the policy will be continued automatically under Option (I) unless the insured has filed at the Home Office of the Company while no premium is in default written request that the policy be continued under Option (II). The amount of the paid-up insurance under Option (I) or the term of the extended insurance under Option (II) shall be such as the cash value of this policy and of any existing paid-up additions, less any indebtedness hereon to the Company, will purchase as a net single premium on the basis of the American Experience Table of Mortality with interest at the rate of, three and one-half per cent, per annum.