Drury's Admx. v. New York Life Ins.

Opinion op the court by CHIEF JUSTICE BURNAM Reversing. On the 7th day of July, 1897, the New York Life Insurance Company issued and delivered to Charles N„ Drury a policy for $1,000 upon the 20-years payment life plan, payable to his executors, administrators, or assigns, or such other beneficiary as might be designated by the insured, in consideration of $29.70 paid in advance, and the payment of a like sum on the 7th day of July in every year during the continuance of the policy until twenty full years’ premiums should have been paid. As an inducement to take the policy, the company offered certain special advantages in the way of loans and surrender values, which were set out in a table on the second page of the policy, and which were made a part of the contract of insurance, and which are as follows: Table of Loans and Surrender Values in Paid-up Insurance or Extended Insurance, under the conditions specified on next page. — 685 — On the third page of the policy, under the head of “Benefits and Provisions,” the policy contained these stipulations : “This policy can not be forfeited after it shall have been in force three full years as hereinafter provided: “First. If any subsequent premium is not duly paid, this policy will be endorsed for the amount of paid-up insurance payable at the death of the insured, specified in the table on the preceding page, less the value of any indebtedness on this policy, provided demand is made therefor with the surrendér of this policy within six months after'such nonpayment, or, “Second. If any subsequent premium is not duly paid, and if this policy is not surrendered as provided in the preceding clause, the insurance under this policy, will after the repayment of any indebtedness, be extended without request or demand therefor, for the amount of one thousand dollars, during the term provided in the table on the preceding page, payable only if the insured dies within said term. At the end of said term, if the insured is then living, this policy shall cease and determine.” The annual premium of $29.70 was paid when the policy 'was issued, and on the 7th day of July, 1898, and 1899. On the 7th day of July, 1900, the insured, Drury, failed to pay in cash the premium of $29.70 in advance, and by agreement, with the company executed the following note: “Premium Lien Note. “$29.70 July 7, 1900. “Twelve months after date I promise to pay to the order of the New York Life Insurance Co., at the office of said company in the city of New York, the sum of $29.70, with interest in advance at the rate of five per cent, per annum (for value received), being for premium due July 7th on — 686 — policy number 801,525, issued by said company on the life of Charles N. Drury. “It is understood and agreed: “First. That this note may be renewed if interest thereon and subsequent premiums on said policy are duly paid. “Second. That unless said interest and premiums are duly paid, said policy and its accumulations shall immediately be forfeited, except as to the right to a surrender value or paid-up policy, which may be provided in said policy or by statute. “Third. That in the settlement of any claim or any benefit under said policy before this obligation shall have been fully paid, the amount thereon shall be deducted from the amount otherwise payable by said company. “[Signed] Charles N. Drury.” Drury failed to pay either the principal or interest on this note at maturity, and he also failed to pay any part of the premium of $29.70 for the ensuing twelve months, which fell due on the 7th day of July, 1901, and departed this life intestate, on the 16th day of August, 1901. And the appellant, Ann T. Drury, shortly thereafter qualified as his administratrix, and forwarded to the company proofs of the death of the insured, and demanded the payment to her under the terms of the policy of $1,000, with interest from October 4, 1901, and, payment being refused by the company, instituted this suit against appellee on the 11th day of October thereafter. The company, in its answer, admitted the issual of the policy and the payment of the premiums for the years 1897, 1898 and 1899; that no application was made by the insured for paid-up insurance; but. denies that it was indebted to the appellant in any amount exceeding $84, and the second paragraph of the answer reads as follows: “Defendant — 687 — says that by the terms oí the contract above quoted the assured waived and surrendered his right to extended insurance by refusing or failing to pay the interest on his premium note above set out, and by refusing or failing to pay the premium due July 7, 1901. Defendant says that by the terms of the premium lien note quoted supra it was expressly agreed, in addition to the contract set out in the policy, and in conformity therewith, ‘that, unless said interest and premiums are duly paid, said policy and accumulations shall immediately become forfeited and void, except as to the right to a surrender value or paid-up policy;’ that the assured, by the terms of the policy above set out, and by the terms of the premium note aforesaid, is entitled to a paid-up policy only as specified in the policy, less the amount of his indebtedness at the time to the company, leaving a net amount, as of date July 7, 1901, of $84, for which amount this defendant hereby offers to confess judgment in full of-plaintiff’s recovery.” A general demurrer was filed by plaintiff to the defendant’s answer, and it was overruled, and, plaintiff declining to plead further, it was adjudged by the trial court that the. plaintiff recover judgment for $84, with interest from the 16th of August, 1901, until paid, and so much of her petition as sought to recover more than this sum was dismissed, and plaintiff has appealed. It is admitted that the conditions of the policy had all been complied with by the assured up to the time he executed the note of July 7, 1900, for the premium then due, carrying the policy up to July 7, 1901; and that by the express terms of the policy he was on that date entitled to a loan of $40, or to a paid-up policy of $150, or to extended insurance for $1,000 for four years and ten months. It is also admitted that, if the appellant had not executed the — 688 — premium note relied on, or paid any of the subsequent premiums in accordance with the terms of his contract, and had died at any time within four years and ten months from the 7th of July, 1900, that his administratrix would have been entitled to recover the full amount of the policy. But the defendant insists that the note given on the 7th of July, 1900, contained a new contract between the company and the assured, by which it was agreed that, unless the principal and interest of the premium note was paid at maturity, the policy and its accumulations were immediately forfeited, except as to the right of the assured to a paid-up policy for $150, less the indebtedness of the assured to the company growing out of the execution of the note. It does not seem to us that this is a fair construction of the second condition attached to the premium note of July, 1900, While it recites that, unless the interest and premiums are duly paid, the policy and its accumulations shall be forfeited it expressly stipulates that the right to a surrender value' or paid-up policy provided in the policy shall remain intact. Under the head of “Surrender Values,” in the table.of loans and surrender values set out on the second page of the policy, we find paid-up insurance and extended insurance both under the head of “Surrender Values;” and under the head of “Nonforfeiture Provisions,” on the third page of the policy, we find it provided that, if any subsequent premium is not duly paid, this policy shall be indorsed for the amount of paid-up insurance, payable at the death of the insured, specified in the table on the preceding page, less the amount of indebtedness on this policy; provided demand is made therefor with surrender of this policy within six' months after such payment. There is no pretense that the insured ever complied, or attempted to comply, with this provision of the policy. It therefore follows — 689 — that his right to a policy for paid-up insurance was abandoned. In the second condition under this head it is provided that if any subsequent premium is not duly paid, and if the policy is not surrendered as in the preceding clause, the insurance under this policy will, after the repayment of any indebtedness, be extended without request or demand therefor for the amount of $1,000.00 during the term provided in the table on the preceding page, payable only if the insured dies within said term. At the end of said term, if the insured is then living, the policy shall cease and.determine. It will be observed that extended insurance for the full amount of the policy is one of the surrender values expressly provided for, and the only one which, under all conditions, is not forfeitable. Paid-up insurance is also a surrender value, but, to enable the insured to take advantage of this provision, the policy requires that the insured should, within six months after failure to pay a premium, surrender his policy and demand paid-up insurance. If the contention of the company is a sound one, the effect of the failure of the insured to pay the interest and premium note at maturity is to exactly reverse these conditions of the policy. In other words, it forfeits automatically the provision for extended insurance, and revives the provision for a paid-up policy, which had been forfeited by the assured’s failure to make demand therefor and surrender his policy within six months. The law does not favor forfeitures, and will not assume that the assured intended by the execution of the note of July, 1900, to forfeit the right to extended insurance, which he had already acquired by the payment of three annual premiums on the policy. The only reasonable construction which can be put upon the language of the policy and note is that on the forfeiture of the policy — 690 — by the nonpayment of interest assured forfeited all right to further participate in accumulations, to receive dividends, to- be reinstated after the lapse of the policy, etc.; but did not surrender his right to extended insurance for the tei¡m earned by the premiums paid. Nor can we doubt that, if the insured had made a demand for paid-up insurance at the time of his default in the payment of the premium note and interest, the company would have been prompt to claim that he was not entitled to a paid-up policy, as he had failed at the proper time to make demand therefor, but only to such extended insurance as his interest in the policy would purchase after the payment of his indebtedness to the company. It therefore follows that the judgment must be reversed, and cause remanded, with instructions to sustain plaintiff’s demurrer to the defendant’s answer, and for other proceedings consistent'with this opinion.