Jackson v. Farmers Union Mutual Ins.

George Rose Smith, J. TMs is a suit by tbe appellant upon a $2,000 fire insurance policy covering two dwelling bouses and certain furniture. Tbe policy was issued for a term of three years, beginning May 30, 1953, and expiring May 30, 1956. Tbe property was destroyed by fire on June 6, 1956 — seven days after tbe expiration of tbe contract. At tbe close of tbe plaintiff’s proof tbe trial court directed a verdict for tbe insurance company and for its agent, James Cole, wbo was joined as a defendant in the case. It is tbe plaintiff’s contention that her proof presented an issue of fact as to whether tbe policy was still in effect on tbe day of tbe fire. Tbe complaint alleges, and the plaintiff testified, that in selling tbe policy tbe insurer’s agent, Cole, informed her that she would have a thirty-day period of grace in which to pay tbe premiums. Upon this testimony it is argued that tbe jury might have found that tbe policy was in force when tbe fire took place. There are two answers to this argument. First, tbe written contract does not provide tbe asserted grace period, and tbe burden was on tbe plaintiff to show that the insurer’s soliciting agent was authorized to change tbe terms of tbe agreement. American Ins. Co. v. Hornbarger, 85 Ark. 337, 108 S. W. 213; Sadler v. Fireman’s Fund Ins. Co., 185 Ark. 480, 47 S. W. 2d 1086. That burden of proof was not met. Second, by tbe terms of tbe policy a premium of $50 was payable annually on May 30 for a term of three years beginning in 1953. Even if there had been a grace period it could have up-plied only to the premiums that were due in 1953, 1954, and 1955. Since no premium was due when the contract expired on May 30, 1956, the existence of a grace period on that date is immaterial. One of the plaintiff’s witnesses testified that he once had a policy with the defendant company and that he was permitted to pay his premiums as much as two weeks after their due date. This witness was unable to say whether the extension of time was granted by Cole or by the company, nor was any effort made to show that the witness’s policy was similar to the one sued upon. It is clear that this testimony did not make a ease for the jury. That the insurance company accepted the belated payment of premiums actually due, under another policy, has no tendency to show that the contract in issue was still in force when by its terms it had already expired and when by its terms no further premiums were even due. After the fire the company, upon being notified by its local agent of the loss, wrote to the plaintiff and disclaimed liability on the ground that the policy had lapsed. In this letter the insurer’s assistant manager made this statement: “I am sure you will agree as a general rule your insurance representative is on the lookout for your well being, since James [Cole] stated he made one or two calls to your place to collect the premium right after the policy lapsed.” It is earnestly insisted that the insurer’s attempt to collect a premium after the lapse of the policy would have justified the jury in finding that the contract was still in effect when the loss occurred. This contention cannot be sustained. There is authority for the view that an insurer, by demanding payment of an overdue premium, waives the right to declare a forfeiture on the ground that the premium in question was not paid when due. Other decisions take the position that the insurer’s conduct does not constitute a waiver. In discussing the eases on both sides of this question Professor Williston has expressed his preference for the latter view. Williston on Contracts, § 761. We need not explore this controversy, for the case at bar does not involve the essential element of a forfeiture. Here the appellee issued a policy insuring the property for a term of three years, on condition that the appellant pay the premium in advance for each year. Had the appellant failed to pay one of the premiums during the life of the contract, and had the insurer nevertheless demanded payment, it would have been necessary for us to say whether the company’s attempt to collect the premium amounted to a waiver of its right to declare the policy canceled for the remainder of its term. But that is not the case before us. Here the appellant paid each premium as it was due and was protected by the policy until it expired by its own terms on May 30, 1956. After that date there was no contractual relationship between the parties, and the insurer obviously could not waive its right to declare a forfeiture, for there was nothing left to be forfeited. Affirmed.