Owen v. New York Life Ins.

Cook, J., delivered the opinion of the court. Mrs. Miriam B. Owen, plaintiff brought suit as beneficiary in an insurance policy for ten thousand dollars, issued by the New York Life Insurance Company, defendant, upon the life of her husband, Thomas S. Owen. At the conclusion of the testimony a peremptory instruction was granted in favor of the defendant, and from the judgment, entered in pursuance of this instruction this appeal was prosecuted. The facts necessary to be stated are as follows: On the 24th day of October, 1916, the appellee issued its policy of insurance on the life of Thomas S. Owen, payable at his death to appellant. The policy provides that it is issued in consideration of the payment in advance of the sum of four hundred and fourteen dollars and thirty cents, constituting the first premium and maintaining the policy to the 24th day of October, 1917, and of a like sum on said date and every twelve calendar months thereafter during the life of the insured until the maturity of the endowment. Under section 1 of the policy it is provided as follows: “The proportion of divisible surplus accruing upon this policy shall be ascertained annually. Beginning at the end of the second insurance year, and on each -anniversary thereafter, such surplus as shall have been apportioned by the company to this policy shall, at the option of the insured be either (a) paid in cash; or (b) applied toward payment of premiums; or (c) applied to purchase of a participating paid-up addition to the sum insured; or (d) left to accumulate at such' rate of interest as the company may declare on funds so held', but at a rate never less than three per cent, compounded and credited annually, and withdrawable in cash on any anniversary, or payable at the maturity of the policy to the person entitled to its proceeds; or (e) applied on the accelerative endowment plan as set forth below. — 889 — “If the insured fails to notify the company in writing within three months after the company shall have mailed to him a written notice of the amount of said dividend and the options available as aforesaid, which option he selects, the company will apply said dividend to the purchase of a paid-up addition to the sum insured; such paid-up addition may be surrendered for cash at any time not later than three months after any default in the payment of premium, and the cash value thereof shall never be less than the original cash dividend.” Under section 5 of the policy is found a provision that a grace of one month (not less than thirty'days), subject to an interest charge of five per cent, per annum, was allowed for the payment of every premium after the first, during which jpme the insurance should continue in force, and this section also' contains the following provision: “The policy and the application therefor, copy of which is attached hereto, constitute the entire contract.” In the application, a copy of which is attached to and made a part of the policy, the applicant, Mr. Owen, was asked this question: “(12) Do you desire to apply the dividends on the acceleration endowment plan to mature the endowment at an earlier age?” And in reply to this question he answered: “No; to apply toward payment of premium.” On the 29th day of November, 1918, at a time when the insured was seriously ill at his home, he sent for his law partner, Mr. Roberts, and told him that he thought that was the last day on which he could pay his premium on this policy, and requested Mr. Roberts to look on his desk at the office, where he would find a notice from the company of the amount of the premium. In accordance with these instructions Mr. Roberts went to the office and found the notice of the amount of the premium; this notice being as follows: — 890 — “New York Life Insurance Company. “Darwin P. Kingsley, President. “Branch Office at Jackson, Miss. Nov. 19,1918. “Mr. Thomas S. Owen, Cleveland, Miss — . Dear Sir: We regret to notify that, according to our records, the premium, four hundred fourteen dollars and thirty cents and interest, $-, on policy No. 6050680, due October 24,1918, is not paid. The period during which the company may receive payment without any condition except interest at the rate of five per cent, per annum from the due date expires on November 24,1918. After that date, in addition to payment of- the amount due and interest thereon, the policy requires you to furnish evidence of insurability satisfactory to the company before reinstatement can be secured. “The company realizes that the loss of insurance is something which every one should avoid, if possible, and desires to help a policy holder in every way consistent with the terms of the policy contract to keep it in force. “We hope, therefore, that you will give this important matter your attention and write us at once concerning it, or, better still, if you are in this city, that you will call on us so that we may confer with you regarding this insurance. “When you write, please give your full name, your address, and your policy number, so that we may send a prompt reply. “Yours Truly, H. H. Graham, Cashier” After finding this notice Mr. Roberts directed the president of his local bank to call the cashier of the First National Bank of Jackson, Miss., and instruct him to pay to the defendant’s branch office at Jackson the amount of the premium, with interest, and this was accordingly done. Later in the day New York exchange for said sum was mailed to the First National Bank of Jackson. Upon receipt of the telephonic instructions so to do, the cashier of the bank at Jackson telephoned to the office of the defendant company, and stated that he had this payment in and and that it could take credit for the amount of this premium on the — 891 — next day’s deposit. ' On the morning of November 30, 1918, the exchange was indorsed and delivered to a clerk of the defendant company, who in turn delivered it to the cashier of appellee’s branch office. Hpwever, Mr. Owen, the insured, had died at 'three o’clock that morning. On December 2, 1918, presumably without notice of the death of the insured, the cashier of appellee’s branch office addressed a letter to Mr. Owen acknowledging receipt of the premium and stating that November 24, 1918, was the last day on which, under the terms of the policy, the company could accept payment of the premium, but that the company would consider the reinstatement of the policy if the insured would properly execute an inclosed application for reinstatement, and that pending the return of this application the remittance would be held subject to his order. On October 24, 1918, “the end of the second insurance year,” there was apportioned to the policy as a surplus or dividend the sum of sixty-seven dollars and fifty cents, and on February 18, 1919, the appellee wrote appellant as follows : “New York Life Insurance Company. “Darwin P. Kingsley, President. “Jackson Branch Office, Century Building, Jackson, Miss. “0. O. Wilkins, Agency Director. “H. H. Graham, Cashier. “Robert B. Mims, Resident Mgr. Feb. 18,1919. “Mrs. Miriam R. Owen, Cleveland, Miss. — Dear Madam: Re Pol. No. 6050630 — Owen, Deceased. We are pleased to hand you herein our check drawn on the First National Bank of this city to your order for sixty-seven dollars and fifty cents in payment of the dividend apportioned to the above numbered policy on October 24, 1918. You probably know that this policy became lapsed f,or the nonpayment of the premium due on October 24th, and was of no value at the time of the death of Mr. Owen. “Your very truly, H. H. Graham, Cashier.” — 892 — On February 18, 1919, appellee also returned to tbe Cleveland State Bank the draft for tbe premium wbicb bad been delivered to it on November 30, 1918. Appellant declined to accept tbe dividend check and promptly returned it to appellee, while tbe Cleveland State Bank advised appellee that pending tbe adjudication of tbe matter of loss, if any, under tbe contract between tbe company and Mr. Owen tbe money would be held subject to its orders. The declaration filed in this cause contains six counts, but tbe sole and controlling issue made by tbe pleadings and presented here for decision is whether under tbe contract between the parties, as evidenced by tbe policy and application therefor, tbe right of the company to claim a lapse or forfeiture of tbe policy was waived by reason of the failure to notify tbe insured of tbe amount of tbe dividend Avhich bad been apportioned to this policy on October 24, 1918. Tbe policy here involved provided that tbe proportion of tbe divisible surplus accruing upon the policy should be ascertained annually, and that at tbe end of tbe second insurance yeay, and on each anniversary thereafter, such surplus as bad been apportioned by tbe company to tbe policy would, at the option of tbe insured, be applied toward tbe payment of premiums. Under tbe express provisions of tbe policy the application therefore is made a part of tbe contract, and in this application the insured exercised bis option to have all dividends accruing on the policy applied toward tbe payment of premiums. Thus at tbe very inception of the.contract tbe company was put on notice of tbe insured’s election to so apply all dividends. Tbe end of tbe second insurance year having arrived, tbe insured had the right to expect and demand that tbe company would carry out bis direction to apply tbe dividends which had been apportioned to the policy for tbe tAvo years in reduction of tbe annual premium then due. Tbe insured could not know tbe amount of these dividends, as this information was peculiarly within tbe exclusive knowledge of tbe company, wbicb bad full control in the matter of dividends. Under these circumstances is was clearly tbe — 893 — duty of the company to notify the insured of the amount of the dividend, in order that he might know the amount in cash he was required to pay to discharge the premium, and if this notice was not given the company thereby waived the prompt payment of the premium and cannot declare a forfeiture. This view, we think, is founded upon reason and is supported by the great weight, of authority. In Phoenix Mutual Life Ins. Co. v. Doster, 106 U. S. 30, 1 Sup. Ct. 18, 27 L. Ed. 65, it is said: “Now, although the policy issued upon Riddle’s life required payment annually of a specific sum as a premium, that stipulation must be construed in connection with the agreement set out in the application, that the premium might be discharged pro tanto by such dividends as were allowed to the insured from time to time. Whether the company, in any particular year, declared dividends, and what amount was available in reduction of the premium, were facts known, in the first instance, only to the'company, which had full control of the matter of dividends. It certainly was not contemplated that the insured should every, year make application, either at the home office or at the office of its general agent in Chicago, in order to ascertain the amount of dividends. The understanding between the parties upon this subject is, in part, shown by the practice of the company. Independently of that circumstance, and waiving any determination of the question whether the forfeiture was not absolutely waived by the act of the general agent, in sending notice to the insured after the day fixed for the payment of the premium due September 20, 1876, it was, we think, the company’s duty, under any fair interpretation of its contract, having received information as to the post office of the insured, to give seasonable “notice of the amount of dividends, and thereby inform him as to the cash to be paid in order to keep alive the policy.” In Union Central Life Ins. Co. v. Caldwell, 68 Ark. 522, 58 S. W. 361, the Arkansas court, in a well-considered case, held: — 894 — “In the absence of any stipulation in the policy, and of any directions otherwise by the assured as to the application of dividends which have been declared, it is the duty of a mutual company to apply such dividends to the payment of interest on loans made on the policy, when by so doing a forfeiture of all rights and benefits under the policy will be prevented. This is the rule in the case of premiums to keep the policy in force from year to year, and, of course, would be for the payment of interest on an ordinary loan, which prevents a sale of the policy. . . . The learned counsel for appellant says, “These cases all arise under very different facts from those existing in the case at bar, and these differences are so vital and essential in their nature as to make them valueless as authorities.’ We will not review them here. But in our opinion the difference in the facts does not destroy the application or lessen the efficacy of the principle. It is true that in some of them there was a contract, custom, or course of dealing. But because insurance companies enter upon contracts or establish a usage in conformity to the doctrine above announced, from which they have not been allowed to deviate, does not prove the unsoundness of the doctrine itself, but rather the contrary. The doctrine does not arise out of the peculiar facts of any particular case. It does not depend upon contract, custom, or course of dealing for its existence and potency. It has its origin in that fundamental principle of justice which will compel one who has funds in his hands belonging to another, which may be used, to use such funds, if at all, for the benefit, and not to the injury, of the owner; for his consent to the one, and dissent to the other, will be presumed. . . . “The authorities also establish the rule that it is the duty of the company, before taking a forfeiture for default in the payment of a maturing obligation, to notify the assured or beneficiary of the amount of declared dividends where such dividends are insufficient to meet the obligation. . . . These principles are founded upon reason and common fairness and honesty, and they will have ap — 895 — plication wherever it becomes necessary to prevent a forfeiture, which is favored neither in law nor in equity.” Again in Eddy v. Phoenix Mutual Life Ins. Co., 65 N. H. 27, 18 Atl. 89, 23 Am. St. Rep. 17, the New Hampshire court says: “When the insured shares in the profits, and at the time when the annual premium becomes due cannot know what amount he will be required to pay the company, the insurers cannot insist upon a forfeiture until they give the insured notice of the amount he is required to pay.” In Nall v. Provident Savings Life Assur. Soc. (Tenn.), 54 S. W. 109, the principle is announced in the following language: “Inasmuch as the insured was entitled, according to the terms of the policy, to certain reductions on premiums, the amount of such reductions from time to time to be fixed by the company, he could not know at any time, without notice, how much would be due, and for this reason there could be no forfeiture without notice.” Again in a note in 10 Ann. Cas. 688, it is said: “The cases cited above have reference to premiums for fixed amounts, due at certain dates. But where, by the terms of the policy, the insured shares in the profits of the company and is entitled to have his premium discharged pro tanto by such dividends as are declared from time to time, it is well settled that the insurer cannot insist on a forfeiture for nonpayment of a premium until he-gives notice of the amount of the dividends, in order that the insured may know what amount in cash he is required to pay.” See, also, Home Life Ins. Co. v. Pierce, 75 Ill. 426; Reed v. Bankers’ Reserve Life Ins. Co., (C. C.), 192 Fed. 408; Joyce on Insurance, sections 1166, 1320; 25 Cyc. 828. Appellee contends, however, that, if it shall be held that the company was required to give notice of the amount of the dividends before declaring a forfeiture for the nonpayment of the premium, still the burden of proof was on appellant to show that no such notice was given, and that — 896 — she had failed to discharge this burden. If it be conceded that the burden was on appellant to show that this notice was not given, which we do not decide, we think there is sufficient testimony in this record to .warrant the submission of this question to the jury. The judgment of the lower court is therefore reversed, and the cause remanded. . Reversed and remanded.