Johnson v. Hartford Insurance

WILLIAMS, J. This is an action upon a policy of life insurance issued by the defendant company, on November 1, 1888, to James T. Johnson, in the sum of five thousand dollars, payable, upon the death of the assured, to Nannie M. Johnson, the named beneficiary, therein. The defendant company seeks to avoid payment ’of the policy on the ground that the policy became forfeited because the assured failed to pay a premium assessment thereon. Trial was had in the circuit court of Henry County, before a jury, resulting in a verdict and judgment in favor of the plaintiff for the full amount of the policy, plus interest, which amounted to the total sum of $5556.66. Thereupon the defendant company duly appealed to the Kansas City Court of Appeals, which court (166 Mo. App. 261) affirmed the judgment. The case was certified here by the Kansas City Court of Appeals on the ground that the majority opinion of that court was in conflict with certain decisions of the St. Louis Court of Appeals. By the pleadings it stands admitted that defendant was a corporation and that it had issued the insurance policy upon which-this suit was founded; that the assured died on the 15th day of February, 1907, and that plaintiff is the named beneficiary in said policy and. since the death of the assured has complied with all of the requirements of said policy. It was further admitted that plaintiff had made demand for the payment of the policy, which had been refused. The evidence upon the part of the plaintiff was substantially as follows: The policy contract was introduced in evidence. Portions of the contract necessary to an understanding of the issues are as follows: — 568 — “In consideration of the representations, agreements, and warranties made in the application herefor, and of the admission fee paid; and of three -dollars per annum on each $1000 of the indemnity herein provided for, for expense dues, to he paid as hereinafter conditioned, and of the further payment of all mortality calls proportioned to .the said indemnity, levied against the herein named member to form a mortuary fund for the payment of all indemnity matured by deaths of members, and to create a safety fund as hereinafter described, which mortality calls, to he levied upon all the. members in the department wherein this certificate is issued whose certificates are’in force at the dates of such deaths, shall be made according to the table of graduated mortality ratios given hereon, and as further determined by their respective ages and the aggregate indemnity at the dates of such deaths, with due allowance for discontinuance of membership (one-third of the proceeds of such mortality calls to be applied towards said safety fund until the sum of ten dollars on each $1000 indemnity aforesaid, shall have been thus applied, when the basis of all subsequent mortality calls shall be two-thirds only of the table given hereon), does hereby issue this certificate of membership in its safety fund department to James T. Johnson (herein called the member), of Clinton, County of Henry, State of Missouri, with the following agreements : ' ‘ ‘ That ninety days from the receipt by the president or secretary of said company of satisfactory proofs, in accordance with forms furnished upon notice of death and with full information as to the manner and cause of the death of the herein named member while this certificate is in force, all of the conditions hereof having been conformed to by the member, upon presentation and surrender of this certificate properly receipted, there shall be due and payable, out of the aforesaid mortuary fund and not otherwise, the indemnity of five thousand dollars (less the balance unpaid, if any, of the stipulated contribution to said safety fund, with fifty per cent added, together with the unpaid installments of annual — 569 — expense dues and any mortality or .other charge against the member, payment of which is not matured) to his wife, Nannie M. Johnson, if living; otherwise to his legal representatives. All such payments to be made at the home office of said company in' lawful money of the United States. “That said company will deposit said sum of ten dollars, when received, with the trustee, named in a contract made with it (of which a copy is printed hereon), as a safety fund in trust for the uses and purposes expressed in said contract; and shall make a semi-annual division of the net interest received therefrom by it, pro rata among all the holders of certificates in force in said department at such times, who shall have contributed five years prior to the date of any such'division their stipulated proportion of said fund, by applying the same to tlie payment of their future dues and assessments; and that, whenever said fund shall amount to one million dollars, all subsequent receipts therefor shall be divided by the said company in like manner as the interest.” The policy also provided that upon a failure to pay the annual dues, mortality calls and safety fund deposit as required by the contract, the policy should become null and void and of no effect. Plaintiff introduced in evidence that portion of the annual statements of the defendant company made to the Insurance Department of the State of Missouri, showing the condition of the safety fund department for the years ending December 31, 1900, 1901, 1902, 1903, 1904, 1905 and 1906. The report for the year ending December 31, 1900, showed the following items: Net safety funds in’ Security Company of Hartford, Conn, ........................................... 1,112,569.14 Reserve on safety fund policies .................... 230,220.00 Mortuary fund held in addition to reserve .......... 111,495.36 Premiums in course of collection, safety fund department .......................................... 349,000.00 The report for the year ending December 31, 1901, contained the following items: — 570 — Net safety funds in security company................ 1,166 905.02 Reserve on safety fund policies ..................... 262,257.00 Mortuary and other funds in addition to reserve .... 116,313.59 Premiums in course of collection, safety fund department ........................................... 358,300.00 The report for the year ending December 31, 1902, shows the following items: Net safety funds ...................................$1,176,561.25 Special reserve and surplus on safety fund policies .. 352,640.92 Premiums in course of collection, safety fund department ........................................... 198,250.00 The evidence upon the part of the defendant was in deposition form and consisted largely of the deposition of George E. Keeney, president of the defendant company. The charter of the defendant company was introduced in evidence, showing that it was chartered to do a life insurance business by the Legislature of the State of Connecticut. The by-laws of the company which were introduced in evidencé provided that the board of directors “shall have full power to exercise the corporate powers conferred upon the company by its charter and any amendments thereof excepting as shall be otherwise determined by the by-laws or resolutions of the company,” and further provided that three ’ directors “ shall constitute a quorum for transacting the ordinary business of the corporation.” The defendant company, from the date of its organization until 1880, issued what is known as the legal-reserve or old-line insurance policies. Prom 1880 to 1899 it issued the safety-fund or assessment form policies. This is the form of policy involved in this suit. In 1899 it ceased doing the assessment or. safety-fund business and again began doing the old-line or legal-reserve business. Prom the date of the issue of the policy in this case up until the assessment due June 1, 1902, the assured paid all dues and assessment calls made against this policy. Call No. 95, which was not paid by the assured and upon which defendant bases its forfeiture, was laid or — 571 — assessed as of date April 1, 1902, and was due and payable June 1, 1902. The amount stated in the call as due upon Dr. Johnson’s policy was $74.55. This call was mailed to Dr. Johnson May 2, 1902. It states that the call is due June 1, 1902, and that it is made to meet one hundred and thirty-seven deaths, amounting to $369,859. A list of the one hundred and thirty-seven deaths accompanied the call. On June 10th a second notice was mailed by the defendant company to Dr. Johnson, calling his attention to the fact that the quarterly call No. 95 had not been paid by him and stating further that unless the amount of the call plus fifty cents for the additional notice should be received at the home company on or before June 20, 1902, the policy should be cancelled. On June 19, 1902, Garland S. Johnson, son of the assured, wrote defendant company the following letter: Schell City, Mo., June 19, 1902. Hartford Life Ins. Co., Hartford, Conn. Gentlemen:— My father and I both have been out of town and did not get to attend to payment due on policy 109854, Hartford Life & Annuity Insurance Co., on life of Jas. T. Johnson. I see our time expires tomorrow. What steps can we take now to make payment and .have it reinstated. Father is in perfect health. I am very sorry indeed for the delay, but it could not possibly be avoided. Kindly let us know by return mail. Yours very truly, Garland S. Johnson, June 24, 1902. On June 24, 1902, the defendant company replied to said letter as follows: Garland S. Johnson, Schell City, Mo. Dear Sir: As you wrote us before the last day of grace expired for payment of the June call, policy No. 109S54, we are warranted in extending the time of payment, and have given you until July 5th to renew the policy. If, therefore, you wish to remit us $75.05 on or'before that date, the policy will be kept in force. Yours truly, E. A. Wright, Chief Clerk. — 572 — Call No. 95 was never paid by the assured or by anyone for him and it appears that no further communication was had between the. defendant company and the assured thereafter. Garland S. Johnson was called to testify in the case by the defendant-and, upon direct examination, testified that he wrote the above mentioned letter to the defendant company without any authority from his father, the assured, and that his father didn’t know anything about it until he received the above reply and that his father then said that “he would attend to it.” On cross-examination this witness testified that at that time he knew nothing about the company’s mortuary fund, reserve fund or safety fund. The evidence upon the part of the defendant attempts to explain the annual report made by it to the Insurance Department of the State of Missouri, by stating that the company carried two safety funds, one known as the men’s department safety fund and one known as the women’s department safety fund; that in truth and fact these two funds were levied separately and kept separately by the security company, under two separate contracts, and that the two funds were erroneously added together and appeared as one fund in the annual reports. The evidence upon the part of the defendant further tended to show that the men’s department safety fund attained the sum of one million dollars on December 31, 1893, and that ever since that date all interest thereon, together with dues thereto, were turned over by the security company to the defendant, company and by it distributed to its policy-holders, under the terms of its policy contracts; that on April 30, 1902, the book value of the men’s safety fund was $1,-056,354.04, but that the par value was only one million dollars; and that on June 1st of the same year the stock value of the men’s safety fund was $1,056,654.04 and the par value thereof was $1,000,000. It further appeared that the average death loss per month was about $100,000. The president of the company described the different items going into the assess — 573 — ment call No. 95. It appears that the lapses were estimated at five per cent, and later turned out to be 3.52 per cent. Call No. 95 was assessed by the president and secretary of the company or by the vice-president and secretary of the company or by the vice-president and someone acting for the secretary; that the practice of the company in levying calls for assessment was not only for the purpose of paying existing death losses, but also for paying anticipated death losses occurring before the next call; that call No. 95, together with the mortuary funds on hand, had not only to provide for existing death losses, but also all anticipated death losses that would occur before September 1, 1902; that the death losses wore not paid from any particular call, but were paid from the mortuary fund, and the mortuary fund was in turn replenished by the quarterly calls, and that death losses were frequently paid from tbe mortuary fund before an assessment was made to pay that particular loss; that all death losses were included in some assessment and the receipts from all assessments were paid into the mortuary fund, from which fund death losses were paid; that this was done as a matter of convenience, so that death losses might be paid within ninety days from the date of proof. The trust agreement between the defendant insurance company and the security company, a copy of which agreement was attached to the policy in question, required the security company to invest said trust fund in United States bonds “until the whole fund shall amount in such bonds at their par value to $1,000,000.” It appears that after the policy in question was issued the Legislature of Connecticut- passed an act in 1889 authorizing the defendant insurance company to invest its safety fund in securities other than United States bonds, and thereafter a large portion of the safety fund was invested in railroad and municipal bonds. This possibly explains the two items “book value” and “par value” of the safety fund. Dr. Johnson, the assured, was a member of the safety fund department, but the defendant company is a — 574 — stock company and he had no right to participate in the management of the company. The defendant offered a demurrer to the evidence, which was overruled. Plaintiff’s instructions numbered 1, 2 and 3, given by the court, which are claimed to be erroneous by defendant, are as follows.: “1. ‘The court instructs the jury that if you find from the evidence that at the time the defendant notified the deceased Johnson that his premium was due, and which defendant claims he failed to pay, there was a sum of money in excess of $1,000,000 in the safety fund mentioned in the contract, and a surplus in the mortuary fund mentioned in the evidence, then it was the duty of defendant to have applied such excess to the payment of premiums of policyholders; and if you find from the evidence that said Johnson’s share in such excess, if any, was sufficient to pay the amount of premium due at the time said notice was given to him, then defendant could not declare said insurance forfeited for the failure to pay said premium. “2. The court instructs the jury that it devolves upon the defendant to prove that it was necessary, at the time it claims an assessment was made, for failure to pay which it claims the insurance was forfeited, to make an assessment, and that an assessment was made by the, directors of defendant, and that said assessment was not for a larger amount than was necessary to pay the death losses which had accrued up to that time, after giving-said Johnson credit for his pro rata share of the excess in the safety fund over $1,000,000, if you find there was such excess, and in the mortuary fund, if you find there was excess in that fund, and unless defendant has so proven, it cannot declare said insurance forfeited. “3. The court instructs the jury that if you find from the evidence there was on hand in said safety fund a sum in excess of $1,000,000, and if you find also there was in the hands of defendant a mortuary fund, which had been collected from previous assessments, then it was the duty of defendant to have applied such excess — 575 — in said safety fund and said mortuary .fund to the payment of death claims which had matured prior to the time the notice was given to Johnson that his premium was due, for failure to pay which defendant claims said insurance was forfeited, and if defendant failed to so apply said money, then it cannot claim that the insurance is forfeited.’ ’ It appears that defendant asked only one general instruction and that was to the effect that there was no evidence showing vexatious refusal to pay the amount of the policy. This instruction was given. Defendant seeks a reversal of the judgment on the ground that instructions numbered 1, 2 and 3 were erroneous, and on the further ground that the assured has abandoned the policy. Instructions. I. It is contended that instructions 1 and 3 above are erroneous because there was no evidence which would warrant the jury in finding that there was a sum of money in excess of $1,000,000 in the safety fund. We are unable to agree with this contention, yye are 0f £he opinion that the facts disclosed by the appellant’s annual reports to the State’s Insurance Department supplied evidence sufficient to allow the jury to pass upon this issue of fact. Those annual reports purport to be the ones- required by law to be made by the appellant company to the Insurance Department of this State and any required statements therein made as to the financial condition of the safety fund department were properly admitted in evidence, at the instance of plaintiff, as admissions of the appellant company. The appellant had the right, which right was accorded it, to explain the admission contained in said report but it has no right as a matter of law to say that its explanation and not its prior written admissions shall be believed by the jury. It was, we think, clearly the jury’s province, to determine that point. It is contended that instruction numbered 2 above is erroneous because it places upon appellant the burden of showing that Call 95 was made by the board of direc — 576 — tors, and that the assessment was not for a larger amount than was necessary to pay the death losses which had accrued up to that time. From the evidence offered, it appears that the charter and by-laws of the appellant company provide that all the affairs of, the company should be managed and controlled by a board of directors. In the. recent case of Barber v. Hartford Life Insurance Company, 269 Mo. 21 (a case very similar to the one now before us, and against the same company), Division One of this court had before it the questions now urged by appellant. It was there held that in relying upon a forfeiture, the burden was upon the company to show an assessment levied in strict accordance with the contract; that the assessment must be made by authority of thé company’s board of directors; and that a forfeiture of a policy could not be predicated upon the non-payment of an assessment which was excessive. The facts presented in the case at bar are sufficiently similar to the facts held in judgment in that case to bring this case clearly within the rule therein determined. We fully agree with the decision of that case upon the points here involved and it is, therefore, unnecessary to further discuss the various propositions here. It is contended hy appellant that, under the policy contract, it’had the right to make assessments for death losses occurring in the future to provide a mortuary fund from which future death losses could he promptly paid. We are unable to agree with this contention. This identical point was recently before the Supreme Court of Minnesota in the case of Ibs v. Hartford Life Insurance Co., 121 Minn. 310. The policy contract thére in judgment was issued by the appellant herein and the terms of the policy were in legal effect substantially the same as the terms of the policy contract now considered. It was there held that the policy contract did not authorize the company “to accumulate a mortuary fund out of which to pay death losses that occur in the future.” The court said: “It is settled law that an assessment to pay future losses is illegal, unless the power is conferred by — 577 — the contract; and we hold that the contract between the insured and defendant cannot be fairly construed as conferring that power. As it is clear that the assessment in question here was not necessary to pay accrued losses, but was in reality levied to pay losses that might be anticipated to occur in the future, it follows that it was unauthorized and could not be made the basis of a forfeiture.” [Id., l. c. 315.] Among the authorities cited by the Supreme Court of Minnesota in support of that proposition is the case of Johnson v. Hartford Life Ins. Co., 166 Mo. App. 261 (the same being the opinion of the Kansas City Court of Appeals in the case at bar). We are aware that the judgment of the Minnesota ■Supreme Court in the case of Ibs v. Hartford Life Insurance Company, supra, was, later, by the Supreme Court of the United States, reversed. [Hartford Life Insurance Co. v. Ibs, 237 U. S. 662.] But the reversal was on a ground not involved in the case at bar, viz., on. the ground that the full faith and credit clause of the Constitution of the United States (Art. 4, sec. 1) had been violated by the Minnesota court in rejecting proof of the record of a Connecticut court in a case known as the Dresser case. The case at bar was tried below on May 12, 1909, which was prior in time to the entering of the decree in the Dresser case, and the record in the Dresser case was therefore not offered or presented in the trial of this case. Since the record of the Dresser case is in no manner properly raised- or lodged in this case, we do not deem it to be within the scope of our review arid likewise the Federal question based thereon. Under such circumstances the rule announced by the Supreme Court of the United States in Hartford Life Insurance Co. v. Ibs, supra, should not be applied to this case. II.- It is further contended by appellant that the judgment must be reversed because there was an abandonment by the assured of the policy contract. In approaching a consideration ’of this point it must be borne in mind that the sole function of this court, in this, a case at law, is to pass upon matters of error prop — 578 — erly raised in the trial court and passed upon by that court. We are unable to see wherein this point was presented or passed upon below. It appears that an abandonment was not even pleaded by appellant. ‘ ‘ Abandonment of a contract of insurance is an affirmative defense which is waived if not pleaded.” [Bacon on Life and Accident Insurance (4 Ed.), sec. 364, p. 760.] The only portion of the answer which comes even near the point is the following: “Defendant alleges that although the said James T. Johnson lived until the 15th day of January, 1907, or nearly five years after the forfeiture of said policy, by reason of the non-payment of said assessment in July, 1902, he, at no time, considered said certificate or policy in force, but at all times acquiesced in the forfeiture thereof, resulting from the non-payment of said mortality call or assessment.” It will appear at a mere glance that this does not plead an abandonment. Abandonment presupposes an existing valid right which is to be abandoned. Acquiescence in a forfeiture (a cancellation of a right) is quite a different thing from abandoning an existing right. In the former the loss of the right, if any, occurs by reason of the forfeiture, while in the latter the loss of the right occurs by voluntarily and intentionally surrendering an existing right. An abandonment might give cause for forfeiture, but a forfeiture can supply no basis for an abandonment, because when once forfeited the right does not remain to be abandoned. The question of abandonment is one largely of intention, and the burden of proof is upon the one who asserts it. Upon a proper showing, as a general rule, it becomes a question of fact to be determined by the jury. There was no attempt in this case to even submit that question to the jury — no instruction upon that theory was requested by the appellant. We therefore rule this point against appellant on the sole ground that the issue was not raised in the trial below. The judgment is affirmed. All concur.