244 A.D. 357 | N.Y. App. Div. | 1935
Summary judgment has been granted in favor of the plaintiff, the beneficiary named in a life insurance policy issued by the defendant upon the life of one Joseph I. Rosenblum.
The insured died on December 21, 1932. The policy provides for the payment of an annual premium of $63.90 on the third day of September in each year until the death of the insured. The face amount is payable to the beneficiary upon receipt of due proof of death, provided the policy is then in force. The premium which fell due on September 3, 1932, was not then paid nor within the period of grace provided in the policy. It remained unpaid when the insured died over three months later. Notwithstanding this default, it is contended by the plaintiff that the policy was in effect at the death of the insured, because it had a cash surrender value of $333 on the date of default, and also because the defendant had in its possession accumulated dividends belonging to the insured of $359.47, which, it is claimed, it was obligated to apply either to the purchase of extended term insurance or to the payment of the premium.
The decision depends upon the interpretation to be accorded to the policy. It provides under “ Options on Surrender or Lapse ”
The policy further provides: “ If there be any indebtedness against this policy, the cash surrender value shall be reduced thereby, the paid-up insurance shall be reduced proportionately, and the extended term insurance shall be for the face amount of the policy less the indebtedness and for such period as the reduced cash value will purchase.”
On September 3, 1932, the date of the default, thirteen annual premiums had been paid and the cash surrender value of the policy was $333. At the same time there was outstanding a loan against the policy of $333, made to the insured upon the sole security thereof. Consequently, under the provisions of the policy relating to “ Options on Surrender or Lapse,” the cash value of $333 was offset by the indebtedness against the policy of an equal amount, the reduced cash surrender value was nil and there was no surplus available for the purchase of extended term insurance.
The plaintiff contends, however, that the defendant was not justified in applying the cash surrender value of .$333 to the payment of the loan, thereby leaving no funds available for the purchase of extended term insurance. This contention is based upon a clause of the policy under the provision which relates to “ Loans ” and which reads as follows: “ Failure to repay such loan or to pay interest thereon shall not avoid this policy unless the total indebtedness hereon shall equal the total loan value, nor until thirty-one days after notice shall have been mailed to the Insured, and to the assignee of record, if any, to their addresses last known to the Society.” It is conceded that notice was not given in accordance with this provision which, the plaintiff contends, became controlling when the loan became due and was not paid. However, loans made on policies of life insurance, unlike commercial loans, do not constitute personal obligations payable at a specific date but are treated as advances against the policy repayable only out of any proceeds at maturity. (Orleans Parish v. New York Life Ins. Co., 216 U. S. 517; Williams v. Union Central Life Ins. Co., 291 id. 170; Wagner v. Thieriot, 203 App. Div. 757; affd.,
We next proceed to consider the plaintiff’s contention that the company was required to apply the $359.47 of accumulated dividends either to .the payment of the premium due September 3, 1932, in order to prevent a default on the policy or to continue the policy for the amount thereof as extended term insurance. In the consideration of that question we again refer to the policy which defines the rights of the parties in this respect. Therein provision is made for the determination and distribution annually of the divisible surplus accruing on the policy, and as to such dividends four options are accorded to the insured: (1) To receive them in cash; (2) to apply them to the payment of premiums; (3) to apply them to the purchase of paid-up additional insurance; or (4) to leave them to accumulate at three per cent interest compounded annually with an agreement to increase the interest by any excess interest dividend that may be determined and apportioned and with a further agreement that such accumulations shall be payable upon the maturity of the policy or on any anniversary of the register date. By written notice dated September 16, 1920, the insured elected to allow the 1921 and all future dividends to accumulate with the company at interest. That accu
' In further support of its contention that the $359.47 remaining with the company operated to continue the pohcy as extended term insurance, the plaintiff refers to option (c) under “ Options on Surrender or Lapse,” as follows: “ (c) To continue the insurance for its face amount (and any outstanding dividend additions) as paid-up extended term insurance for the period shown in the above Table, or for such further period, as the dividend additions (if any) will purchase, but without future participation, or right to loans, or double indemnity or total and permanent disability
The judgment and order appealed from should be reversed, with costs, and plaintiff’s motion denied, with ten dollars costs.
Martin, P. J., Merrell, McAvoy and O’Malley, JJ., concur.
Judgment and order reversed, with costs, and motion denied, with ten dollars costs.
