206 Ky. 361 | Ky. Ct. App. | 1924
Opinion of the Court by
Reversing.
On March 27, 1906, appellant insurance company, issued its policy for $1,000.00 on the life of Thomas E. Harris, of Free Union, Webster county, in consideration of the premium of $33.31 paid that day and the payment of a like sum annually from that date, his wife, Pheba J. Harris, being beneficiary. She predeceased her husband. He paid the premiums in cash for five successive years and thereafter gave his note to the company for $33.31 each year for five more years. He then ceased to pay his premiums either with money or by note but made no election under the terms of the policy, reading:
. “Agreements, Benefits and Privileges Nonforfeiture.
“ (a) Failure to pay any premium, or any part thereof, or any loan or premium note (on account of this policy) or interest thereon, when due, shall cancel the insurance and this contract; if, however, lapse occurs after three full annual premiums have been paid, the company guarantees, at the end of successive policy years, one of the benefits or options of settlement specified in the following table, which are: First, without action of the insured, nonparticipating, continued term insurance, for $-•........................for the specified term; or second, on application and legal surrender of this policy, within three months, a paid up policy (participating, if for $100.00 or more), or third, on application and legal surrender of this policy within three months, a cash value
*363 “ Table op Continued and Paid-up Insurance and Cash Values.
Note: — The same basis on which the above tables are constructed will apply if the policy is continued in force beyond the twentieth year.
(b) Should this policy lapse because of default in the payment of any premium note (on account of this policy) or interest .thereon, all indebtedness to this company on account of this policy shall be deducted from its cash value, and the value of the several options specified in the above table shall be correspondingly reduced; in such case, subject to the conditions of section (a) preceding, the company agrees to pay the balance of said value in cash, or to convert it into an equivalent paid-up policy, or, if no election is made by the insured and beneficiary, to convert said balance into continued term insurance of reduced amount but for the full term mentioned in the table.”
After he ceased to pay and within six years and 183 days, the time the policy is continued in force after five premium payments, the insured died. Application was made for blanks on which to furnish proof of the death and the company denied liability on the policy save to the extent of $40.59, which it tendered and offered to pay, but which tender was refused by the administrator of the insured. This action was then brought upon the policy to recover its face value subject to credit by the five premium notes of $33.31 each, which the deceased had given but not paid in satisfaction of premiums.
It is the contention of the insurance company that by its policy of insurance issued March 27, 1906, it insured the life of T. F. Harris for $1,000.00, conditioned that if the policy should lapse because of default in the payment of any premium, or of any loan or premium note, all indebtedness on account of the said policy should
The company also insists that the tenth annual premium, which was due March 27, 1916, was not paid, and that the indebtedness of the insured to the company on outstanding premium notes amounted to $176.54. At the end of the tenth year, the options provided in the policy table were as follows:
Continued Insurance Paid-up Ins. Cash Values
10 years and 77 days $325.00 $184.01
And deducting the indebtedness on March 27, 1916, of $176.54 from the cash value of $184.01, leaves a balance of $7.47 for the purchase of continued term insurance for 10 years and 77 days, no election having been made to accept the balance in cash, or to convert it into a paid-up policy. If there had been no indebtedness to the company, the cash value at the end of the tenth year, to-wit, $184.01, if converted, into continued term insurance, would have'extended the policy at its full face value of $1,000.00 for 10 years and 77 days. But since the balance, after deducting the indebtedness from the cash value, was only $7.47, by the terms of the policy the amount of insurance, which was automatically extended for the full term of 10 years and 77 days, was $40.59. which is the proportion which $7.47 bears to $184.01. In other words, the insurance is continued for the full term, but is reduced in amount in the proportion which the net balance, after deducting the indebtedness, bears to the cash value. The insured died in the fourteenth month after- the policy lapsed so that the continued insurance for $40.59 was in effect at the time of his death, so argues the company.
It will be observed, however, that there is an exception to the- condition in the policy that the same shall be cancelled upon the failure of the insured to pay a premium or premium note, after three full annual prem
Appellee relies upon the case of the New York Life Ins. Co. v. Van Meter’s Admr., 137 Ky. 4; and the case of Drury’s Admrx. v. New York Life Ins. Co., 115 Ky.
As the judgment appealed from held appellant company liable for the face of the policy, less the premium note with interest, it must be reversed for proceedings consistent with this opinion.
Judgment reversed.