136 Ky. 391 | Ky. Ct. App. | 1910
Opinion op tiie Court by
— Reversing.
Appellant issnecl to Dillard M. Evans a life policy on April 20, 1888, for $2,000, which was payable to appellee, the wife of the insured. The annual premium was $54.80. The premiums were all paid, down to the one due April 20, 1904. The latter was not then paid. On May 15, 1902, the insured borrowed from the company $300 on this policy, secured by a pledge of the policy. The loan agreement. provided that the loan was in no instance to be extended beyond the duration of the policy. The premium due April 20, 1904, not having been paid, the policy was, by its terms, subject to lapse.
On June 11, 1904, the insured applied for reinstatement, furnishing a medical certificate of his health. He then paid in cash $15, one year’s interest in advance on the $300 note above named, $14.80, and 20 cents (the latter as interest) to be applied on the premium then due, and executed the following “blue note”: “Pol. 280131. April 20, 1904. Without grace, six months after date I promise to pay to the order of the New York Life Insurance Co., forty dollars, at Bank of Commerce, Louisville, Ky., value received, with interest at the rate of 5 per cent, per annum. This note is given in part payment of the premium due April 20, 1904, on the above policy, with the understanding that all claims to further insurance, and all benefits whatever, which full payment in cash of
This note was not paid at maturity. Considerable correspondence ensued, the company urging the insured to “reinstate” his policy. He was advised in the first of the letters dated October 26, 1904, that “the above policy lapsed for the nonpayment of the April, 1904, premium on account of the note of $40.00 due October 20, 1904.” The detail of those communications, and of the transaction of'June 11, 1904, will be taken up later on in the opinion. On January 17, 19Q5, the insured sustained a severe injury. On the 19th of January, 1905, he sent the company a draft on a New York bank for $40. He died on January 20, 1905. The bank collected the draft, but referred the matter of reinstatement to its Louisville agency, as the insured did not accompany the draft with a certificate of health. The company had not then learned of the death or of the injury to the insured. It declined to pay the policy. This suit- was brought by the beneficiary to recover the face of the policy less the loan of $300. The company denied liability, on account of the nonpayment of the note named, except that it admitted that on October 20, 1904, when the policy lapsed, as it claims, the net value of the reserve of the policy, after deducting indebtedness, would buy, at the company’s published single rate for one of the then age of the insured, a policy of paid-up insurance of $185, which was tendered in court, hut was declined. Two issues were made by the pleadings: One, that the company had waived its
Whether appellant was entitled to a non-suit verdict depends on whether there was a total failure of proof on behalf of the plaintiff below on either of the issues presented. It is true that the policy as well as the premium note each provides that the policy shall lapse by the fact of the failure of the insured to pay the note. But it is also true that that provision is one wholly for the company’s benefit, and one which it therefore may waive. The waiver may be express, or it may be by such conduct as evinces the purpose of the company not to enforce it. It does not necé'ssarily include the elements of estoppel. It is enough if the company actually elects not to enforce the provisions of forfeiture, or even fails to do so before the policy contract becomes a claim upon the death of the insured. The policy provides for an automatic forfeiture. If the conditions were such that there then remained nothing to be done by the company to consummate the forfeiture, it would operate of its own force. But we will see that such was no,t the 'ease here.
A number of cases have come before this court involving forfeiture features of insurance policies similar in many respects to this one. In those cases, as here, the insuréd had executed premium notes, in lieu
AVliere the insurer, after the policy had lapsed, retained the note merely as evidence of the fact that it had been canceled, and acted consistently with its claim of forfeiture, it is held not to be a waiver of the forfeiture. Moreland v. Union Central, supra; Union Central v. Duvall, supra. If, however, the insurer retains the note as evidence of indebtedness to it, or asserts it as a debt against the insured (which is the same thing), the forfeiture is deemed to have been waived. The reason is, the note is consideration for the carrying of the policy for the full term it represents, say one year. If the insurer asserts it as a debt owing it, then it must concede the equivalent, which is its liability upon the policy for the period represented by the premium note. The company will not be heard to say that the insurer owes it for insuring him for one year, yet deny that he is insured. Other conduct of the insurer denoting its election to consider the insurance as still in force may also operate to waive the forfeiture. The courts are alert to seize upon such circumstances and conduct to relieve from forfeiture; forfeitures being abhorrent to the law.. They have been tolerated in insurance more than in any other character of transaction, because of the supposed necessity of prompt payment by the insured in order to enable the insurer to keep its obligations to its other policy members. But as it is being better understood now that the insured, after they have paid a few premiums, have established a fund, called the “reserve of the policy,” with which to pay the liability of each policy when it matures, insuring themselves with their
The company retained the $40 note. The note is filed in the record as evidence, marked “canceled.” When it was canceled is not clear from the testimony. It is once intimated that it was canceled immediately after its due date, and when it was returned from the Bank of Commerce, unpaid. But this does not ap
There was a loan agreement executed by the insured and his wife to the company in 1902, to secure the $300 loan alluded to. It provided for the payment of interest in advance at the rate of 5 per cent-per annum, and contained this stipulation: “Interest is payable in advance, but in case said loan is repaid cr said policy canceled under section 4, interest will be charged to the date of repayment or of cancellation, and any excess will be refunded.” Section 4, referred to, provides: “That in the event of default in payment of said interest, or of any premiums on said policy, for one month after they shall respectively become due, said party of the first part (the company) which is irrevocably hereby appointed the attorney for that purpose, is hereby authorized at its option to cancel said policy and its accumulations, for the customary cash surrender value then allowed by said party of the first part for the surrender of policies of this class * * * after deducting said loan and accrued interest. ’ ’
The policy had no surrender cash value indorsed on it, available as of the date of its lapse. The stipulation for forfeiting a substantial benefit under the policy as a penalty for the nonpayment of a note for money loaned was in the nature of a usurious exr tortion, and void as against the statutes. N. Y. Life Ins. Co. v. Curry & Bro., 115 Ky. 100, 72 S. W. 736, 24 Ky. Law Rep., 1930, 61 L. R. A. 268, 103 Am. St. Rep., 297.
In addition, four witnesses testified that they had seen and read a letter from the compan3r to the insured, written in January, 1905, in which he was ashed to pay the $40 note past due. The letter was lost. The motion for a peremptory instruction was •then properly overruled.
What occurred after the insured was injured has little relevancy to the issues to be tried. The then payment of the $40 note would not alone have reinstated him, if the policy had actually been canceled previously. Still the fact was relevant as tending to show how the insured and insurer interpreted the correspondence, and the concurrent transaction.
Eeversed and remanded for a new trial under proceedings consistent herewith.