65 F.2d 240 | 5th Cir. | 1933
Nannie May Williams recovered judgment against Union Central Life Insurance Company on a policy of insurance for $10,-000 on the life of her husband, Peter Hardy Williams. The following facts appear: An annual premium of $449.10 was due each June 10th. That for 1930 was paid out of a loan or advance of $848 made against the policy, the insured borrowing at the same time $1,643.63 from the company’s general agents personally for which he gave them his note. Just before June 10, 1931, the company sent Williams a notice, which he received, stating that a premium of $449.10 would be due on that date, subject to a dividend
The controlling assignment of error is on the court’s refusal to instruct a verdict for the defendant. We have not stated the evidence relating to the making of the dividend order of September 18th, nor do we pass upon its sufficiency to show insanity, fraud, or mistake, because we think liability on the policy depends upon the situation on July 11th, the last day of grace for paying the premium. The transaction of September 18th controls only the question whether the dividend belongs to the agents or to Williams’ estate. The terms of the insurance are fixed by the policy, by the statutes under which it was made, and by the advance agreement. It is not disputed that under all of these the policy became void on the thirty-first day after June 10, 1931, for nonpayment of premium unless saved by the provisions for extended insurance; that the reserve or surrender value of the policy at that date was $910 and the advance with interest was $898.-88, the difference being insufficient to extend the insurance even to the last grace day; but that if the dividend of $74.80 be applied to purchase extended insurance or to reduce the advance against the policy the extension would reach beyond the date of death. The case therefore turns upon the disposition of the dividend. Mrs. Williams contends that it is one of the policy values which under the provisions of the statute and the policy are automatically to be applied in extended insurance if no other option be exercised; or, if not, that the company should have applied it to reduce the advance against, the policy, and thus increase the available reserve. The company contends that the dividend is different from the reserve, and is governed by different policy stipulations, and that in the absence of action by Williams it could only be held for him in cash.
A dividend is in its nature clearly to be distinguished from the reserve on a policy both from the standpoint of the insurer and the insured. The reserve is usually required to be set up by law, as well as by the dictates
We are told that these provisions ought to be construed against the company and in favor of the insured. We do not think them so ambiguous as to require any application of that rule. The lapse happened on failure to pay a premium of $447.10. Williams was then in fair health and it was not likely he would soon die. The dividend was under the contract cash belonging to him which the company could not lay out in extended insurance without his direction. Had it done so, and had Williams survived the extension purchased, he could have sued for his misapplied cash. It was for him to say what he would do with the dividend, whether on July 11th he preferred to buy extended insurance for a few months or to save this money for other uses. He said nothing; it remained cash due him.
It is urged that the company ought to have applied the dividend to reduce the advance against the policy so as to increase the reserve available to buy extended insurance. The policy requires no such application. The advance agreement does not pledge the dividends nor even purport to create a debt which might be offset against the dividend. It reads: “In consideration of an advance of $858.00 by the Union Central Life Insurance Company, the receipt of which is hereby acknowledged, I hereby assign to and deposit with said Company as sole security for said advance and interest, its policy No. 940547 on the life of Peter H. Williams, together with the paid-up additions thereto, if any.” It is stated therein: “This advance 'may be paid in full or in part at any time.” But there is no promise by Williams to pay it otherwise than from the policy on its forfeiture or maturity, nor any authority to the company to apply any other credit to it. That such a contract creates no debt but is a mere anticipatory collection of the reserve due on the policy is established in Board of Assessors of Orleans Parish v. New York Life Insurance Co., 216 U. S. 517, 30 S. Ct. 385, 54 L. Ed. 597. We do not think the company had the duty to apply the dividend in part payment of this advance without the request of Williams to do so.
It is next said that the dividend was in fact applied to the advance by the iompany because in the negotiation which went on between the agents and Williams about surrendering this and other policies and maintaining the one for $15,000' the company had sent to the agents a statement of the surrender value of the policy in suit which showed the dividend, $74.80, applied as a credit- and a balance of $81 which was due against the $15,000 policy charged as a debit. This statement, sent with statements of the other policies whose surrender was to free the $15,-000 policy, was only a suggestion of what could be done, not a declaration of what had been done. It did not propose to credit the $74.80 without charging the $81 to the policy in suit. Whatever proposal it did make was rejected by Williams on September 1st, and became of no effect.
The agents in their letter of September 14th communicated to the company that on September 1st Williams, in rejecting the negotiations and refusing to pay anything to the agents, had said he wanted every nickel applied to carrying the policies. There were seven policies involved. This statement was too indefinite to serve as a direction to apply this dividend in any particular way. Moreover, it was too late for him to apply it to extend this policy for it had become void on July 11th, and could only be reinstated on payment of the premium with interest and satisfactory medical examination, and Williams since August 16 had been an ill man.
The notice of cancellation dated October 7th was not one given as provided in the advance agreement in consequence of the indebtedness and advances on the policy having exceeded the loan value of the policy, all premiums being paid, in which ease the insured would have thirty-one days after the notice in which to make payments before his policy would be avoided on this ground. As stated in the notice, the policy had lapsed for failure to pay a premium. The notice was unnecessary to terminate the policy for this cause, and served only to inform Williams that the company understood that all negotiations were off and that the advance against the policy had been paid by the reserve on the policy.
It is lastly urged that the statute of Texas, Rev. Stats, of 1925, art. 4732, applies this dividend to extend the insurance. “No policy of life insurance shall be issued or delivered in this State * * * unless the same shall contain provisions substantially as follows: * * * 7. A provision which, in event of default in premium payments, after premiums shall have been paid for three full years, shall secure to the owner of
Under the evidence discussed, the policy sued on was not of force after July 11, 1931, and the company only owed the declared dividend in respect thereof.
The judgment is reversed, and the cause remanded for further proceedings not inconsistent with this opinion.