43 A.2d 102 | Pa. | 1945
This is a suit on a policy of life insurance issued by the defendant on October 17, 1924, to Thomas F. Walsh, in the amount of $10,000. The insured died on May 4, 1941, and his beneficiary, Elizabeth H. Walsh, brings this action. The defense to this claim is that the policy lapsed on July 19, 1934. The validity of this defense depends on the construction of the following clauses in the insurance policy: *431
"Section 6. The Company will make loans on the sole security of this policy, if there has been no default in payment of premium. The loan may be for any amount which, with interest, shall not exceed the cash value in Table A for the end of the current policy year, less any unpaid premiums for such policy year. . . . Interest shall be at the rate of six per cent per annum payable at the end of each policy year. . . . If interest is not paid when due it shall be added to the principal and bear interest at the same rate, provided the total indebtedness shall be within the limit secured by the cash surrender value of the policy. Otherwise, non-payment of interest shall render the policy null and void thirty-one days after notice shall have been mailed by the Company to the last known addresses of the owner, of the insured. . . .
"Section 8 . . . . the amount of any premium not paid before the end of the grace period will automatically be loaned by the Company in payment of such premium and charged as an indebtedness secured by this policy, subject to interest at the rate of six per cent. per annum as prescribed for loans, provided that the total indebtedness hereunder will then be within the loan value described in Section 6. If the loan value is insufficient to cover the whole premium, the Company will loan a pro rata premium for as long a period as the loan value will allow. At the end of such period, if the balance of the premium be not paid, this policy shall cease; subject, however, to 31 days' notice as provided in Section 6 hereof."
The facts are as follows: The insured paid all the premiums up to and including premium due on January 17, 1933. On April 12, 1933, the insured made a cash loan against said policy in the amount of $615. On October 17, 1933, which was the end of the policy year, interest from April 12, 1933 to October 17, 1933, in the sum of $18.96 fell due and was added to the principal of the loan, making a total due of $633.96, with reference to the cash loan. *432
The April 17, 1933 and July 17, 1933, premiums were not paid by the insured and the amounts of these premiums were loaned by the company under the provisions of Section 8 known as the automatic premium loan provision. On October 17, 1933 and January 17, 1934, the premiums were not paid by the insured and the company made loans under Section 8 of pro rata premiums of $26.23 and $42.03, respectively, and each time sent a thirty-one days' notice to the insured, stipulating that he must pay the balance of the premium by a certain date, and both times insured paid the balance of the premium.
The next quarterly premium date was April 17, 1934, and the insured did not pay that premium, but within the period of grace, upon the payment of the sum of $14.85, obtained an extension of payment for the balance of the premium, $64.15, for a period of seventeen days, or until May 4, 1934. Under the grace period the insured actually had until June 4, 1934, in which to pay the balance of the premium, which he failed to do. Nothing was done by the company on June 4, 1934, but on June 18, 1934, a notice was mailed by the company to the insured, as follows: "Since the premium under the above numbered policy due April 17th, 1934, was not paid and the loan value of the policy was not sufficient to pay the entire premium, the Company has loaned the entire value of the policy in payment of a pro rata premium for as long a period as the loan value would allow. In conformity with the terms of the policy, you are hereby notified that the balance of this premium amounts to $64.15, and if not paid within 31 days after date of this notice, which date is the date on which this notice is mailed by the Company, the policy will cease.
"Our General Agent, R. H. Miller, Select Building, Scranton, Pennsylvania, to whom all payments should be made will offer any possible assistance to aid you in keeping your policy in force, and will be glad to furnish you with any further information you may desire." *433
After sending the above notice on June 4, 1934, the company made a calculation which revealed that it was not warranted under the automatic premium loan clause to lend a sufficient sum of money to carry this policy to July 19, 1934. These calculations showed that if a loan had been made sufficient to maintain the policy for the period stated, the indebtedness would have been $969.08. The cash value of the policy on that date, if all premiums had been paid, would have been $953.56.
Appellant contends that the company erred in including in its calculation of indebtedness, the sum of $19.02, this being an item of interest on the cash loan for the six months' period from October 17, 1933 to April 17, 1934. If that item hadnot been included in the company's calculation, the indebtedness would have been only $950.06, or $2.50 less than the cash value of the policy.
The initial question is: Was the company justified in charging interest on the loan covered by this policy for the six months' period above stated, or was it obliged under the terms of the policy to wait until the end of the policy year, i.e., October 17, 1934, before adding interest to the "loan charge" on the policy?
All matters in controversy were referred to Sidney Grabowski, Esq., who after a hearing filed his report in which he held as conclusions of law that "under the terms of the policy, interest on the cash loan was due only at the end of each policy year," and that "the policy does not authorize the defendant to include in its calculations of indebtedness the amount of interest to any intermediate date, other than the end of the policy year, for the purpose of determining the loan value of the policy available for automatic premium loans" and "the defendant had no right to include interest of $19.02 on the cash loan for a period from October 17, 1933 to April 17, 1934, in calculating the indebtedness on the policy as of July 19, 1934.
The Referee cited as authority for his conclusions the case of Roeser v. National Life Ins. Co., *434
On the anniversary date, November 7, 1931, the cash value exceeded the amount of the obligations by $62.16. On March 9, 1932, the defendant calculated the interest to that date at $62.40 and notified the insured in writing that the policy would become null and void if such interest was not paid within thirty-one days. *435
The company then undertook to calculate the interest eight months in advance of the anniversary date on the theory that the principal and interest so accrued would then exceed the cash or loan value of the policy on the previous anniversary date. The court below in that case and the Superior Court held that "this could not be done under the terms of the policy or the loan agreements."
The Superior Court, in an able opinion by Judge PARKER, later Justice PARKER of this Court, said: " 'That an existing doubt as to the construction of the different parts of a policy of insurance must be resolved in favor of the insured is familiar law': Carter v. Metropolitan Life Ins. Co.,
"We are of the opinion that the condition in the policy loan agreements that whenever such indebtedness *436
and the interest thereon shall exceed the loan value of the policy it might, after notification, be forfeited, means interest that is not paid at the time it is due according to the contract, that this interest was not due until the end of the policy year, and that the policy was not subject to forfeiture at the time notice was given. 'Forfeitures are odious in law, and are enforced only where there is the clearest evidence that that was what was meant by the stipulations of the parties': Helme v. Phila. Life Ins. Co.,
The authority just cited clearly decides that in cases arising under contracts like the one before us, it is the interest due and payable and not the interest accrued that must be taken as the interest factor in the calculations. A similar conclusion was reached in the cases of Senin, Admr., v.Metropolitan Life Ins. Co., 153 Pa. Sup. Co. 658, and New YorkLife Ins. Co. v. Shivley,
The Referee then said: "The question now arises whether the policy was still in force at the time of the death of the insured, who died on May 4, 1941. We have no difficulty in finding that the defendant did not exercise strictly its right to a forfeiture of the policy and that the forfeiture was not justified and was unlawful for several reasons: In the first place, the notice was premature, in that the policy by its terms would not have lapsed on July 19, 1934, as noted above; in the second place, the notice was not strictly in accordance with the provisions of the policy; in the third place, the company demanded a payment greater than it should have." In its letter of June 18, 1934, pursuant to which letter the company claimed the policy lapsed, the company took the position that it had "loaned the entire value of the policy in payment of a pro rate premium." The Referee properly found that such was not the fact. *437 The Referee pointed out: "Even on the defendant's own calculations there was some loan value on May 4 and on June 18. Instead of making such a loan, the company demanded payment of the full balance of the premium due May 4, to wit: $64.15, and notified the insured that if this amount was not paid within thirty-one days after the date of the notice, June 18, 1934, the policy will cease. Under these circumstances, the insured was misled when he was informed that the loan value had been used up to pay a pro rata premium and the amount demanded was for more than he should have been required to pay."
But the Referee also specifically found that "the insured abandoned all right, title and interest in and to the policy, if any he had." The question now comes to this: Is there sufficient competent evidence to support this finding? This evidence, if it exists, must be found in inferences drawn from plaintiff's conduct in respect to the policy. It is undisputed that the insured made no objection to the defendant's statement in the letter of June 18, 1934, that if the balance of the premiums, amounting to $64.15, is "not paid within 31 days after date of this policy . . . the policy will cease." The Referee stated in his report: "No premium or tender of payment of premium has been made either on October 17, 1934, or on any other subsequent quarterly premium payment date, or at any time up to the date of the death of the insured on May 4, 1941. In fact, twenty-eight premium dates passed since the forfeiture was declared." The insured did not even take exception to the letter of June 18th even to the extent of suing on the contract to recover damages for its breach or suing in assumpsit to recover the money paid on it. In Gaskill v. Pittsburgh Life Trust Co.,
According to the theory of the appellee, when an insurance company makes an error in its interpretation or in its calculation and erroneously states to an insured that if he does not pay a certain amount by a certain date, his policy will lapse for non-payment of premiums, that statement so based on such an error is tantamount to giving the insured a paid-up life insurance policy, and the insured's duty in respect to that policy is completely terminated. While courts have gone far in interpreting insurance contracts in favor of the insured when questions have arisen as to the continued existence of an insurance policy under certain conditions even when premiums have not been paid, we do not believe that any court has gone as far as appellee would have us go in this case. The facts in this case do not bring it within the general rule stated by Joyce on Insurance, Vol. 2, sec. 1123, p. 2240, as follows: "If the company has expressly declared a forfeiture of the policy, and it is clearly apparent from acts or declarations that a tender would not be accepted, or if it has declared a forfeiture and refused the premium, the fact that there has been a failure subsequently to pay or tender the premiums as they fell due will not prevent a recovery on the policy."
In the instant case the company did not declare the policy forfeited or give any indication that a tender of premiums would not be accepted. The company asked for a tender of premiums on July 19, 1934, (when a premium was not in fact due), and it said that if the premium was not paid then "the policy will cease." Upon receipt of this notice it was the insured's duty to *439 call the company's attention to the error in its calculation and to challenge its statement as to the date the policy "will cease." Instead of doing this, the insured apparently accepted the company's calculations and conclusions and never thereafter tendered any premiums. We cannot reasonably believe that the insured had any idea that he was, by the letter of June 18th, being presented with a paid-up life insurance policy. He knew that to keep a policy alive (before it becomes a fully paid-up policy) premiums must be paid when they are due or within 31 days thereafter. When after the receipt of the letter of June 18th the insured did nothing in respect to this policy the inference is legitimate that he considered it as terminating on July 19, 1934, and accepted the situation. If he had wished to keep his policy in force after the latter date, he would have challenged the defendant's statement, and would have said that according to the loan value of this policy, it remains in force until a date subsequent to July 19, 1934, and at that subsequent date, the premium then due will be forthcoming. Of course, if the insured had died after July 19, 1934, but before the "subsequent date," the beneficiary could have recovered on the policy. The subsequent date was apparently July 23, 1934.1 It certainly was not May 4, 1941, when the insured died. That the insured looked upon the policy as having "ceased" is indicated by the fact that three months after he received the letter of June 18, 1934, he applied to the original soliciting agent for a new policy and stated in his application *440 that the only policy then in force on his life was another policy which had been issued by defendant in 1933. (The policy involved in this suit had been issued in 1924.)
If on July 19, 1934, the company had declared the policy forfeited and during the few days period which intervened before the company had the right to declare the policy forfeited, the insured had tendered the premium due to keep the policy in force thereafter and if the company had refused such tender, we would have a factual situation where the insured would have been under no obligation to make further tender of premiums, in order to keep the policy in force. An insured is not required to make tender of premiums where the company by its action plainly tells him that his tenders will be refused.2 But that was not the situation in the instant case. The company by its letter of June 18th really invited the insured to pay the premiums so that the policy could remain in force and offered the assistance of its agent in keeping the policy in force.
We have found no other case in which the facts are like those in the case at bar, but the reasoning in the opinions in certain analogous cases support the conclusion reached by the Referee in this case. In William E. Clow et al. v. Western LifeIndemnity Company, *441
182 Ill. App. Ct. Rep. 251, it was held that a member of a life indemnity company who was unlawfully suspended from the membership and who, after a compromise agreement for a settlement of the dispute has been reached, abandoned the negotiations with the company, had abandoned his policy and acquiesced in its cancellation. In the instant case the insured did not even enter into negotiations, though the letter of June 18th, in substance invited him to do so. He really took an attitude of "let it go." In Swayze v. Mutual Life Ins. Co.,
In Mutual Life Insurance Co. v. Hill,
"Courts have always set their faces against an insurance company which, having received its premiums, has sought by technical defenses to avoid payment, and in like manner should they set their faces against an effort to exact payment from an insurance company when the premiums have deliberately been left unpaid. . . . We are satisfied that the thought never occurred to Rex [the insured] during his lifetime that he had a claim against this company on the policy which had been issued so many years before, or, if he did, after the lapse of any appreciable time, it was a dishonest thought, for he knew that he had not performed the duties which devolved upon him under the contract, and that he had no rights thereunder; and there seems to be no just reason why his administrator should demand rights which he virtually waived."3
We sustain the Referee's finding and conclusion as follows: "Taking into account the fact that after notice *443 of the lapse, the insured took no active steps to repudiate the asserted forfeiture, kept inactive and silent, made no objection to the notice of lapse, no tender of payment of premiums, and a period having elapsed equal to the period of the statute of limitations, the insured is held to have abandoned his contract of insurance, the policy in this suit. For that reason, the policy was not in force at the time of his death and plaintiff should not recover."
The judgment of the court below reversing the judgment of the Referee is reversed, and judgment is here entered for the defendant.
