Alabama Nat. Life Ins. Co. v. Smith , 214 Ala. 585 ( 1926 )

Opinion. The inquiry is: Did the policy have a loan value, in excess of the unpaid loan, to carry the policy to the death of the insured, notwithstanding nonpayment of premium? The loan clause expressly declares the loan values shown in the table shall begin when the contract "shall have been in force two years * * * and the premiums on the contract shall be paid in full to the end of the next policy year."

The table shows a loan value of $73 at the end of the second policy year, or when the policy has been in force two years. The second policy year ended March 25, 1921. On payment of the renewal premium of March 26, 1921, keeping the policy in force for the third year, the loan value of $73 accrued on the policy. This sum was borrowed by the insured in the following month. The increased loan value of $112 at the end of the third policy year, when the policy had been in force three years, could accrue under the policy only on payment of the fourth premium March 26, 1922. This was never paid. No funds came to the hands of the insurer to pass to the reserve as a basis of increased loan value. It results that the loan of $73 consumed the loan value, and left no residue to purchase extended insurance.

Other features of the contract harmonize with the terms of the loan clause. The first guaranteed dividend coupon was payable March 26, 1922, "provided all premiums due on said policy up to and including said date have been paid." The premium of that date never having been paid, no unused coupon could become available to extend the policy under the nonforfeiture clause. The list of loan values in the table shows accelerating yearly additions as the policy grows older. The increase at end of third year is $39, that of the nineteenth $80.

It appears in evidence that more than the first premium is consumed in expense. If $73 is the loan value at the end of the second year without payment of the third premium, the insurer operates at a net loss in such event. The table further shows the loan value at the end of the nineteenth policy year to be $1,000, the face of the policy. If this accrues without the payment of the twentieth premium, the insured could draw as a loan on the policy after payment of 19 premiums the same he would draw at the end of the twentieth year for 20 premiums, less the year's interest. These considerations indicate that the insurer, in framing the contract, had no such intent as insisted upon by appellee.

True, the contract must be construed favorably to the insured, and if the insurer has so written it as to reasonably import a liability, he should be held to it. The nonforfeiture clause does, in its opening words, indicate a loan value after "premiums have been paid for two or more years"; but the same clause limits its extended insurance provisions to the loan values, not there given, but expressly fixed in other clauses of the contract. Necessarily, the insured would have to look to these other provisions for loan values. We are constrained to hold the policy lapsed for nonpayment of premium March 26, 1922. Meridian Life Ins. Co. v. Hobbs, 200 Ala. 487, and cases cited on page 488, 76 So. 429, L.R.A. 1918A, 904; Fidelity Mutual Ins. Co. v. Oliver, 111 Miss. 133, 71 So. 302.

The case of Dibrell v. Citizens' National Life Ins. Co.,152 Ky. 208, 153 S.W. 428, in most respects, is very like the case at bar.

The evidence for both plaintiff and defendant is to the effect that the loan was made on the policy. It does not warrant an inference that it was made as a personal loan, not on the security of the policy according to its terms. The rule announced in New York Life Ins. Co. v. Smith, 139 Ala. 303,35 So. 1004, cannot be applied.

In the absence of contract, statute, or course of dealing, no notice of lapse of the policy was required. 3 Joyce on Insurance, §§ 1320, 1321.

Reversed and remanded.

ANDERSON, C. J., and SOMERVILLE and THOMAS, JJ., concur,