Brooks v. Northwestern Mutual Life Insurance , 193 Ga. 522 ( 1942 )

1. Where an insurance policy, dated March 4, 1929, provided for payment of the annual premiums in advance on March 4, allowing a grace period of thirty-one days, during which the insurance would remain in full force, for payment of every premium except the first, and provided that "upon default in payment of premium, unless paid within the grace period," the amount of the policy was extended automatically as non-participating term insurance for a designated term from the date of default, on failure to pay a premium according to the terms of the policy the automatic extended insurance provided for in the policy ran from the date the premium became due, and not from the expiration of the grace period for payment of the premium.

2. Where an application for insurance was made on February 12, 1929, and a policy was issued on March 4, 1929, and on May 2, 1929, the applicant requested the insurance company to issue on said application "a policy on the ordinary life plan with waiver of premium contract attached in all other respects the same as originally issued," and a policy was accordingly issued, bearing date of March 4, 1929, and on May 23, 1929, the applicant paid the premium and accepted the policy, and thereafter paid the premium becoming due on March 4, 1930, retaining the policy until his death on October 27, 1933, the term of automatic extended term insurance provided for under the policy ran from the date of default in payment of the premium due on March 4, 1931, and not from the date the first premium was paid and the policy delivered; the insured, having accepted and retained the policy, being bound by its terms.

3. Where a policy of insurance, dated March 4, 1929, providing for the payment of premiums in advance annually on that date, was delivered on May 23, 1929, to the insured and the first annual premium paid, and thereafter the insured paid the premium due on March 4, 1930, and, without payment of other premiums, retained the policy until his death on October 27, 1933, the beneficiary could not in equity reform the policy as to date by making it May 23, 1929, upon the bare allegation that the policy was dated March 4, 1929, "through error and mistake."

4. The court did not err in dismissing the action on general demurrer.

No. 14019. FEBRUARY 16, 1942. Reid, C. J., Atkinson, P. J., and Jenkins and Duckworth, JJ., being disqualified, Judges Humphries, Moore, Hendrix, and A. L. Etheridge were designated for this case.

Mrs. Sarah Brooks, as beneficiary, filed suit against the Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin, to recover on a policy of insurance issued on the life of her husband, John F. Brooks. The policy was dated March 4, 1929. It was alleged that the insured paid the premiums in accordance with the terms of said policy, except the one which fell due on March 4, 1931, and which was not paid within the grace period of 31 days allowed by the policy; that the insured died on October 27, 1933; that the defendant was notified of his death, and it informed the plaintiff that formal proof of death would not be required, as it denied liability under the policy, for the reason that when the insured failed to pay the insurance premium which became due March 4, 1931, the policy lapsed, and in accordance with the agreement it was then changed to term insurance, which expired September 30, 1933, and there was no insurance in force on the life of John F. Brooks at the time of his death. The policy provided for extended insurance as follows: "Upon default in payment of premium, unless paid within the grace period, the amount of this policy and any existing dividend additions, less any indebtedness to the company on account thereof, shall be extended automatically as non-participating term insurance for such time from the date of default as the then cash surrender value will provide at the net single premium rate for the attained age of the insured according to the American Experience Table of Mortality, with interest at 3%." The policy set out a table providing that at the end of the second policy year the term of extended insurance amounted to 2 years and 209 days. The policy provided: "A grace of 31 days, during which time the insurance will remain in full force, shall be allowed for the payment of every premium except the first." Also: "Participating paid-up life insurance for such an amount as the cash surrender value, plus any policy loan indebtedness, which indebtedness shall remain as a lien against this policy, will provide at the net single premium rate for the attained age of the insured according to the American Experience Table of Mortality, with interest at 3%, may be secured in lieu of automatic extended term insurance, upon written request of the insured, and assigns if any, made prior to the default in the premium payment or within the grace period." It was alleged that the insured during said 31 days grace period made no election to accept participating paid-up insurance, and at the end of said 31 days grace period the automatic extended insurance began to run, and under the terms of said policy the same was extended in the full principal sum for a period of 2 years and 209 days from the fourth day of April, 1931, and said automatic extended insurance did not expire until October 31, 1933, four days after the death of the insured; and said policy was in full force and effect at the time of the death of the insured on October 27, 1933. A copy of the insurance policy was attached to the petition.

The defendant demurred to the petition, on the grounds: (1) It sets forth no cause of action against defendant. (2) It shows on its face that the policy sued on was not in full force or effect, either as primary insurance or as extended term insurance, on the alleged date of the insured's death, October 27, 1933. On the contrary it shows that said policy lapsed for non-payment of the annual premium of $170.48, which became due on March 4, 1931, and that under the terms of the policy said insurance was extended from March 4, 1931, until September 30, 1933, which extended insurance expired before the alleged date of insured's death.

The plaintiff amended her pleadings, denominating the original petition as count one, and adding count two, in which it was alleged, that on February 12, 1929, the insured made a written application to the defendant for a policy of insurance known as five-year term policy; that the policy so applied for was issued and dated March 4, 1929, but was never delivered to the insured and never became of force and effect; that on May 2, 1929, the insured made a written request to the defendant to issue in place of said term policy an ordinary life policy upon said application dated February 12, 1929, said request being in the following language: "I hereby request the Northwestern Mutual Life Insurance Company to issue, upon my application dated February 12, 1929, a policy of ordinary life plan with waiver of premium contract attached, in all other respects the same as originally issued;" that no cash remittance for premium accompanied the application of February 12, 1929, or the application dated May 2, 1929, but the premium of $173.84, was paid by the insured on April 20, 1929; that the annual premium quoted by the defendant to the insured for the ordinary life plan, applied for on May 2, 1929, was $173.84, and said annual premium was to cover the cost of said contract of insurance for one year, and the insured was to pay a like sum for each subsequent year that the policy was in force; that said application for ordinary life plan insurance contract was approved by the defendant on or about May 9, 1929; that several days afterward the defendant issued the policy of insurance, a copy of which is attached to the petition; that said policy was sent to the Atlanta agent of the defendant, and on or about May 23, 1929, was delivered by said agent to the insured; that the effective date of said policy was May 23, 1929, and no insurance of any kind went into effect on the life of the insured before the delivery of the policy to the insured.

The application for insurance contained the following provision: "If the premium for the insurance hereby applied for is not paid to the agent at the time of making the application, no insurance shall be effective and no liability shall exist unless and until a policy as applied for is issued and delivered to the applicant and the first premium thereon actually paid during his lifetime." The contract of insurance contained the following: "This policy and the application therefor . . constitute the entire contract between the parties." It was alleged that said policy was dated March 4, 1929, through error and mistake, whereas it should have borne date of May 23, 1929, said date being the effective date of said contract by reason of the provisions of said application and policy hereinbefore set out; that the insured paid all premiums in accordance with the terms of said policy except the third annual premium, which, according to the provisions of said application and policy, was not due and payable until May 23, 1931; that the insured died on October 27, 1933, and the defendant was at once notified of his death; but the defendant informed the plaintiff that formal proof of death would not be required, as it denied liability under the policy, for the reason that when the insured failed to pay the annual premium which became due on March 4, 1931, the policy lapsed, and in accordance with the agreement it was then changed to term insurance which expired on September 30, 1933, and if the insured died on October 27, 1933, there was no insurance on his life in force at the time of his death.

The policy sets out a table providing that at the end of the second policy year the term of extended term insurance amounted to 2 years and 209 days. It was alleged, that the insured, during said 31-day grace period made no election to accept participating paid-up insurance, and that at the end of said 31-day grace period the automatically extended insurance began to run, and under the terms of said policy the same was extended in the full principal sum for 2 years and 209 days from the date of its lapse, and said automatically extended insurance did not expire until two or more months after the death of the insured; and that under the foregoing facts the policy was in full force and effect at the time of the death of the insured on October 27, 1933. The prayer was for judgment on the policy, and that said contract of insurance be reformed as to its date and decreed to be dated May 23, 1929.

The defendant demurred on the grounds: (1) Count 2 sets forth no cause of action against the defendant. (2) It shows on its face that the insured and this defendant agreed that the anniversary date of said policy should be March 4 in each year, and that the second premium became due on March 4, 1930, and the third premium on March 4, 1931.

The court sustained said demurrers with the following ruling and order: "The case is controlled by the decision in the case ofMutual Life Insurance Company v. Stegall, 1 Ga. App. 611; and the general demurrers to the original petition, and to the petition as amended as aforesaid, be and the same are hereby sustained, and the petition as amended is hereby dismissed." Count 1 of the petition alleges that the insured paid the premiums in accordance with the terms of the policy, except the one which fell due on March 4, 1931, which was not paid within the grace period allowed by the policy, as follows: "A grace of 31 days, during which time the insurance will remain in full force, shall be allowed for the payment of every premium except the first;" that upon default in payment of premium the amount of the policy was extended automatically as non-participating term insurance for 2 years and 209 days from the date of default, which, it is alleged, occurred at the end of the grace period; and, the insured having died on October 27, 1933, that the policy was in force as extended term insurance at the time of his death. The policy itself defines default. The provision for extended term insurance is: "Upon default in payment of premium, unless paid within the grace period," extended term insurance will automatically result. The clause relating to participating paid-up insurance in lieu of extended insurance, if the insured should elect to take the same, begins: "Upon written request of the insured, and assigns, if any, made prior to the default inthe premium payment or within the grace period." It follows, therefore, that under the provisions of the policy, default in payment of the premium due on March 4, 1931, resulted when payment was not made on that date, and not at the end of the grace period of 31 days; and that at the time of the death of the insured on October 27, 1933, the policy had lapsed, and there was no insurance in force at the time of the death of the insured.

The policy dated March 4, 1929, provided: "This policy and the application therefor . . constitute the entire contract between the parties." The application for the insurance provided, that "if the premium for the insurance hereby applied for is not paid to the agent at the time of making the application, no insurance shall be effected and no liability shall exist unless and until a policy as applied for is issued and delivered to the applicant and the first premium thereon actually paid during his lifetime." It is alleged, that subsequently to the issuance of the policy the insured, on May 2, 1929, applied for a different form of policy, as follows: "I hereby request the Northwestern Mutual Insurance Company to issue, upon my application dated February 12, 1929, a policy on the ordinary life plan, with waiver of premium contract attached, in all other respects the same as originally issued;" that the policy thus applied for, dated March 4, 1929, was not delivered until May 23, 1929, which, by reason of the provisions of said application and policy, became the effective date of the policy; that the period for which insurance was actually paid was two years subsequent to May 23, 1929; and that the extended term insurance provided for in the policy and application ran from May 23, 1931, for two years and 209 days, and was in full force and effect at the date of the death of the insured, October 27, 1933.

In Mutual Life Insurance Co. v. Stegall, 1 Ga. App. 611 (58 S.E. 79), the insurance policy was dated August 30, 1904, and required payment of the annual premiums in advance on August 30. The policy was accepted and the first premium paid on November 19, 1904. No premium thereafter was paid. The insured died on October 29, 1905. The court held that the contention that acceptance of the policy on November 19, 1904, had the effect of continuing the policy in full force for one year from that date was unsound as a matter of law. The stipulation in the application, to the effect that the contract to be issued thereunder should not take effect until the first premium was paid, being for the benefit of the insurer, the insured, having accepted the policy and paid the premium thereon, was bound by the provisions of the policy as to payment of premiums.

The Stegall decision was approved in Kesler v. CommercialCasualty Insurance Co., 39 Ga. App. 197 (146 S.E. 506), where it was said that in the Stegall case "the insurer had accepted the application and was tendering insurance according to the terms thereof during the entire period from August 30 to November 19. It was the fault of the applicant that he was not insured in the meantime." This construction of the policy is in harmony with the weight of authority in other jurisdictions. The general rule, as declared in Wilkie v. New York Mutual Life Insurance Co., 196 N.C. 513 (60 S.E. 427), is "that where a policy expressly specifies the date on which it is to take effect, and the date on which recurring premiums are due and payable, such date must be held controlling regardless of the date on which the policy is delivered, and notwithstanding the reservation that the insurance is not effective until the policy is delivered and the first premium paid." Pace v. New York Life Insurance Co., 219 N.C. 451 (14 S.E.2d 411-14), and numerous cases annotated in 6 A.L.R. 774, and 32 A.L.R. 1253; Wilkinson v. Commonwealth Life Insurance Co. (Ky.App.), 197 S.W. 557.

The case of Parham v. National Relief Assurance Co.,33 Ga. App. 59 (125 S.E. 519), was decided on the theory that the policy contained conflicting provisions, and the court applied the rule that in such case that construction most favorable to the insured would be adopted; the policy there involved being a monthly renewable policy, and providing that the insured was insured from twelve o'clock noon of March 28, 1921, until twelve o'clock noon of May 1, 1921, and for such periods stated in the renewal receipts as the renewal premium of $3.72 per month paid by the insured would maintain the policy in force.

Count 2 of petition claims, (a) that the policy ran from the date of delivery, May 23, 1929; and (b) that through error and mistake the policy was dated March 4, 1929; and prays that the policy be so reformed as to conform to the date of delivery; that by proper decree the policy be declared to be dated May 23, 1929. The application for change in the form of the contract, referring to the policy as originally issued March 4, 1929, asks that an ordinary life plan policy be issued on the original application of February 12, 1929, "in all other respects the same as originally issued." It does not appear that the policy as subsequently issued was not in accordance with the application for change in the form of the policy, and "in all other respects the same as originally issued." The insured accepted the policy as thus issued, paid two yearly premiums thereon, and never made any complaint as to the form of the contract. It is the beneficiary named in the policy who now asks for a reformation of the contract, notwithstanding the acceptance and retention of the policy by the insured. The beneficiary did not contract with the insurer, and her rights under the policy did not become absolute so long as the insured lived; the policy having been issued "with reservation to the insured of the right of revocation and change of beneficiary." The petition alleges only that the policy was dated March 4, 1929, "through error and mistake, when it should have borne the date of May 23, 1929."

"In all cases of a mistake of fact material to the contract or other matter affected by it, if the party complaining applies within a reasonable time, equity will relieve." Code, § 37-206. But "Equity will not reform a written contract, unless the mistake is shown to be the mistake of both parties" (§ 37-207); nor will it do so if the party could by reasonable diligence have ascertained the truth as to the matter concerning which the mistake was made. Keith v. Brewster, 114 Ga. 176 (39 S.E. 850). Error and mistake, without being mutual, is insufficient. Where it is sought to reform a contract based on a mutual mistake, the petition must allege the particular mistake, and show how it occurred. In Frank v. Nathan, 159 Ga. 202, 208 (125 S.E. 66), this court said: Even "If mistake is relied on, it must be distinctly charged and stated with precision, the particular mistake being shown, and how it occurred. In other words, the pleader should state why the terms of the actual contract happened to be left out, and how the terms not agreed on came to be inserted. 23 Rawle C. L. 361." See Helton v. Shelnut,186 Ga. 185 (197 S.E. 287); Crim v. Alston, 169 Ga. 852 (151 S.E. 807). If the beneficiary has the right to prosecute this suit for reformation, that right would not be broader than the right of the insured if the suit had been brought by him at the time this suit was filed.

"Where a policy of life insurance which was duly delivered to an applicant differed in any material respect from the kind of policy for which he had contracted, it was his duty, if he did not desire to retain and accept the policy received by him, to return or offer to return the same within a reasonable time to the company, or an agent thereof authorized to receive it."Leigh v. Brown, 99 Ga. 258 (25 S.E. 621); Johnson v.White, 120 Ga. 1010 (2) (48 S.E. 426); Wells v. HartfordFire Insurance Co., 36 Ga. App. 789 (138 S.E. 276). "Equity will not lend its aid to reform a written contract because of mistake as to its contents on the part of a complaining party who was able to read, and fraud of the other party which consisted only in making false representations as to such contents, on which the complaining party relied as true because of confidence in the party making them, no confidential relation existing between the parties, and no sufficient excuse appearing why the complaining party did not read the instrument." Green v.Johnson, 153 Ga. 738 (113 S.E. 402). In this case it does not appear that any fraud was practiced or any confidential relation existed. It is not alleged that the policy as issued is different from the kind of policy applied for. The insured accepted the policy on May 23, 1929, paid the premiums thereon, and retained it without objection or criticism as long as he lived; and it was only after his death that the question of fraud or mistake was raised by the beneficiary under the policy.

The judgment dismissing the action on demurrer is

Affirmed. All the Justices and Judges concur, exceptHumphries, J., absent because of illness.