Filley v. Illinois Life Insurance ( 1914 )

The opinion of the court was delivered by

Smith, J.:

The former opinion in this case is found in 91 Kan. 220, 137 Pac. 793. On the reargument the appellant vigorously objects to the following statements in the original opinion:

“The instrument in this case . . . has more resemblance to an old-line policy of insurance than to a mutual benefit certificate. . . . While in old-line insurance cases the interest of the beneficiary is said to vest at the time of the execution of the policy. . . . The provisions of this policy are more like the provisions of old-line life insurance policies than fraternal certificates.” (p. 225.)

It is also contended that the case of Johnson v. United Workmen, 91 Kan. 314, 137 Pac. 1190, is controlling in this case. In that case 'the policy or certificate was issued by a fraternal beneficiary association, defined by section 4303 of the General Statutes of 1909 as follows:

“A fraternal beneficiary association is hereby declared to be such a corporation, society or voluntary association of individuals, formed or organized into a lodge system with ritualistic form of work, or composed of members of an order or society having a lodge system with a ritualistic form of work, or of such members, their wives, widows, or daughters, as shall make provision for the payment of benefits in case of death, sickness, or temporary or permanent disability, and shall be carried on for the sole benefit of its members and their beneficiaries, and npt for profit.”

The distinction between the two policies is fairly made in the Johnson case, supra, as follows:

“In Filley v. Insurance Co., 91 Kan. 220, 137 Pac. 793, the right of a divorced wife to recover upon a policy of insurance, naming her as the beneficiary, is upheld; the distinction between that case and this resting wholly upon the statute (Gen. Stat. 1909, § 4303) which controls in the case of beneficiary associations and which has no force or effect upon ordinary life insurance policies.” (p. 321.)

Practically the only difference between the policy in question and the ordinary life insurance policy is that the Kansas Mutual Life Association, which issued the policy, derived the money to meet its debt demands by what is denominated annual dues of $4, which the holder of each policy agreed to pay to the association on the first of January of each year, and an admission fee of $16, instead of collecting annual premiums. The association agreed to pay on policies only the gross amount collected for so-called dues, less "ten cents for collection, and retained to itself as profits any excess over the amount of the insurance which might be collected from the policyholders. The policy in question was issued in 1883, and there seems to have been no statute of the state at that time authorizing or defining fraternal beneficiary associations.

The defendant is an old-line life insurance company organized for profit, as was also the Kansas Mutual Life Association organized for profit, and not to the policyholders or members of the association.

It appears by the 'exhibit attached to the policy that the Illinois Life Insurance Company presented a proposition to the trustees of the Kansas Mutual Life Association to assume and reinsure the policies of the Kansas company, and that such proposition was duly accepted by unanimous vote of the policyholders, and the Illinois company was subrogated to all the rights, liabilities and obligations of the Kansas company on the policy in question and agreed to assume and carry out the provisions of the policy as in such proposition provided. It thereby appears that the Illinois company acquired the rights of the Kansas company as well as its liabilities. The policyholders, of course, could not transfer the rights of the company; so it is apparent that there was a tripartite agreement, the consideration for which does not appear, nor whether the Kansas company received a profit in the transfer.

It is 'a general rule that one may take out a policy on his own life for the benefit of any person he may choose to designate, in the absence of a statute or of a provision in the constitution or by-laws of the fraternal association to the contrary, and statutory provisions of this character are held prospective and not retrospective in their operation. (1 Cooley’s Briefs on the Law of Insurance, pp. 796-798.) Any provision of our statute subsequent to the issuance of the policy is therefore not applicable to this case. (United States v. American Sugar Co., 202 U. S. 563; Winfree v. Nor. Pac. Ry. Co., 227 U. S. 296; Un. Pac. R. R. v. Laramie Stockyards, 231 U. S. 190.) The fact that the Kansas company collected annual dues instead of premiums did not make it a beneficiary society. (State v. Moore, 38 Ohio St. 7, 10.)

An old-line life insurance company is generally a corporation which insures any applicant who passes the medical examination and otherwise can meet the rules of the company, and the insured does not thereby become a member of the company. Yet> as in this case, the consent of the policyholder would be necessary to substitute another corporation in place of the insurer and to relieve the insurer from liability. On the' other hand, the individual member of a strictly mutual life insurance association or fraternal benefit association is at once an insurer as to his fellow members, and, in turn, is insured by them. None but members of the association are insured. The Kansas Mutual Life Association was not such an association. We adhere to the statement in the former opinion, that “The provisions of this policy are more like the provisions of old-line life insurance policies than fraternal certificates.” (91 Kan. 225.)

It is contended that Fannie E. Filley had no vested interest in the policy of insurance, for the reason that if the insured lived to the age of sixty-four years he had the option of receiving the cash benefit of the policy to himself and thus divesting any interest of Fannie E. Filley therein. This constituted a condition subsequent and not a condition precedent. The general rule seems to be that the person designated as the beneficiary in a life insurance policy is entitled to the benefit, and neither the insured nor the insurer can change it to the detriment of the beneficiary. (Van Bibber’s Adm’r, &c., v. Van Bibber, 82 Ky. 347, 350.)

We think the right to the benefit provided in this policy vested immediately in Fannie E. Filley, subject only to the right of the insured as provided therein. Her right was subject to a defeasance, but was a substantial vested right until the defeasance should occur, and it never did occur. The insured could defeat the beneficiary’s rights under the policy only as provided therein. (Continental Life Insurance Co. v. Palmer, 42 Conn. 60, 19 Am. Rep. 530; Voss v. Life Insurance Co., 119 Mich. 161, 77 N. W. 697.) On reconsideration we are assured of the correctness of the former decision, and it is adhered to.

„ SYLLABUS BY THE COURT. • 1 Life Insurance — When Interest in Policy Becomes Vested in Beneficiary Named in Policy. Whether a policy of life insurance or a benefit policy issued to one for the benefit of another vests a present interest in the beneficiary depends not upon the name or nature of the company but on the terms of the policy, the existing statutes, and the by-laws, if any, by which such company and its policyholders are bound; and when such policy is issued to a member for the benefit of a proper beneficiary, then in the absence of some statute, by-law or contract to the contrary, the beneficiary thereby becomes vested with an interest which can not be destroyed at the will of the insured. 2. Life Insurance — Payable to Wife — Divorce—Remarriage of Assured — Policy Payable to Divorced Wife. Such a policy issued to a member of a mutual company providing that the death benefit should be paid to such member’s wife, naming her, entitled her to such benefit although some years before the death of the insured she was divorced from him, it being shown that after such divorce and after his remarriage the insured kept the annual dues and demands paid and made no attempt to change the beneficiary. 3. Same — Provision for Surrendering Policy — Does Not Impair Vested Interest of Beneficiary. A provision in the policy that should the insured reach the age of sixty-four and so desire he could surrender such policy and receive back his payments with interest, is held to be a condition subsequent not impairing the vested interest of the beneficiary unless and until the insured should reach the designated age and then choose to surrender.

The judgment is reaffirmed.