Mutual Life Insurance v. Bratt ex rel. Owings , 1880 Md. LEXIS 147 ( 1880 )

Bowie, J.,

delivered the opinion of the Court.

The question involved in this appeal is the proper construction of a policy of Life Insurance, issued by the appellant to the appellee, in the amount of two thousand dollars for the term of the natural life of the assured.

The policy among other conditions and agreements contained the following, viz.,

2nd. “If the said premiums shall not be paid on or before the days above mentioned, for the payment thereof, at the office of the company in the City of Baltimore, (unless otherwise expressly agreed in writing,) or to agents when they produce receipts signed hy the President or Secretary, then in every such case the said company shall not be liable for the payment of the whole sum assured, but only for an amount proportionate to the number of premiums paid.”

At the trial before the Court upon submission without a jury, the plaintiff, to sustain the issues on his part offered in evidence the charter of the defendant, the policy of insurance and application for insurance thereto annexed upon the life of Henry Bell, and proved the death of said Bell on the third of July, 1878, and that due proof and notice of the same was given to the defendant more than ninety days before the suit was brought; the plaintiff also proved that prior to the decease of said Bell, twenty-seven quarterly premiums had been regularly paid from the date of the policy, and that, thereafter, default was made, and no other- quarterly premiums had been paid, and four other quarterly premiums had after said default become due and were unpaid at the decease of the assured.

The defendant then offered in evidence, subject to exception, certain printed pages of a volume entitled “The Principles and Practice of Life Insurance,” also a printed pamphlet entitled “The Charter and By-Laws of the Mutual Life Insurance Company of Baltimore,” and proved that the same had been printed and circulated prior to the application for said policy by the authority of the Company.

They also offered to prove by the actuary of the company, that he was for many years conversant as an actuary with the business and practice of life insurance, and thoroughly acquainted with- the principles, rules and modes of calculating and adjusting life insurances, and that said volume entitled “ The Principles and Practice of Life Insurance,” is a standard work of recognized authority in the business of life insurance, and the exposition of said rules and principles as read by the defendant from said volume, are recognized and accepted in the business of life insurance as authoritative and correct.

The defendant further proved by the actuary, that condition numbered “ 2nd,” as printed in the body of said policy, which regulates the mode of payment by the company in case default shall have been made in the payment of premiums, is the regular and appropriate formula used in the cases of policies, where the whole premium on an insurance for life is provided to he paid up within a definite number of years upon the non-forfeitahle plan, and that in such cases, under that clause or formula, the mode of payment would he to pay to the party entitled such a proportion of the sum insured, as the number of premiums actually paid would hear to the whole number of premiums contemplated by the policy; for example, in a policy for life to he paid up in ten annual premiums, and default made after the seventh, the proportion would he seventh-tenths of the amount insured, and so in similar cases.

Testimony was further offered to show, that certain tables known as Expectation Tables are never used in the business of insurance, and that in ordinary life insurance the computation upon which all insurance is made and all premiums are calculated is, upon the probability of a life enduring to the utmost limit of human life, viz., to ninety-five years; that as an expert he would under the aforesaid condition of the policy calculate the sum to be paid the plaintiff by the ratio of the number of premiums paid, to the number which might have been paid in case the assured had survived to the age of ninety-five, and which, the age of the assured being given in the policy, would be the proportion which twenty-seven, the premiums actually paid, bears to one hundred and forty, the possible number, comparing the age of the insured to the limit of human life. The defendant also proved hy said witness that the equitable value of this policy at the time of the default made in paying its premiums, according to the known and recognized rule for computing such value would be $429.28, and thereupon the defendant rested.

The plaintiff then offered a series of prayers construing the policy, and defining the proportion of the whole sum •assured, which the plaintiff was entitled to recover; and excluding the evidence offered by the defendant to govern that construction.

The defendant submitted two prayers maintaining his theory, founded upon the, principles laid down in the books offered by him in evidence, and the teslimony of the •actuary.

The Court below, in lieu of the plaintiff’s first prayer, •substituted a ruling of its own; granted the plaintiff’s second prayer, excluding the book called Principles of Life Insurance, and the parts read therefrom by the defendant, as evidence in the cause, and granted the plaintiff’s third prayer with a modification. The defendant’s prayers, affirming, first, that the plaintiff was only entitled to recover the equitable value of the policy at the time of the payment of the last premium; 2ndly. That the proportion of the amount of insurance payable to the plaintiff, is that proportion which the number of premiums paid bears to the whole number of premiums contemplated by the policy at the time it was entered into, and that said whole number of premiums is to be considered with reference to the possible duration of life extending to ninety-five years, etc., were rejected. The defendant appealed from each and every of said rulings in favor of the plaintiff, and against the appellant.

The instruction or ruling granted by the Court, in lieu of the plaintiff’s first prayer, is as follows :

“It being admitted that thirty-one quarterly payments of premiums had accrued at the death of Henry Bell, whose life was insured by the policy offered in evidence, and that twenty-seven of them only had been duly paid by the assured, the Court rules, that according to the true construction of the policy sued on, the plaintiff is entitled to recover fL parts of $2000, the sum for which the life of Bell was insured, with interest, in the discretion of the Court, on the amount so ascertained from the date of the institution of this suit.”

The adoption of this ruling by the Court as its guide in construing the policy, and ascertaining the amount to which the plaintiff is entitled, was virtually a negation of all the defendant’s theories, and of the evidence upon which he based them. There can, we think, be no doubt of the correctness of the action of the Court below in its several rulings. -

The policy sued on, was issued by a Mutual Life Insurance Company, upon what is called the non-forfeitable principle.

“ The fact that the policy is a contract between a mutual company and one of its members, does not modify the construction to be given to its terms. The relations of tbe parties are always to be considered in seeking the true interpretation of their language. But their words used for a definite purpose, and applied to a transaction of well understood character, must be held to convey the meaning and force which is ordinarily applied to them.” Bliss on Life Ins., 656, 657.

The second condition of the policy, provided that in cases of default of payment of premiums, “ then in every such case, the said company shall not be liable for the payment of tbe whole sum assured, but only for an amount proportionate to the number of premiums paid.”

The insurance was to continue for the natural life of the assured. The whole sum assured, was $2000 ; twenty-seven quarterly payments had been made, and four were overdue. If all the quarterly payments had been paid, there could be no question or doubt about the right to recover the whole amount insured, but a part only being paid, equity and justice, as well as the language of the contract dictated, a pro rata amount.

It is the very essence of a non-forfeitable policy, that the insurers should pay in proportion to the premiums received, as prescribed by the conditions.

The appellant contends, the Court erred in rejecting the tables and printed rules of the company, printed and circulated prior to issuing this policy, because the company being a mutual company, the insured was a party to those printed rules and declarations as to the meaning and mode of computing payments upon policies, and that the same were to be taken as if incorporated in the policy itself, and as guides to its meaning and interpretation. The Court below excluded such as they deemed foreign to the contract, but admitted the charter and by-laws, and table No. 1, being the table referred to in the application for insurance. The assured becoming a member of the company, by the act of insurance, was bound by those, but not by the other publications, or the speculative theories of writers, on insurance, or the opinions of experts. Bliss on Ins., ch. 16, sec. 427.

(Decided 17th December, 1880.)

There was no evidence that the printed matter excluded, had been practically adopted by the defendant, in the course of its business transactions. There was no proof of a custom or usage to settle the claims of policy holders in such cases, upon the basis of the equitable value of the policy, or upon the theory that the proportion of the assured was to be ascertained by the ratio of the number of the premiums paid, to the number which might have been paid had the assured survived to the extreme limit of human life, or that the assured had accepted the policy upon such conditions.

The Court below admitted all the documents which tended to show the meaning of the contract, and the rights and obligations of the company and the assured. Notwithstanding the learned and ingenious argument for the appellant, it seems to us, the cases cited by the appellant do not apply to or control a case like the present.

The contract in this instance is susceptible of a reasonable and equitable interpretation, without the aid of extraneous instruments or expert testimony. If it was ambiguous, as contended by the appellant, that construction must be adopted, which is most favorable to the promisee. Bliss on Ins., p. 656, sec. 385.

Finding no error in the rulings of the Court below, the same will he affirmed.

Judgment affirmed.