State Ex Rel. Adams v. Allen. , 343 Mo. 1191 ( 1939 )

ON MOTION FOR REHEARING. On motion for rehearing it is contended that the opinion herein is squarely in conflict with the opinion of this court in State ex rel. Clark v. Becker, 335 Mo. 785, 73 S.W.2d 769. It is argued that there is no substantial difference between the paid-up insurance provision in the policy under consideration in this case and the paid-up insurance provision in the policy considered in that case.

The policy in State ex rel. Clark v. Becker provided that, in case of default after payment of three premiums, "without actionon the part of the holder, the policy will be continued for its value in participating paid-up insurance." We held that this provided "unconditional commutation of the policy for nonforfeitable paid-up insurance." It is true that the policy in that case by Option B provided that "if the holder so elect, the policy will be terminated and the surrender value paid in cash." But that meant that such right was given to the holder to terminate it and take the cash after the unconditional commutation of the policy for nonforfeitable paid-up insurance had occurred. This right continued thereafter during the holder's lifetime and the cash surrender value increased yearly. Likewise, the policy by Option C provided that for ninety days after default the holder had the right to change the nonforfeitable paid-up insurance to extended term insurance for the face amount. This was also a right that accrued after the unconditional commutation of the policy for nonforfeitable paid-up insurance had occurred, but continued thereafter for only a limited period. It does not violate the nonforfeiture statutes to provide for the holder to have the right to change his mind and take either cash or some other form of insurance after the unconditional commutation of a policy for nonforfeitable paid-up insurance has occurred. What does violate it is to place any limitation upon its taking effect or to require any action, election or condition precedent of any kind to put such paid-up insurance into effect. It must become effective automatically at the moment of default, but after it has become effective the holder and the company can make any further agreement they desire to make because the statutes are not concerned with what they may do afterwards, but only with what the holder gets automatically upon default.

In this case, the policy provides that (upon default after payment of three premiums) "the company, without action on the part of the insured, will continue this policy as a paid-up non-participating whole life policy" only "if the insured hasselected no other option." Therefore, the matter of whether the insured has selected any other option has to be determined after default before anyone could say whether or not the holder could have paid-up insurance. Who is to determine that question, and when, and how? The policy does not say. How long does the holder have to select some other option? Up to the moment of default? Or thereafter, and if so, for how long thereafter? Again the policy does not say. By what method is the holder to select some other option; by written contract, by letter, or by calling up on the telephone. Once more the only answer is: The policy does not say. How, then, can the holder, or anyone else, tell what kind of insurance he has at the moment of lapse? Does not this policy, then, require him after default to make some request to have the question determined or to ask for what he wants? The nonforfeiture statutes meant to require that this should be so definitely provided that the holder could tell, from reading his policy only, either before or after default, what he has at the moment of default. Paid-up insurance must take effect, in any event, automatically at the moment of default, or the policy fails to provide for an unconditional commutation of the policy for nonforfeitable paid-up insurance. If that is not provided, then the nonforfeiture statutes provide for and substitute from the moment of default extended term insurance for the face amount of the policy. The opinion, herein, holds that the condition in the provision for paid-up insurance"if the insured has selected no other option," prevents an automatic commencement upon the moment of default of nonforfeitable paid-up insurance. To say the least the insertion of this condition in such language into a so-called automatic option for paid-up insurance makes the provision so indefinite that no one can say whether or not it provides for nonforfeitable paid-up insurance to commence automatically at the moment of default. We, therefore, hold that it does not conflict with State ex rel. Clark v. Becker, in which the automatic provision of the policy was definite and certain.

The motion for rehearing is overruled.