Gilley v. Missouri State Life Insurance , 116 Tex. 43 ( 1926 )

We referred the motion for rehearing filed in this cause by the plaintiff in error, Maud H. Gilley, to the Commission of Appeals as now constituted for consideration. The Commission, after re-examining the opinion written by Judge German while a member thereof, in connection with the motion and the record, have recommended to us that the motion be overruled. Out of deference to the earnest insistence of counsel, we have also re-examined the entire case, and reached the conclusion that the Commission of Appeals correctly answered the certified questions in its original opinion. We will state our reasons for this conclusion.

The insurance policy involved is one by which the insurance company agreed to pay to the insured's wife $5,000 upon his death, provided that death occurred at a time when the policy was still in force, "and before the expiration of twenty years from the date hereof." This plainly makes the policy a "term insurance policy," unless it contain provisions to the contrary. The policy does not contain any such further provisions. On the contrary, methods 1 and 2 set forth in the policy make provision for the conversion of the policy actually issued into whole life or endowment insurance. Thus by means of language of inclusion and exclusion it is made manifest that the policy is simply a life insurance policy insuring the life of Gilley for twenty years, without any provision that indicates that it was the purpose to issue an endowment or whole life policy. In fact, the policy itself is described as a "twenty-year term non-participating" policy, and expressly declares: "The cost of this insurance does not depend upon the profits of the company, nor does the policy participate in such profits."

The expression contained in Revised Statutes (1911), Art. 4741, "term insurance" or "term insurances," given its usual and ordinary meaning, means insurance for a fixed time. The word "term" as used in various connections is uniformly given the meaning of a fixed or definite time, whether it relates to days or other fixed periods of time. See generally Words Phrases, Vol. 8, pp. 6819 et seq.; Southland Life Ins. Co. v. Hopkins, 219 S.W. 254, 244 S.W. 989.

The importance of determining whether the policy involved is a term policy within the meaning and purview of certain provisions of Revised Statutes, Art. 4741, is apparent from the opinion of the Commission of Appeals heretofore filed in this case, and will be hereafter adverted to.

Aside from what has just been said in concluding that the policy involved is one of "term insurances," we direct attention to the fact that Revised Statutes, Art. 4759, provides that life insurance companies shall within five days after the issuance and placing on the market of any form of policy of life insurance file a copy of such policy with the Department of Insurance and Banking. The purpose of this provision is clearly shown by the general statutes prescribing the duty of the Commissioner of Insurance and Banking, which are contained in Chap. 7, Title 65, Vernon's Complete Texas Statutes, Edition of 1920. It is unnecessary to refer to or quote the various provisions involved, since Subd. 1 of Art. 4493 expressly declares that it shall be the duty of the Commissioner of Insurance "to see that all laws respecting insurance and insurance companies are faithfully executed." Reading the two articles referred to together, it is obvious that it was the duty of the Commissioner of Insurance and Banking to see that the requirements of Art. 4741 were complied with in all policies of insurance placed upon the market by the company involved in this case, as well as other companies. The requirements of the article referred to necessary to be considered in the case before us are Subds. 6 to 9, inclusive, of that article.

Subd. 6 is one which prescribes a loan value for an insurance policy after it has been in force three years, and sets forth the method by which this value is to be ascertained. The subdivision expressly says: "This provision shall not be required in term insurances." It is obvious, therefore, that in the case of a term insurance policy it was unnecessary to set forth therein the option accorded the policy holder by Subd. 6 of this article. If the policy was not a term insurance policy, nor a single premium policy, then under the first paragraph of the article the privilege declared in Subd. 6 was required to be inserted in the policy. The policy issued in this case contained no such loan value option.

Subd. 7 of Art. 4741 provides for a certain form of paid-up insurance and for a cash surrender value. This provision, however, does not apply to "term insurances." The policy before us contains no such provision. If the policy before us was not one of "term insurances," then obviously it was the duty of the Commissioner to require that form of policy to be withdrawn from the market, or to take some other action to enforce the law relative thereto. It is not contended that the form of policy before us was condemned by the Commissioner of Insurance, or that he took any action to prevent its use.

It is plain, therefore, that the Department of Insurance and Banking has by its acquiescence in the sale of the policy here involved concluded that the policy was one of "term insurances," and therefore not subject to Subds. 6 and 7 of Art. 4741.

The Department of Insurance is organized for the very purpose of enforcing the insurance laws. It has no reason for existence except to enforce the insurance laws. In doing this many duties are prescribed, but the basis of all of them is to see that the statutes of the State enacted for the protection of the people are complied with by insurance companies. It would be idle to say that under these statutes it is not the duty of the Insurance Commissioner to see that insurance companies issue only policies authorized and permitted by the law. We have no doubt that the departmental view of the type of policy here involved has heretofore been that it was a term insurance policy, for otherwise the issuance of such policy would not have been permitted by that department.

The view here expressed is consistent with the testimony of Mr. C. P. Rockwell, actuary for the State Department of Insurance and Banking, who testified in this case that "a term policy is one in which the company agrees to pay the beneficiary of the insured the face amount of the policy, provided the insured dies within the time specified in the policy."

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"When I testified in this case some time recently there was shown me policy No. 316191, issued by the Hartford Life Insurance Company, dated May 11, 1912, upon the life of George W. Gilley. Said policy is what is ordinarily termed by life insurance actuaries a term policy."

Other actuaries for insurance companies who testified in the case also testified that the policy involved was a term policy. We have no doubt, therefore, that the policy was one of "term insurances" such as are specifically exempted by the statute from Subds. 6 and 7 of Art. 4741.

It may be true that the policy involved in the case of Mutual Reserve Life Insurance Company v. Roth, 122 Fed., 853, was also a term insurance policy, but, regardless of that fact, we think it likewise true that the policy before us is a term policy within the meaning of our statutes.

Subds. 8 and 9 of Art. 4741 read as follows:

"8. A table showing in figures the loan values, and the options available under the policies each year, upon default in premium payments during the first twenty years of the policy or the period during which premiums are payable, beginning with the year in which such values and options become available."

"9. A provision that if, in event of default in premium payments, the value of the policy shall be applied to the purchase of other insurances; and if such insurance shall be in force and the original policy shall not have been surrendered to the company and canceled, the policy may be reinstated within three years from such default, upon evidence of insurability satisfactory to the company and payments of arrears of premiums with interest."

It will be noted that neither of these subdivisions contains special language exempting term policies from their provisions. We think, however, that these subdivisions must be read and interpreted in connection with Subds. 6 and 7, which do not apply to term insurances.

It is to be noted that Subd. 8 requires that there shall be inserted in all policies to which it is applicable a table showing in figures the loan values and options available under the policy. To say the least of it, this subdivision necessarily embraces those options which the statute requires shall be inserted in the policy.

It is said by a leading writer on insurance that the principle of recovery on a quantum valebat has no application to policies of life insurance, and if the policy is forfeited under its terms, there can be no proportionate recovery thereunder. He states that the earlier forms of life policies usually provided for absolute forfeiture for non-payment of premiums and an absolute termination of all liability on the part of the insurer. Cooley's Briefs on Insurance, Vol. 3, pp. 2393, 2394. The same writer, however, states that recent forms of contracts generally contain specific provisions defining the rights of the insured after default in the payment of premiums. He states that these provisions usually fall into one or more of four well defined classes, and declare in effect "that after a forfeiture for non-payment of premiums (1) the policy may be reinstated on certain conditions; (2) the insured may, on surrender of the policy, receive a certain portion of the reserve as the 'cash surrender value'; (3) a certain portion of the net reserve will be applied as a single premium to extend the policy for a limited term; (4) the insurer will issue a paid-up policy for a reduced amount proportionate to the amount of premiums actually paid." Cooley's Briefs on Insurance (Ed. 1905), Vol. 3, p. 2394.

The statute before us was enacted in 1909, and no doubt was intended to incorporate within its provisions those features at that time generally regarded as important for the protection of the rights of policyholders. A detailed examination of Subds. 6, 7, and 9 of our statute discloses this purpose. Subd. 6, as we have stated, prescribes a loan value for insurance policies, and its full discussion is unnecessary here. Subd. 7, however, prescribes a cash surrender value for policies, with the method of determining that value. This is of course one of the current clauses of policies in vogue at the time Mr. Cooley wrote. Subd. 7 also declares that there shall be inserted in policies other than term policies "a provision which in the event of default in premium payments after premiums shall have been paid for three full years shall secure to the owner of the policy a stipulated form of insurance, the net value of which shall be at least equal to the reserve at the date of default on the policy and on any dividend addition thereto, specifying the mortuary table and rate of interest adopted for computing such reserves, less a sum not more than 2 1/2 per cent of the amount insured by the policy and of any existing dividend additions thereto, and less any existing indebtedness to the company on the policy."

It is obvious from the provision quoted that one of the options there provided for was "a stipulated form of insurance," and evidently comes within the fourth type of right described by Mr. Cooley, to the effect that on default a policyholder might receive a paid-up policy for a reduced amount proportionate to the amount of premiums actually paid; or it is at least a variation of the type described by Mr. Cooley.

The first sentence in Subd. 9, quoted above, declares that in the event of default in the premium payments, the value of the policy may be applied to the purchase of other insurances. The statute reads, "shall be applied," etc. But it is obviously an option, since Subd. 8 provides for options. We think it an option, but that the language is to be interpreted according to what it actually says, and policies should provide that upon default the policyholder may have the net value of the policy applied to the purchase of other insurance. The remaining portion of Subd. 9, which however is a part of one sentence, taken in connection with what has been previously referred to, provides for reinstatement of a defaulted policy where other insurance has been purchased with the value of the policy. It is thus seen that the four things provided for in Subds. 7 and 9 come within the general description of those things which policies sometimes contained at the time when Mr. Cooley wrote his book, and we have no doubt that they are properly classed as the options described in Subd. 8, which we have quoted. We think it clear, however, that Subd. 9 cannot be made effective unless there is provided some method by which the value of the policy to be used in the purchase of extended insurance is to be ascertained. The object of Art. 4741 was to require insurance companies to lay plainly before the policyholder the rights guaranteed him by the statute. The language of Subd. 8, quoted above, requires that a table showing these options shall appear in the face of the policy, and that the options shall be shown "in figures." It is therefore definitely determined that the value of the policy which might be used under Subd. 9 to purchase extended insurance must be shown in figures. Art. 4741 having undertaken to prescribe what the policy shall contain, it must be looked to in determining what value was referred to in Subd. 9 and what value must be shown in figures. Subd. 7 of Art. 4741 does not leave this in doubt. In determining the amount of the cash surrender value required, this subdivision declares: "Such provision shall stipulate that the policy may be surrendered to the company at its home office within one month from date of default for a specified cash value at least equal to the sum which would otherwise be available for thepurchase of insurance as aforesaid." The sum available for the purchase of insurance is shown in the previous quotation from Subd. 7. It is plain, therefore, that the amount which might become the amount of "a stipulated form of insurance" is to be regarded as the same amount as that "available for the purchase of insurance." Subd. 9 provides that the value of the policy is to be applied to the purchase of other insurances, and is, we think, referable wholly to the amount described and referred to in Subd. 7. It is true that a method of computing the net value of policies, etc., is set forth in Art. 4498, but this is obviously a solvency provision, and has no reference whatever to what the policy form must contain. Subds. 7 and 9 are contained in the same article of the statute, and relate plainly to the same subject-matter, and must be construed together. The same may be said as to Subd. 8. Since Subd. 7 does not apply to term policies, it follows that Subds. 8 and 9 have no application to such policies. The statute appears to be poorly written, and more or less confusing in its provisions, but having provided in Subd. 7 a method of ascertaining the sum available for a cash surrender value, and for "a stipulated form of insurance," and having designated this as an amount available for the purchase of insurance, we think it would be unreasonable to apply any other test of the value of the policy for the purchase of insurance under Subd. 9. The policy of the Legislature was to make the law definite, and the options plainly set forth in figures, and we do not think the statute ought to be construed as permitting the value of the policy to be determined by any other rule than that specifically laid down in the related subdivisions of the statute. This view is somewhat enforced by the fact that the method of determining the loan value of the policy, as set forth in Subd. 6, is precisely the same as that for determining the amount of stipulated insurance, the cash surrender value, and that available for the purchase of insurance as defined in Subd. 7. In other words, we think that Subds. 6, 7, 8, and 9 relate as a whole to the same subject — that is, the subject of options available to policyholders in policies that come within their provisions, and that none of these provisions apply to policies exempted directly and specially in Subds. 6 and 7 — that is, "term insurances."

It follows from the above that since we have concluded that the policy here involved is a term insurance policy, Subds. 6, 7, 8, and 9 of Art. 4741 do not apply to the policy.

We have considered the other questions raised in the motion, and conclude that the original opinion of the Commission of Appeals makes the correct answer to the certified questions. The motion for rehearing is therefore overruled.

Associate Justice Pierson not sitting.