Lowry v. &198tna Life Ins. Co. , 120 S.W.2d 505 ( 1938 )

Oren M. Lowry sued Ætna Life Insurance Company, W. G. Harris and George V. Peak, Jr., to recover $30,000 — interest, penalty and attorney fees — on an accident insurance policy issued by the company, insuring Robert C. Lowry; the plaintiff-brother of assured being named as beneficiary. W. G. Harris was general agent for the company in Dallas and Northeast Texas, through whose agency the policy in suit was issued, the same having been solicited by defendant Peak, who was authorized to solicit insurance, collect premiums, deliver renewal receipts, etc. On November 4, 1929, the insured was killed while en route from the City of Mexico to the City of Torreon in an aeroplane that crashed against a mountain 20 minutes out the City of Mexico. After some negotiations the company denied liability, on the sole ground that the policy lapsed September 15, 1929, for non-payment of the annual premium of $100. At the conclusion of the evidence, the court instructed a verdict for defendant Harris, but as to the other defendants the case was submitted to a jury on special issues and, based upon their answers, judgment was rendered for the defendants, from which this appeal was prosecuted.

In the course of the trial below, counsel for defendants correctly stated that, "The only question here is whether the policy was in force at the time he (insured) died; and then if he died under circumstances that would relieve the company of liability". It is conceded that the policy was in force up to and including September 14, 1929, the annual premium of $100 having previously (on November 28, 1928) been paid. Based upon these undisputed facts, plaintiff first contends that the policy was alive and in full force on November 4, 1929, the date of the accident — that is, that the payment of the annual premium (November 28, 1929) and its acceptance by the company, purchased insurance for twelve months from that date, therefore that the court erred in overruling his motion for judgment. The defendant contends that, plaintiff's pleading failed to present this issue, therefore, that the proposition urged should be overruled. Plaintiff's petition is quite lengthy and, we think, abundant allegations may be found upon which this contention may be predicated. Allegations are to the effect that, defendant's general agent and those under him were fully authorized to collect premiums, irrespective of the date of their maturities, and to reinstate policies and to maintain the contract in force, and it is alleged generally, that both the plaintiff and the insured had complied with all the provisions of the policy and that the death of the insured was not within the terms of any exception or qualification of the policy, excusing the defendant from the payment of all or any part of the stipulated indemnity.

The following provisions of the policy are pertinent to this inquiry that: "The principal sum of this policy is Thirty Thousand Dollars. The premium for term of this policy is One Hundred Dollars. The date of this policy is September 14th, 1927. This policy is issued for a term of Twelve (12) months to commence on the day this policy is dated, beginning and ending at twelve o'clock noon, standard time of the place where the insured resides, but it may be renewed with the consent of the company by the payment of the premium in advance at the Company's premium rate in force at the time of renewals". The policy also contained a provision for reinstatement, as follows: "If default be made in the payment of the agreed premium for this policy, the subsequent acceptance of a premium by the Company or by any of its duly authorized agents shall reinstate the policy, but only to recover loss resulting from accidental injury thereafter sustained".

The policy was not renewed under the renewal provision above set out, but was reinstated on November 28th, under the provision for reinstatement of lapsed policies. Upon a trial to a jury, their answers to issues submitted were: (1) that George V. Peak, Jr., did not agree with plaintiff, O. M. Lowry, prior to September 1, 1929, to notify the latter, should Robert C. Lowry fail to pay the premium on the policy, so that O. M. Lowry would be enabled to pay said 1929 premium in due time; (2) that before September 1, 1929, George V. Peak, Jr., had knowledge of the fact that Robert C. Lowry had taken employment with a company operating aeroplanes; (3) that George V. Peak, Jr., and Robert C. Lowry had an agreement that the $100 premium on the policy in suit might be paid to said Peak in quarterly installments; (4) that Peak had no authority to make such agreement on behalf of appellee; (5) that prior to September 14, 1929, Robert C. Lowry failed to keep his promise to pay said Peak a quarterly installment of $25 due in 1927, and similar installments of $25 for the year 1928; (6) at the time of his death said Lowry was traffic manager for a Mexican Aeroplane Company, and was not riding without payment of fare; and that Robert C. Lowry was never advised that the renewal receipt for 1929 had been sent from the home office of the company to Harris, the general agent, for delivery to said Lowry upon payment of the regular premium of $100. Under the above statement of the case, which we deem sufficient for the disposition of this appeal, it will be necessary only to discuss the first and second propositions of appellant based on numerous assignments of error; the remaining assignments, in the main, having been disposed of adversely to him by the jury answers, and which the evidence was sufficient to support. Such propositions are (the second being in the alternative):

(1) "The premium paid in 1928 created a new contract of insurance for a term of twelve months beginning November 28, 1928; and the policy was in force when insured died on November 4, 1929".

(2) "On the undisputed testimony of defendants and the insurance company's agents, the policy was continued in force for a term of twelve months beginning September 14, 1929 by virtue of credits extended by the company and its agents, subject to the company's power of cancellation, which was not exercised; and the policy was in force when insured died on November 4, 1929".

Neither as an issue of fact arising under the evidence nor as a matter of law, did the premium payment of November 28, 1928, create a new contract of insurance for a period of twelve months thereafter, by which the policy could be considered in force on November 4, 1929. There is no testimony in the record concerning the contents of this receipt and, of course, no justiciable issue is before us as to its wording. Elliott on Contracts, Vol. 5, par. 4288, cited by appellant, says: "Whether a renewal creates a new contract depends upon its terms. It has been held that every renewal of a policy of insurance being upon a new consideration and optional with both parties creates a new contract and is, unless otherwise expressed, subject to the terms and conditions whichare contained in the original policy" (Italics ours).

We find the following statement in 24 Tex.Jur. page 741, Sec. 52. (Insurance), citing cases: "In the absence of an agreement to the contrary, the presumption is that the renewal of an insurance policy is upon the same terms and conditions and for the same amount as provided in the original policy". The terms, under the original policy of appellee, were for a period of twelve months intervening September 14th of each year. The 1929 receipt still in the possession of appellee's general agency, and placed in evidence by it, was to the same effect; but, as just stated, no issue having been raised by appellant as to the contents of the 1928 receipt, all matters relative to the terms thereof were waived. Dallas Hotel Co. v. Davison, Tex.Com.App., 23 S.W.2d 708. The question remains: Did the issuance by appellee of its renewal receipt of November 28, 1928, create a new contract of insurance, as a matter of law, continuing twelve months from that time, the insured's accidental death having occurred November 4th previously? We do not think so, under this record. It is not disputed that the insurance policy, theretofore issued, was reinstated by the delivery to Robert Lowry of such receipt, as authorized under the policy provision heretofore quoted. What is the ordinary or legal meaning of "reinstate"? It is defined in Webster's New International Dictionary as: "To enstate again; to place again (in possession or in a former state); to reinstall; to reestablish; to restore (to a state from which one has been removed)". Nowhere in Words Phrases, from the first edition to the present (4th) is the word given any other legal meaning in the decisions than in substance the following: "To ``reinstate' a policy holder or one who has allowed his policy to lapse does not mean new insurance or taking out a new policy, but does mean that the insured has been restored to all the benefits accruing to him under the policy contract, the original policy. Missouri State Life Ins. Co. v. Jensen, 139 Okla. 130, 281 P. 561, 562." See 3 Words and Phrases, Fourth Series, p. 349. The holding of the Commission of Appeals, in State Mutual Life Insurance Co. v. Rosenberry, 213 S.W. 242, 243, decided in 1919, is alone sufficient to justify the overruling of appellant's first proposition. It was there said [page 245]:

"There is some conflict in the authorities as to the effect of a reinstatement of a policy after lapse for failure to pay the premium. Some courts hold that there is a new contract of insurance as of the date of the reinstatement, but containing all the terms of the original policy, and thus hold that the clause rendering the policy incontestable applies to the new contract and authorizes a contest for the period named after the reinstatement. Pacific Mutual Life Ins. Co. v. Galbraith, 115 Tenn. 471, 91 S.W. 204, 112 Am. St. Rep. 862, and cases cited.

"But we think that the better rule and the one that would come nearer doing justice is to regard the contract for reinstatement, not as a new contract of insurance, but as a waiver of the forfeiture, thus restoring the policy and making it as effective as if no forfeiture had occurred, but reserving the right of the company to avoid the effect of the reinstatement by showing, if it can, that the reinstatement was induced by unfair and fraudulent means. Massachusetts Benefit Life Association v. Robinson, 104 Ga. 256, 30 S.E. 918, 42 L.R.A. 274; Goodwin v. Provident, etc., Life Association, 97 Iowa 226, 66 N.W. 157, 32 L.R.A. 473, 59 Am. St. Rep. 411; Monahan v. Fidelity Mutual Life Insurance Co.,242 Ill. 488, 90 N.E. 213, 134 Am. St. Rep. 337; Mutual Life Insurance Co. v. Lovejoy [201 Ala. 337], 78 So. 299, L.R.A. 1918D, 864".

While this case was not approved by the Supreme Court, save as to the conclusion reached, it has often been cited in later decisions of other American jurisdictions; and, in the frequent references to it by our own appellate courts, the above statement has not been limited or questioned. True, the main point decided in the Rosenberry Case was a construction of Art. 4953, R.S. (now art. 5050, relating to insurance contracts) — yet, the effect of a reinstatement of an insurance policy was necessarily incident to the judgment there rendered. "It has been repeatedly held that a proposition assumed or decided in order to establish another proposition which expresses the conclusion of the court is as effectually passed upon and settled as the very question directly decided". Tex.Jur. Vol. 11, Sec. 95; Stephens County v. Hefner, 118 Tex. 397, 16 S.W.2d 804. In the annotations following Tatum v. Guardian Life Ins. Co., 2 Cir.,75 F.2d 476, 98 A.L.R. page 341, the Editor at page 345, after a report of the case, says: "There is considerable diversity of opinion upon the general question of the effect of a reinstatement of a lapsed or forfeited policy; but in the majority of the cases which have passed upon the specific question under annotation, the reinstatement has been held not to create a new contract of insurance, but to effect merely a continuing in force of the original contract, so that the liability of the insurer for death by suicide is not affected by the fact that death occurred within the period after reinstatement specified in the suicide clause, if the contestable period reckoned from the date of the inception of the original coverage had expired. To this effect are the decisions in Business Men's Assur. Co. v. Scott, 8 Cir., 1927, 17 F.2d 4, writ of certiorari denied in 1928, 275 U.S. 531, 48 S. Ct. 28, 72 L. Ed. 410; Mutual L. Ins. Co. v. Lovejoy, 1917, 201 Ala. 337, 78 So. 299, L.R.A. 1918D, 860, as reaffirmed on this point on subsequent appeal in 1919,203 Ala. 452, 83 So. 591; and Life Cas. Ins. Co. v. McCray, 1933,187 Ark. 49, 58 S.W.2d 199, affirmed in 1934, 291 U.S. 566, 54 S. Ct. 482, 78 LEd. 987, and petition for rehearing denied in 1934,292 U.S. 600, 54 S. Ct. 627, 78 L. Ed. 1464."

The cases cited by appellant, of Halsey v. American Central Life Ins. Co., 258 Mo. 659, 167 S.W. 951; Kennedy v. National Acc. Health Ins. Co., Mo. App., 76 S.W.2d 748, and Jefferson Standard Life Ins. Co. v. Baker, Tex. Civ. App. 260 S.W. 223, do not infringe upon the reasoning of State Mutual Life Ins. Co. v. Rosenberry, supra, in that, in those cases, irrespective of the date of the policy contract, there was a provision that same should not become effective until delivery of policy, or payment of first premium, or clauses of similar import. The policy here sued on was dated and issued September 14, 1927, ending twelve months from such date, unless renewed. The undisputed fact that the 1928 premium was paid later in November is, under this record, wholly insufficient to support the contention of a new contract to continue for twelve months from the subsequent time; the cases holding otherwise going off largely on a construction of the receipt, or paper evidencing such renewed insurance. It is, therefore, unfortunate that the receipt in question was not in evidence. In MacDonald v. Metropolitan Life Ins. Co., 304 Pa. 213,155 A. 491, 77 A.L.R. 353, also cited by appellant, the receipt being before the court, was held to be ambiguous as to the "due date" of the policy after lapse and reinstatement. In this connection, the court said [page 492]: "The date at which the reinstated policy is to begin being uncertain must be so construed as to protect the policy holder", and "if the company, in the instant case, intended the reinstated insurance to commence January 18, it should have so stated"; the date just given referring to the inception of the policy in the case last cited. Here, the reinstatement transaction of November 28, 1928, being tantamount only to a renewal after a lapse was merely a restoration to the assured of all the benefits accruing to him under his original policy of September 14, 1927, according to its terms.

To the argument that such a construction of the dealings between the parties would result in assured's receiving less than a year's insurance for the year 1928-1929 term, it must be remembered that we are dealing with a standard provision of the policy, lawfully inserted therein, to secure prompt payment of premiums, and is in the nature of a penalty for tardiness or neglect. Vance on Insurance (2d Ed.) pg. 283, Sec. 82, pertinently says: "Accordingly, a policy is seldom found that does not contain some penal provision for the enforcement of the insurer's premium claims * * *. It is, of course, competent for the parties to make any other agreement desired as to the consequence of default on the part of insured in the payment of premiums. The policy may stipulate that the rights of the insured shall be suspended during his delinquency, and provide for their revival, subject to certain conditions, upon the payment of the over-due premiums. Of course, the insurer is not liable for any loss that may be incurred during such a period of suspension."

Appellant further contends that, on September 14, 1929, appellee company received a year's premium in advance, by a 60-day credit given to George V. Peak, during which time the policy in suit was not cancelled, and same was therefore in force on November 4, 1929. We see no relation between appellee's custom of giving soliciting agent Peak sixty days in which to report on the 1929 premium of the assured, and liability vel non of appellee on the policy in question. Such was an internal affair of the Dallas agency. It was in no sense an extension of credit to the policy-holder, and, under the undisputed previous dealings, could not have possibly become such until delivery of a renewal receipt to the assured by Peak, he thereby becoming personally responsible for the particular premium. The 1929 receipt involved here never left the possession of appellee. The letter of Mr. Peak of July 3, 1929, and the later wire of August 23rd, conclusively established that such agent would extend no further credit to assured until the balance of the 1927 premium and the whole of the premium for 1928 were paid. Consequently, as a matter of law, there was no extension of credit given by either Mr. Peak or the company relative to the premium for an additional year. Furthermore, the jury findings were that the so-called credit arrangement between the assured and Mr. Peak to pay premiums in sums and at times other than as provided in the policy, had been breached by Mr. Lowry; also that the particular agreement just mentioned had not been authorized by appellee.

And we think that, whether or not, in the files of appellee agency, there was a specific showing of cancellation prior to November 4, 1929, was immaterial. The plain language of the policy stated that it ended at twelve o'clock noon on every succeeding September 14th, unless "renewed with the consent of the company by the payment of the premium in advance, at the company's premium rate in full force at the time of renewals". See Donaldson v. National Life Acc. Ins. Co., Tex. Civ. App. Galveston, 53 S.W.2d 136, writ refused, construing a similar provision of an accident policy, where the court concluded that the same had lapsed by virtue of its terms. We quote therefrom [page 137]: "We can read no other meaning into the contract, and that the parties to it had the right to so stipulate the beginning, ending, and conditions attending the risk they were dealing with, goes without saying", citing 32 C.J. page 1164 sec. 277, and Duncan v. United Mut. Fire Ins. Co., 113 Tex. 305,254 S.W. 1101, among other Texas cases. Perkins v. Associated Ind. Corp., 189 Wash. 8, 63 P.2d 499, considering an almost identical provision of an accident policy, held with reference to such insurance, in contrast with life policies, that [page 501]: "When a policy provides for its termination at a particular time like the one in the case at bar, it terminates at that time without any notice". See, also, Continental Ins. Co. v. Stratton, 185 Ky. 523, 215 S.W. 416, 8 A.L.R. 391, where, under the annotations following the opinion, are cited cases from the United States Supreme Court, Canada, England, and the great majority of the American courts, supporting the well settled rule of non-liability of the insurer for loss occurring after default in payment of premiums or assessments, although the insurer took no affirmative action, such as declaring a suspension before loss.

We think it clear that all assignments and propositions of appellant, after consideration, should be overruled, and the judgment of the trial court affirmed.

Affirmed.