New England Mut. Life Ins. Co. v. Reynolds

It was error to hold that due proof to the company of insured's disability before default in payment of premium was excused by the fact that insured had become non compos mentis before default. Watts v. Metropolitan Ins. Co., 211 Ala. 404,100 So. 812; N Y L. Ins. Co. v. Alexander, 122 Miss. 813, 85 So. 93, 15 A.L.R. 314; Hipp v. Fidelity Mut. L. I. Co., 128 Ga. 491, 57 S.E. 892, 12 L.R.A. (N.S.) 319; Mid-Cont. L. I. Co. v. Skye,113 Okl. 184, 240 P. 630; Hanson v. N.W. Mut. L. I. Co., 229 Ill. App. 15; Ill. Bankers' L. I. Ass'n, v. Byassee, 169 Ark. 230,275 S.W. 519, 41 A.L.R. 379; Penn Mut. L. I. Co. v. Milton,33 Ga. App. 634, 127 S.E. 798; Wick v. West. Union L. I. Co.,104 Wash. 129, 175 P. 953; Tyson v. Equitable Co., 144 Ga. 729,87 S.E. 1055; Joyce, Ins. (2d Ed.) 12505; Thorenson v. Mass. Ben. Asso., 68 Minn. 477, 71 N.W. 668; Marti v. Mid-West. L. Ins. Co., 108 Neb. 845, 189 N.W. 388, 29 A.L.R. 1507. The terms of the policy constitute the terms of the insurer's liability. Mut. L. Ins. Co. v. Barrett, 215 Ala. 142, 110 So. 275. In order to affect the validity of the policy, the insanity must be at the time the transaction occurred. 32 C. J. 728. The court should never direct a verdict when the evidence is such as to afford a reasonable inference of the existence of any fact unfavorable to the right of the party asking the affirmative charge to a verdict. M. J. K. C. R. Co. v. Bromberg, 141 Ala. 248, 37 So. 395; Birmingham R. Co. v. Enslen, 144 Ala. 343, 39 So. 74; Shipp v. Shelton, 193 Ala. 658,69 So. 102.

Hill, Hill, Whiting, Thomas Rives, of Montgomery, for appellee.

Insurance contracts are construed most favorably to the insured. Union Cent. Rel. Ass'n v. Johnson, 198 Ala. 488,73 So. 816; Woodmen of the World v. Alford, 206 Ala. 18,89 So. 528; Stokely v. Fid. Cas. Co., 193 Ala. 90, 69 So. 64, L.R.A. 1915E, 955; Travelers' Ins. Co. v. Plaster, 210 Ala. 607,98 So. 909. The burden is on the insurer to plead and prove forfeiture and provision of the policy for forfeiture are construed strongly in favor of insured. Watts v. Metropolitan L. I. Co., 211 Ala. 404, 100 So. 812; Equitable Life v. Golson,159 Ala. 410, 48 So. 1034. Plaintiff was entitled to the affirmative charge because defendant failed to meet the burden of proving its pleas of forfeiture or lapse of the policy for nonpayment of premium, Watts v. Metropolitan L. I. Co., supra; and because plaintiff's second replication was proved without dispute and constituted a complete answer to defendant's pleas of forfeiture. Fire Ins. Co. v. Boykin, 79 U.S. (12 Wall.) 433,20 L. Ed. 442; 1 C. J. 472; 18 L.R.A. (N.S.) 109, note; 27 L.R.A. (N.S.) 319, note; Ann. Cas. 1914D, 414, note; 4 Cooley's Briefs (1st Ed.) 3462; 7 Cooley's Briefs (1st Ed.) 1451; Marti v. Mid-West. Life Ins. Co., 108 Neb. 845, 189 N.W. 388, 29 A.L.R. 1507; Reed v. Loyal Protective Ass'n, 154 Mich. 161,117 N.W. 600; Roseberry v. Amer. Benevolent Ass'n,142 Mo. App. 552, 121 S.W. 785; Guy v. Casualty Co., 151 N.C. 465,66 S.E. 437; Hayes v. Cont. Cas. Co., 98 Mo. App. 410, 72 S.W. 135; Woodmen Acc. Ass'n v. Pratt, 62 Neb. 673, 87 N.W. 546, 55 L.R.A. 291, 89 Am. St. Rep. 777; Comstock v. Frat. Acci. Ass'n,116 Wis. 382, 92 N.W. 22; Pacific Mutual v. Adams, 27 Okl. 496,112 P. 1026; Edgefield Mfg. Co. v. Maryland Cas. Co., 78 S.C. 73,58 S.E. 969; Manufacturers' Acc. Indem. Co. v. Fletcher, 5 Ohio Cir. Ct. R. 633; Concordia Fire Ins. Co. v. Waterford,145 Ark. 420, 224 S.W. 953, 13 A.L.R. 1387; Shafer v. U.S. Cas. Co.,90 Wash. 687, 156 P. 861; Curran v. Nat. L. I. Co., 251 Pa. 420,96 A. 1041; Will Baumer Co. v. Rochester Ins. Co.,140 A.D. 691, 125 N.Y. S. 606. We are of opinion that furnishing proof of disability to the insurer is made a condition precedent to the waiver of premium payments under the supplemental agreement set out in the special plea above. This agreement declares:

"If the insured * * * shall furnish due proof to the company, at its home office in the city of Boston, that he has become wholly disabled by bodily injury or disease, * * * the company will waive payment of each premium as it thereafter becomes due during the continuance of such disability."

The intervening clauses name the conditions under which such proof is allowable, and define the character of disability. They must all concur to make the waiver effective. But the furnishing of proof is the specific condition upon which the company "will" waive each premium "thereafter" to become due. "Thereafter" clearly refers to date of furnishing proof. The clause is in no way ambiguous or of doubtful meaning. The preceding paragraph recites the consideration upon which the insurer agrees to the "following waiver." A later clause provides that the insurer may, after acceptance of such proof as satisfactory, have a medical examination made, and if it appears the insured is able to perform work or engage in any occupation for compensation or profit, no further premiums will be waived.

The entire structure of the agreement negatives the idea of a self-operating waiver in the event of total disability, but imposes a contractual obligation on the company to waive premiums when "due proof" is furnished. Manifest reasons appear for thus limiting the agreement. The premium named in a policy of life insurance is the consideration for the contract. Its prompt payment is the life of the business. By the contract the renewal premium carries protection to a fixed date. Unless renewed by another stipulated premium it lapses, and the rights of the insured are measured by the nonforfeiture provisions, usually certain options for cash surrender value, paid-up insurance, or extended term insurance.

It is important that the status of each contract be known. Otherwise the insurer is unadvised as to the amount of insurance outstanding — can make no accurate statement of resources and liabilities as often required by law. This case well illustrates the confusion which may ensue if the policy holder has a policy still in force by reason of a waiver of premiums without any notice thereof to the insurer. Here there was correspondence looking to payment of premium when due, notice of lapse for nonpayment, negotiations for examination and reinstatement, and, finally, a settlement surrendering the evidence of the policy loan, and showing the period of extended insurance — all received and apparently approved without a suggestion to the insurer that the insured had become insane. This status continued for about a year, when death of the insured intervened. It might have continued five or ten years.

It is further of importance that any issue as to the fact of disability be adjusted while the insured is living, not postponed until an issue must be made with the beneficiary after his death. In cases of insanity as the result of chronic disease, great difficulty may often arise in fixing the date when the border line is passed between mental capacity and incapacity to contract.

Appellee strongly relies upon the line of accident insurance cases, wherein the insured is required to give notice of his injury within a given time. In such cases the general rule is that if the insured is rendered physically or mentally incapable of giving notice as stipulated, it will be sufficient to give notice after such disability has passed, and if death ensues in the meantime, the indemnity will not be thereby forfeited. "The theory of these cases is that it could not have been in the contemplation of the parties that if the insured, who was required to give notice, was unable to do so by reason of the very accident against which indemnity was given, he should therefore lose such indemnity through no fault of his own." 4 Cooley's Briefs on Insurance (1st Ed.) p. 3462. See, also, 1 C. J. p. 472, note 4; 14 Rawle C. L. p. 133, § 504; Note 18 L.R.A. (N.S.) 109; Roseberry v. Amer. Ben. Ass'n,142 Mo. App. 552, 121 S.W. 785; Woodmen Accident Ass'n v. Pratt,62 Neb. 673, 87 N.W. 546, 55 L.R.A. 291, 89 Am. St. Rep. 777.

This is but an application of the general rule that insurance contracts are to be liberally construed in favor of the insured as often stated by this court. A construction whereby the contract is made to operate unfairly and oppressively is to be avoided.

We think there is a manifest distinction between that class of cases and this. In such accident cases, the provision is in the nature of a condition subsequent wherein the insurer defends against a liability already accrued. In this case the beneficiary relies upon the waiver clause to keep the policy alive, to excuse the payment of premiums. The disability set up in accident cases is usually the result of the injury insured against. Here there is no insurance against disability, physical or mental.

Dealing with the argument that the insured could not be expected to make proof while mentally incapable of so doing, let us look at this policy without this waiver clause. In that event the actual payment of the premium when due could alone prevent a lapse of the policy. No sickness, insanity, or disability of any kind would excuse payment as stipulated. The law does not class such event as one rendering performance impossible, nor its requirement unreasonable. The insured, by his contract, assumes the risk of any disability rendering it impossible for him to make payment in person, and is thereby warned to place the beneficiary or some next friend in position to take care of his contract in such event. See note to 15 A.L.R. p. 318.

Now, by the terms of the waiver agreement before us, the insured may pay the premium or cause it to be paid, or may avoid so doing by furnishing the proof of disability as stipulated. In case of insanity, the required proof could be furnished by the beneficiary or next friend, just as the premium could be paid.

The cases involving kindred provisions in life insurance policies sustain the views above expressed. Watts v. Metropolitan Life Ins. Co., 211 Ala. 404, 408, 100 So. 812; N.Y. Life Ins. Co. v. Alexander, 122 Miss. 813, 85 So. 93, 15 A.L.R. 314; Thompson v. Insurance Co., 104 U.S. 252,26 L. Ed. 765; Wick v. W. U. Life Ins. Co., 104 Wash. 129, 175 P. 953; Mid-Continent Life Ins. Co. v. Skye, 113 Okl. 184, 240 P. 630; Hipp v. Fidelity Mut. Life Ins. Co., 128 Ga. 491, 57 S.E. 892, 12 L.R.A. (N.S.) 319; Tyson v. Equitable Life Assur. Soc.,144 Ga. 729, 87 S.E. 1055.

Appellee relies upon Marti v. Midwest Life Insurance Co.,108 Neb. 845, 189 N.W. 388, 29 A.L.R. 1507. In that case the court said: "The policy contains no limitation of time in which the proof of disability must be presented." Whether that court correctly construed the policy before it in that regard is not of concern here. The particular provision construed was not in the same terms as that here involved. That court did say the same principle applies as in accident cases. In this regard that case is not in harmony with others cited above.

Touching the contention that the insurer had, or should have had, sufficient funds in hand to extend the insurance beyond the date of the death of the insured, little need be said. If it be true that the insured was insane in August, 1925, when he made application and got a policy loan in settlement of a prior loan obtained when not insane, with a balance of $19.13 cash paid on the draft of the insured, the evidence, without conflict, shows this transaction was without notice of insanity, and in good faith. It was a completed transaction, in which the insured received and held this cash paid on his policy in the form of a loan. We know of no principle by which the company can be treated as still constructively in possession of this cash to be made available for extended insurance. 32 C. J. p. 734.

With reference to the note for $18 made by the insured of date of November 12, 1925, to be used in part payment of premium due on that date, without question it was taken subject to the condition that the balance of the premium be paid in cash, and on failure to thus make the note available, it was returned. Under appellee's view the note was void, and subject to return for that reason.

Our conclusion is that under the undisputed evidence the plaintiff cannot recover. The affirmative charge should have been given for defendant as requested.

The judgment is reversed and the cause remanded.

Reversed and remanded.

ANDERSON, C. J., and SAYRE and GARDNER, JJ., concur.