New York Life Insurance Co. v. Moose

Appellee sued appellant to recover total and permanent disability benefits under the terms of such provisions in a policy of life insurance held by him and issued by appellant. The policy was for $5,000 and was dated April 5, 1928. Premiums of $130.55 were payable annually on January 2, each year, with 30 days of grace. The premium due January 2, 1932, was not paid when due, nor within the days of grace, and the policy lapsed for nonpayment of this premium as of said date. On said date the policy had a cash value of $150, to which was added a cash dividend of $29.60 and dividends on deposit with appellant in the sum of $33.84, or a total cash value of $213.44. Appellee was indebted to appellant on a premium note for $130.55 and $7.19 interest thereon or a total of $137.74, which, deducted from the total cash value as above, left a net cash value of $75.70. The policy provided, in event of default in payment of premium after three full years' premiums have been paid, for the following privileges or benefits:

(A) Temporary insurance for the face of the policy "shall, upon expiry of the period of grace, be continued automatically as temporary insurance as from the date of default for such term as the cash surrender value less any indebtedness hereon will purchase as a net single premium at the attained age of the insured, according to the American Table of Mortality and interest at 3 per cent. This temporary insurance will be without participation in surplus."

(B) If, within three months after such default, but not later, the insured desired to do so, he could surrender the policy and, instead of temporary insurance, have his policy indorsed for participating paid-up insurance in such amount as the net cash surrender value would purchase at his age at default, based on the same tables and interest rate.

(C) If the insured does not want option (B) as next above set out, he may surrender the policy for its net cash surrender value within three months but not later.

Appellee having failed to exercise either option (B) or (C) within three months, the automatic provisions of clause (A), the temporary insurance clause, continued in effect, and on May 2, 1932, appellant wrote appellee the following letter:

"The above-numbered policy lapsed for the nonpayment of the premium and interest due January 2, 1932. Pursuant to the terms of your contract with the company, the amount of your indebtedness to the company has been satisfied by deducting it from the sum which would otherwise be available for the purchase of insurance in the event of the nonpayment of premium or interest when due, and the balance of said sum has been used to purchase, and has purchased, paid-up insurance for $4,926, for the term of one year and 322 days after the 2d day of January, 1932, and your written agreement evidencing said indebtedness has been canceled.

"If you wish any other evidence of said paid-up term insurance than this letter, the company will, upon receipt of the policy at its home office, indorse said paid-up term insurance upon the policy and return the policy to you; also, if you wish, the company will forward to you said written agreement evidencing your said indebtedness to the company, which has been canceled as aforesaid."

Appellee received this letter in due course, but made no reply to it and did nothing further in regard to same. About February 5, 1933, the agent who took the application for the policy, but who severed his connection with appellant in September, 1929, wrote appellant a letter advising it that appellee had been afflicted with tuberculosis since May, 1931, but had made no disability claim under his policy. He asked that the company do anything for him that was possible, and that appellee told him he had let his policy lapse and took extended insurance. To this letter appellant replied denying any liability on the claim because not filed within six months after default in payment of premium due January 2, 1932. On November 1, 1933, appellee wrote appellant requesting blank forms to make proof of total disability, to which appellant replied declining to consider favorably the claim and declining to send blanks.

Thereafter appellee filed this action to recover the accrued total disability benefits at the rate of $50 per month. Trial resulted in an instructed verdict for appellee, and the case is here on appeal.

The disability provisions of the policy are: "Upon receipt at the company's home office, before default in payment of premium, of due proof that the insured is totally disabled as above defined, and will be continuously so totally disabled for life, or if the proof submitted is not conclusive as to the permanency of such disability, but establishes that the insured is, and for a period of not less than three consecutive months immediately preceding receipt of proof has been, totally disabled as above defined, the following benefits will be granted:

"(A) Waiver of Premium. The company will waive the payment of any premium falling due during the period of continuous total disability, the premium waived to be the annual, semi-annual or quarterly premium according to the mode of payment in effect when disability occurred.

"(B) Income Payments. The company will pay to the insured the monthly income stated on the first page hereof ($10 per $1,000 of the face of this policy) for each completed month from the commencement of and during the period of continuous total disability. If disability results from insanity, payment will be made to the beneficiary in lieu of the insured.

"In event of default in payment of premium after the insured has become totally disabled as above defined, the policy will be restored and the benefits shall be the same as if said default had not occurred, provided due proof that the insured is and has been continuously from date of default so totally disabled and that such disability will continue for life or has continued for a period of not less than three consecutive months, is received by the company not later than six months after said default. * * *

"Disability benefits shall not apply if the disability of the insured shall result from self-inflicted injury or from military or naval service in time of war, or from engaging as a passenger or otherwise in aviation or aeronautics; nor shall these benefits apply to the temporary insurance or to the paid-up insurance provided herein under ``Surrender Values', or to any dividend additions provided under ``Participation in Surplus Dividends'."

The complaint alleged that appellee became disabled by reason of tuberculosis on or about June 1, 1932, and has been continuously disabled since said date. Disability, according to the complaint, occurred after default in the payment of the premium due January 2, 1932. There is no provision in the policy covering disability occurring after default. The policy provides for disability insurance in two situations or on two conditions: 1st, the receipt of proof of disability at the home office of appellant before default in the payment of premium. and, 2nd, the receipt of proof within six months after default of a disability which occurred before default. In the first case, premiums are thereafter waived during disability as defined in the policy and income payments of $10 per month per $1,000 of insurance are payable. In the second case, "the policy will be restored and the benefits shall be the same as if said default had not occurred." But proof must be made within six months after default that insured is and has been continuously from date of default so totally disabled, etc. Appellant therefore contends that the judgment should be reversed because appellee has not brought himself within either condition because he made no proof of disability before January 2, 1932, the date of default; and because he made no proof of disability occurring before January 2, 1932, within six months from that date. But appellee insists that appellant should have applied the net cash value of the policy on January 2, 1932, $75.70, to the payment of a semiannual premium, so that there would not have been a default until six months later, and that, had it done so, the notice given on February 5 would have been timely. A sufficient answer to this contention is that the policy very definitely provides a different application of said sum as hereinbefore stated with two options on the part of appellee regarding same. Appellant complied strictly with said automatic provision (A) for temporary insurance. In this respect the case is ruled by the recent case of Life Casualty Ins. Co. of Tenn. v. Goodwith, 189 Ark. 1073,76 S.W.2d 93. The contract having expressly provided for the disposition of the net cash value in the hands of appellant after default, "we have no authority to change it, nor have we the right to refuse to enforce it," as we said in the case last cited. Therefore appellant had no right to apply it other than as provided in the policy. Cases relied upon by appellee are not in point.

It is finally insisted by appellee that there is some substantial proof that he became totally and permanently disabled in 1931, before default in premium payment, and that the matter of giving notice and making proof of disability became unimportant, as it was a condition subsequent. Although the complaint alleged total disability beginning June 1, 1932, after default, Dr. Williams testified over appellant's objections and exceptions, — that in his opinion appellee became totally disabled in May, 1931, although he continued to carry on thereafter. Appellee says himself he was not totally disabled until about June 1, 1932. Assuming, however, that there was sufficient evidence to go to the jury as to whether total disability occurred prior to default, we are of the opinion that the benefits were granted solely upon the condition that the proofs of total and permanent disability before default be furnished within six months after default. In other words, the disability must commence before default in premium payment, and the benefits will then be granted "provided due proof * * * is received by the company not later than six months after said default." This proviso simply states the conditions under which disability benefits will be granted. It necessarily excludes all others. If the disability occurs before default and proof thereof is made within six months thereafter, the disability is covered; otherwise it is not. The general rule is that the failure to give notice or to make proof within a specified time in accordance with the terms of the policy does not operate as a forfeiture of the right to recover, unless the policy in express terms or by necessary implication makes same a condition precedent to recovery. Hope Spoke Co. v. Maryland Casualty Co., 102 Ark. 1, 143 S.W. 85. Here the requirement is condition precedent in express terms, as it is the condition on which the benefits are granted. See also N.Y. Life Ins. Co. v. Farrell, 187 Ark. 984,63 S.W.2d 520; N.Y. Life Ins. Co. v. Jackson, 188 Ark. 292,65 S.W.2d 904. In the latter case we held, to quote the syllabus: "Under the terms of a policy of life insurance, it was the proof of disability and not the fact thereof that was essential for recovery of disability benefits under a policy of life insurance."

Not having made the proof within the time required by the policy, assuming that there was a question for the jury as to disability before default, the court erred in directing a verdict for appellee.

Judgment reversed.