Bankers Health & Life Insurance v. Crozier

1. The beneficiary named in a life-insurance policy reserving to the insured the right to change the beneficiary obtains no vested interest.

2. The named beneficiary does not, in the absence of contract, obtain a vested interest in the policy by mere payment of the premiums.

3. Where by the terms of the policy the beneficiary therein named may be changed at the will of the insured, the policy may be canceled by the insured and the insurer without the consent of the named beneficiary who has paid the premiums without contractual or other consideration.

No. 13632. MAY 14, 1941. The Court of Appeals (in Case 28398) certified to this court the following questions:

1. Does a beneficiary named in a life-insurance policy have a vested interest therein where there is a reservation of the right in the insured to change the beneficiary? See Roberts v.Northwestern Ins. Co., 143 Ga. 780; Ogletree v. Ogletree,127 Ga. 232; Merchants Bank v. Garrard, 158 Ga. 867 (2); 2 Couch's Cyc. of Ins. Law, 989, § 333.

2. Does a beneficiary named in a policy of insurance, in the absence of a contract, obtain a vested right in the policy merely because he paid the premiums? See 2 Couch's Cyc. of Ins. Law, 1038, § 351.

3. Where the beneficiary in a policy may, by the terms of the policy, be changed at the will of the insured, can the insured and the company cancel the policy without the knowledge or consent of the beneficiary, even though the beneficiary pays the premiums, but there is no contract that he pays them in consideration that he be made beneficiary or upon some other consideration?

4. If question 1 is answered in the affirmative, does the insurance company waive its right to have the premiums paid, or tendered, and does the policy of insurance continue in force in the absence of such payment or tender, where, subsequently to the last paid premium, and before the grace period expires, the company enters into an agreement with the insured cancelling the policy and the insured receives an amount which the company contends is the cash surrender or loan value of the policy, and the company declares to the insured that the policy is void and no longer in force, even though before said agreement the beneficiary, upon request, refused to give her consent to cancel the policy, and there is no provision in the policy which could be construed as a cash-surrender or loan-value provision, unless it is the following provision of said policy, to wit: "The net premium and reserves under this policy are determined in accordance with the American Experience Table of Mortality and interest at four per cent. (4%), the first year's insurance being term insurance?" 1. Where no power of divestiture is reserved in a policy of life insurance, the issuance of the policy confers a vested right upon the person named therein as beneficiary, and the insured can not transfer such interest to any other person without the consent of such beneficiary. Perry v. Tweedy,128 Ga. 402 (57 S.E. 782, 119 Am. St. Rep. 393, 11 Ann. Cas. 46);Smith v. Head, 75 Ga. 755; Baldwin v. Wheat, 170 Ga. 449,453 (153 S.E. 194). The rule is different, however, where a power to change the beneficiary or to assign the policy is reserved to the insured by the terms of the instrument; and in such a case the issuance of the policy does not confer a vested right or interest upon the beneficiary. Hawkes v. Mobley,174 Ga. 481, 483 (163 S.E. 494); Washburn v. Washburn,188 Ga. 468 (4 S.E.2d 35); Farmers State Bank v. Kelley,155 Ga. 733 (3), 737 (118 S.E. 197), and cit.; Nally v. Nally,74 Ga. 669, 674 (58 Am. R. 458); Ogletree v. Ogletree,127 Ga. 232 (2), 237 (55 S.E. 954). Accordingly, the first question propounded by the Court of Appeals must be answered in the negative.

2. A beneficiary named in a policy of life insurance acquires no vested right therein merely by virtue of paying the premiums, which, in the absence of any contractual obligation so to do, will be deemed gratuitous. 2 Couch's Cyc. of Ins. Law, 1038, § 351, and cit.; 7 Cooley's Briefs on Insurance, 6407, 6435, and cit. Accordingly, the second certified question must be answered in the negative.

3. In a policy of life insurance which reserves to the insured a right to change the beneficiary, the beneficiary by a mere payment of the premiums, without any valid contractual obligation so to do, would acquire no right to notice of an intended cancellation of the policy under an agreement between the insurer and the insured. In such a case, where the beneficiary has no vested interest in the policy, but the policy by its terms gives to the insured the specific right to change the beneficiary, a cancellation of the policy would not infringe upon any right of the beneficiary, any more than would a change of the beneficiary or an assignment of the policy. In Merchants Bank v. Garrard,158 Ga. 867, 872 (124 S.E. 715), it was held that an assignment to creditors by the insured of a life-insurance policy amounts to a change of the beneficiary. See Baldwin v. AtlantaJoint Stock Co., 189 Ga. 607, 609 (7 S.E.2d 178). By parity of reasoning, a cancellation of the policy would have the same effect in so far as any right of the beneficiary would be involved. Accordingly, the third question propounded by the Court of Appeals must be answered in the affirmative. The ruling in Roberts v. Northwestern National Life Insurance Co.,143 Ga. 780 (85 S.E. 1043), although a case in which the policy reserved to the insured a right to change the beneficiary, appears to have been grounded on a special provision in the policy, whereby a vested interest was in fact conferred upon the beneficiary by the language of the special provision of the policy, quoted in that opinion. This being the purport of that decision, the language embodied in the Roberts case, to the effect that the right reserved in such a life-insurance policy to change the beneficiary does not include the right to surrender and cancel the policy without the consent of the beneficiary, would have application only where the beneficiary, despite the right of the insured to change the beneficiary, nevertheless owned a vested interest in the policy.

4. An answer to the fourth question propounded by the Court of Appeals is not necessary, since it is requested only in the event the first question should be answered in the affirmative.

5. A considerable portion of the brief of counsel for the beneficiary named in the policy is devoted to the contention, that, even though the insured should be held not to own a vested interest in the policy, she is none the less not a stranger thereto, and that a change in the beneficiary or any action equivalent thereto must, in order to bind the beneficiary named in the policy, be effected in the manner provided by the terms of the policy. Since it does not appear from the questions propounded that any ruling by this court is desired upon these propositions, no ruling or intimation is made with reference thereto.

All the Justices concur.