Sovereign Camp W. O. W. v. Cooper

1. Where a certificate of insurance in a fraternal benefit association provides for an automatic premium loan upon the failure of the holder of the certificate to pay the required monthly premium, the association can not cancel the certificate without notifying the insured, a reasonable length of time before the amount of the automatic premium loan made to keep the certificate in force would exhaust the cash value of the certificate, so as to afford the insured an opportunity to resume the payment of the monthly premiums and continue the certificate in force.

2. Where an insurance company wrongfully repudiates and cancels a contract of insurance and refuses to accept the payment of any further premiums thereon, the insured may recover the damages sustained by him by reason of such repudiation and cancellation. The measure of his damages is the amount of premiums paid, with interest on each from the time such payment was made.

DECIDED MARCH 13, 1940. REHEARING DENIED MARCH 26, 1940. John P. Cooper brought suit against Sovereign Camp Woodmen of the World to recover, because of the wrongful cancellation by the defendant of a certain insurance certificate on the life of the plaintiff, all premiums which had been paid by him to the defendant to keep the certificate in force. The plaintiff alleged substantially as follows: The defendant is a fraternal benefit association as contemplated in the Code, §§ 56-1601 et seq. The defendant has damaged the plaintiff in the sum of $609.37 principal, and $706.91 interest to December 31, 1938, and future interest on the principal at 7%, being the amount with interest thereon paid by the plaintiff to the defendant as premiums to keep the insurance in force. On April 23, 1907, the plaintiff made written application to the defendant for membership, and pursuant thereto he was received into the Woodmen of the World, and on May 28, 1907, the plaintiff accepted a $1000 certificate of insurance issued to him by the defendant. From May 28, 1907, until September 1, 1915, the plaintiff paid to the defendant $1.50 a month in order to keep such certificate in force. From September 1, 1915, until October 1, 1917, the plaintiff paid to the defendant $1.57 a month to keep such certificate in good standing. From that date until April 1, 1929, the plaintiff paid to the defendant $1.67 each month in order to maintain such certificate of insurance. On April 1, 1929, at the request of the plaintiff, such certificate was surrendered, and the defendant's contract was rewritten on a different form furnished by it, and the new certificate was for $1000 and was dated April 10, 1929. Such new certificate was No. R. W. 842635-L. The old certificate was merged into the new contract, and the old contract became a part of the new contract. Photostatic copies of the new certificate and of the application therefor were attached to the petition and made parts thereof. From April 10, 1929, until March, 1932, the plaintiff paid to the defendant $5.31 each month in order to maintain the new certificate of insurance. The new certificate had incorporated therein a provision relative to the automatic payment of premiums by a policy loan as follows: "After thirty-six monthly payments on this certificate shall have been paid, if any subsequent monthly payment be not paid on or before its due date, and if the member has not, prior to such due date, selected one of the options available under the nonforfeiture provisions of this certificate, the association will, without any action on the part of the member, advance as a loan to the said member the amount of the monthly payments required to maintain his certificate in force from month to month until such time as the accumulated loans, together with compound interest thereon at the rate of five per cent. per annum, and any other indebtedness hereon to the association, equal the cash value hereof at the date of default in the payment of the monthly payments. When the said cash value has been consumed in loans advanced and interest thereon, then this certificate shall become null and void, provided, that while this certificate is continued in force under this provision, the member may resume the payment of the monthly payments without furnishing evidence of insurability, and the accumulated loans and interest thereon shall become a lien upon this certificate and shall continue to bear interest at the same rate. Provided further, that such lien may be paid in whole or in part at any time by the member, but if not paid said loan and accumulated interest thereon shall be deducted upon any settlement with the member, or from the amount payable at the death of the member."

This certificate also provided that the articles of incorporation, the constitution, the laws and by-laws of the association, should be parts of the contract; pertinent parts of the constitution and by laws being as follows: A. "Section 61 (a). Members to whom universal whole life certificates shall be issued on and after December 31, 1919, shall pay the rates per $1000 of benefits at age of entry as set forth in the following table, to wit:" There follows a table providing for payments according to age on a monthly and on an annual basis. B. "Section 62. Annual assessments or monthly installments thereof, begin with the date on the certificate placed there by the secretary of the association. In the event the member has not paid his annual assessment in advance, but has paid monthly installments of his assessments and dues up to and including the month of his death, the Sovereign Camp shall deduct from the amount of his certificate the balance due for his installments to cover his entire annual assessments." C. "Section 63 (a). In order to accumulate and maintain funds for the payment of the benefits stipulated in beneficiary certificates held by the members of this association as and when such benefits accrue, to maintain the reserves thereon and to provide for the payment of the expenses of the association, every member of this association shall pay to the financial secretary of his camp one annual assessment in advance each year, or one monthly installment each month, as required by these laws or by the provisions of his beneficiary certificate, which shall be credited to and known as the Sovereign Camp fund; and he shall also pay such camp dues as may be required by the by laws of his camp." D. "Section 63 (b). If he fails to make any such payment on or before the last day of the month he shall thereby become suspended, his beneficiary certificate shall be void, the contract between such person and the association shall thereby completely terminate, and all moneys paid on account of such membership shall be retained by the association as his liquidated proportionate part of the cost of doing business and the cost of the protection furnished on the life of said member from the delivery of his certificate to the date of his suspension."

In April, 1932, the plaintiff was unable to pay the regular monthly premiums; and as he had not before the due date selected one of the options available under the non-forfeiture provisions of the certificate, the plaintiff relied on the defendant to "keep in full force and effect the said certificate of insurance provided for in the hereinbefore quoted paragraph. Since the last payment hereinabove listed," the plaintiff has made no further premium payments to the defendant on the certificate, "but has continued to rely upon the defendant to keep said insurance in force under the terms of the above-quoted paragraph, or in the event defendant was for any reason unable to keep said insurance in force," the plaintiff relied upon it to advise him of such inability and the reason therefor. The computation of the period of time for which the certificate held by the plaintiff would be by the defendant maintained in full force under the terms of the automatic premium loan provisions was a matter of difficult ascertainment, involving mathematical calculations and formulae peculiarly the work of an actuary, and involved calculations which the plaintiff and insureds generally would be unable to correctly solve. It is now reported to the plaintiff that the defendant, operating under the automatic premium loan provision, kept the certificate in force from April, 1932, until and including December, 1934, but the plaintiff has been informed and believes that defendant canceled the certificate on January 31, 1935.

From April, 1932, until June, 1936, when the plaintiff through his counsel took the matter up with the defendant, the plaintiff received no advice and no notice from the defendant as to the status of the insurance, as to how long the defendant could maintain the certificate in force or as to when the insurance would be or had been canceled. On the contrary, when the plaintiff by and through his counsel called on the defendant for a statement, he was simply informed that the insurance was no longer of any force and effect, and that the insurance had permanently lapsed and could not be reinstated. After and during the time from April, 1907, up to and including January 31, 1935, the plaintiff paid to the defendant all sums that were required of him to keep the certificate in force. Several years, at least three, before the date when the plaintiff elected to avail himself of the automatic premium loan provision, he entered into an agreement with his bank and with J. W. Blamblett, the financial secretary of the defendant's local camp, who was its sole agent for the collection of membership dues, to the effect that the bank would pay such drafts as were drawn upon the plaintiff by Blamblett for the payment of the monthly amounts due on the certificate of insurance, and to the further effect that Blamblett would present to the bank drafts for the payment of the required assessments and dues. Pursuant to this agreement, over a period of at least three years, each month Blamblett would draw a draft on the plaintiff and present it to the bank which would pay the draft. So it was that a custom or course of dealing between the plaintiff and the defendant was established for the collection of the dues, assessments, or premiums, and the agreement was never revoked and was in full force and effect in January, 1935, and at all times thereafter.

The plaintiff alleged that had the defendant notified him that the accrued cash value of the certificate had been or was about to be exhausted, or had the defendant even notified the financial secretary or the clerk of its local camp of this fact, this custom of payment would have been resumed, and there would have been no occasion on the defendant's part to attempt to abrogate and forfeit the contract with the plaintiff. On January 31, 1935, while the plaintiff was in good standing, the defendant without any "provocation or fault" on the part of the plaintiff, and without any just cause or legal warrant or authority, annulled, repudiated, and forfeited its contract of insurance by the terms of which it had undertaken to insure the plaintiff's life for $1000, the same being made without any notification or notice whatsoever being given to the plaintiff of the amount of the reserve accumulated applicable to the maintenance of the insurance or the length of time for which this reserve would serve to keep the insurance in force and effect, or as to when the insurance was to be forfeited, before forfeiting the insurance for nonpayment of premium.

The defendant demurred to the petition as amended on the ground that no cause of action was set forth, and because it appeared therefrom that the certificate, which is alleged to have been breached or repudiated, contained provisions giving certain options and reserving certain rights and remedies to the plaintiff in the event of a lapse or forfeiture of the certificate and in lieu of these provisions, which formed a part of the contract, amounted to an agreement between the parties fixing the rights of the insured and the amount and measure of his damages in the event of a forfeiture, and therefore, the present action for the recovery of premiums with interest does not lie, and because it appears therefrom that the insurance coverage was afforded to the plaintiff through January 31, 1935, for which the plaintiff received benefits, and none of the allegations of fact in the petition constitutes such a repudiation of the contract by the defendant as in law would cause it to forfeit the value of the insurance coverage thus afforded to the plaintiff, and before seeking any recovery of premiums paid with interest the plaintiff should be required to account for the value of the insurance protection which he has received and "seek recovery only of the balance, if any by which the premium and interest thereon exceed the value of such coverage afforded him." The defendant further demurred because the plaintiff had not fully set out the terms of the certificate which he had alleged was breached, nor attached a copy of said certificate, and the defendant was entitled to this information in order to more fully prepare its defense. The defendant also demurred specially upon the ground that a considerable portion of the sum sued for as principal and interest represented premiums paid with interest thereon under the certificate which the defendant had been issued in 1907, and which the plaintiff had voluntarily surrendered "at his own request," and for which a new certificate had been issued in 1929, and it was nowhere in the petition alleged that the defendant had canceled, breached, or repudiated the previous certificate, or in any way failed to comply with its obligations thereunder, and it therefore affirmatively appeared from the petition that no cause of action was set out as to that portion of the principal and interest sought to be recovered which constituted the premiums paid with interest thereon under the previous certificate and up to the date of the issuance of the new certificate on April 10, 1929. The defendant also specially demurred to various paragraphs of the petition.

On July 17, 1939, the judge overruled the demurrers to the petition as amended, on each and every ground. On July 29, 1939, the defendant filed exceptions pendente lite to the order overruling its special demurrers to the petition, to the amendment, and to the petition as amended. The bill of exceptions recites that on July 17, 1939, this case came on to be heard at an interlocutory hearing on the several grounds of general demurrer filed by the defendant to the petition; that at that time the plaintiff tendered an amendment to his petition which was allowed and ordered filed, and the defendant renewed its general demurrer to the petition, and demurred generally to the amendment and to the petition as amended; that on said date the court rendered judgment overruling the general demurrer, and that the defendant excepted to this judgment, and assigned error thereon on the ground that it affirmatively appeared from the petition that the defendant had not breached the certificate of insurance, but that the same had lapsed because of the failure of the plaintiff to pay the assessments required to keep the certificate in force. It further appears from the bill of exceptions that on July 17, 1939, at an interlocutory hearing on the several grounds of special demurrer filed by the defendant, the plaintiff tendered an amendment to his petition which was allowed and ordered filed subject to demurrer, and the defendant thereupon renewed the special demurrers to the petition, demurred specially to the amendment and to the petition as amended, and that the court on said date rendered its judgment overruling the special demurrers, to which judgment the defendant excepted and filed its exceptions pendente lite which were allowed by the court and placed on record and filed on July 29, 1939, and that the "defendant now assigns error on said exceptions pendente lite and says that the court erred in overruling said special demurrer upon each and every ground of special demurrer." The plaintiff alleged that in April, 1932, he was a member in good standing in the defendant association; that the certificate of insurance issued to him by the defendant provided that after thirty-six monthly payments had been made upon the certificate, when any subsequently monthly payment was not paid by him and he had not previously thereto selected one of the options available to him under the nonforfeiture provisions of the certificate, the defendant would, without any action upon the plaintiff's part, "advance as a loan to the said member the amount of the monthly payments required to maintain his certificate in force from month to month until such time as the accumulated loans, together with compound interest thereon at the rate of five per cent. per annum, and any other indebtedness hereon to the association, equal the cash value hereof at the date of default in the payment of the monthly payments;" that this provision further provided that "when the said cash value has been consumed in loans advanced and interest thereon, then this certificate shall become null and void; provided that while this certificate is continued in force under this provision, the member may resume the payment of the monthly payments without furnishing evidence of insurability;" that on the above date the plaintiff ceased to pay the monthly premiums on the certificate, the required number of monthly payments having been previously made by him on the certificate; that the defendant, under the above provisions of the certificate, thereupon advanced against the cash value of the certificate the necessary sums to pay the monthly premiums on the certificate; that the plaintiff relied upon the defendant "to keep in full force and effect the said certificate" under the automatic premium loan provisions; that since the payment in March, 1932, the plaintiff has made no further monthly premium payments to the defendant, but continued to rely upon the defendant to keep the certificate in force under the premium loan provisions, depending upon it to advise him when the cash value of the certificate had been exhausted by the payment of monthly premiums, and that the computation of the time necessary for this cash value to become thus exhausted by an exercise of the premium loan provisions of the certificate was a matter of difficult ascertainment, involving mathematical calculations and formulae, and involving calculations which the plaintiff and "insureds generally" would be unable to correctly solve; that the defendant kept the certificate in force under such provisions until and including December, 1934, and on January 31, 1935, it canceled the plaintiff's certificate for nonpayment of monthly premiums; that the plaintiff was not notified of this action by the defendant, nor was he ever previously advised that the cash value of the certificate was about to become exhausted by reason of the application thereof to the payment of his premiums, and that it would be necessary for the plaintiff to resume the payment of the monthly premiums required in order to maintain the certificate of insurance; that it was not until sometime thereafter that he learned of the cancellation of the certificate, and the company now refuses to issue to him another certificate or to permit him to resume monthly payments on the certificate; and that the defendant, without any just cause or fault upon the part of the plaintiff, has repudiated and canceled such certificate without any notice to the plaintiff as alleged, and the plaintiff therefore seeks to recover the amount of monthly premium payments made by him to the defendant.

The certificate provided, in addition to the automatic premium loan provisions, that, upon the failure of any member to pay the required monthly payments of premiums, etc., the "certificate shall be void," and "the contract between such person and the association shall thereby completely terminate, and all moneys paid on account of such membership shall be retained by the association as his liquidated proportionate part of the cost of doing business and the cost of the protection furnished on the life of said member from the delivery of his certificate to the date of his suspension." Therefore, unless the automatic premium loan provisions of the certificate had become available to the plaintiff, and had provided for the payment of his monthly premiums when the plaintiff ceased paying such premiums, the defendant could have canceled the certificate. Sovereign Camp v. Shaw, 143 Ga. 559 (85 S.E. 827); Willis v. SovereignCamp, 29 Ga. App. 470 (116 S.E. 52); Bryant v. SovereignCamp, 29 Ga. App. 359 (115 S.E. 285); Sovereign Camp v.Hart, 187 Ga. 304 (200 S.E. 296). However, under these provisions the defendant itself undertook to keep the certificate in force until the cash value of the certificate had become exhausted, by advancing to the credit of the plaintiff the monthly premium and charging such advancements, together with 5% compound interest thereon, against the cash value of the certificate. The plaintiff contends that, because of the intricate mathematics involved, it became the duty of the defendant before canceling the certificate, to notify the plaintiff that such reserve was about to become exhausted, so that he could continue his monthly payments as provided in the certificate. This question has been determined favorably to the plaintiff by this court in American National Insurance Co. v.Brown, 58 Ga. App. 70 (197 S.E. 658), involving a similar clause in an insurance contract, wherein this court held: "We deem it unnecessary to consider any but the one controlling issue in the case, and that is whether the company was under the duty to notify the insured of the amount of the premium loan made and the time it would keep the policy in force, in view of the provisions of the policy. We think, and hold, that the company impliedly agreed, by agreeing to make such loans, to give such notice to the insured a reasonable length of time before the policy expired, for the reason that the company was in exclusive possession of the information and means to know the amount of the loan, and because the average person, even if he had the data, could not compute the same, while on the other hand the company employs an actuary, an expert, whose sole duty it is to perform the duty of making such complicated mathematical calculations. . . We think that under the facts in this case the company could not forfeit the policy without giving the insured notice of when his policy would expire."

Therefore, upon the wrongful repudiation by the defendant of this contract of insurance, under the facts alleged, which the plaintiff accepted, the plaintiff could bring his action to recover the damages suffered by him as a result of the cancellation of the certificate of insurance and repudiation by the defendant of its contract. The defendant, by its action, so accepted by the plaintiff, has refused to further perform the contract and to continue it in force. The plaintiff was at liberty to treat the contract as breached by the defendant, and to take the defendant at its word that it would accept no further premiums. The plaintiff was therefore relieved from tendering any further premiums to the defendant. "`Where there is a breach of a contract of insurance by the insurer, as where an insurance company refuses to accept a premium on a life and health insurance policy tendered in accordance with the terms of the contract, and thus repudiates the contract, the insured mayrecover any damage he has sustained by reason of the breach, andordinarily his measure of damages is the premiums paid, with interest thereon. Alabama Gold Life Insurance Co. v. Garmany,74 Ga. 51; Order of Railway Conductors v. Clark, 159 Ga. 390,392 (125 S.E. 841); Glover v. Bankers Health LifeInsurance Co., 30 Ga. App. 308 (117 S.E. 665, 48 A.L.R. 111). While, as a general rule, where the action of the insurance company does not amount to a repudiation of the contract of insurance, but amounts merely to a refusal to pay, as required by the policy, sick benefits accruing under its terms, the right of action of the insured is governed by the policy itself, and he is entitled only to sue for and recover the amount of the benefits thus accruing (29 C. J. 279), still if the action of theinsurance company amounts to a repudiation of the contractitself, and is accompanied by a declaration to the effect that no future premiums will be received, the insured may treat the contract as breached.' (Italics ours.) Industrial Life HealthIns. Co. v. Thomas, 43 Ga. App. 679 (159 S.E. 885)." Prudential Ins. Co. v. Ferguson, 51 Ga. App. 341,345, 346 (180 S.E. 503). Ordinarily where an insurance company wrongfully refuses to accept further premiums, or to continue the insurance, and the insured brings an action for breach of the contract, the measure of damages in such case is the amount of premiums paid, with interest on each from the time such payment was made. Alabama Gold Life Insurance Co. v.Garmany, supra; Moore v. Prudential Insurance Co., 56 Ga. App. 356 (192 S.E. 731); Arnold v. Empire Mutual InsuranceCo., 3 Ga. App. 685 (5); (60 S.E. 470); State Mutual LifeInsurance v. Forrest, 19 Ga. App. 296 (6-e) (91 S.E. 428). In the case now under consideration the plaintiff accepted the breach by the defendant and elected to treat it as a repudiation of the contract, and the present suit is to recover the damages sustained by the plaintiff, to wit: the premiums paid with interest.

Where the defendant insurance company wrongfully canceled the certificate without giving notice, was the plaintiff bound by the stipulations of the policy that, upon the termination of the contract of insurance because of nonpayment of premiums, "all insurance paid on account of such membership shall be retained by the association as his liquidated part of the cost of doing business and the cost of the protection furnished on the life of said member from the delivery of his certificate to the date of his suspension?" We think not. This would be permitting the defendant to retain all premiums paid, where the cancellation of the certificate resulted because of the defendant's wrongful act and failure to give the plaintiff any notice that the cash reserve was about to become exhausted and that it would be necessary that he resume the payment of his monthly premiums under the certificate if he desired to maintain the certificate in force. Besides, the plaintiff is not suing on the contract. The contract had been repudiated by the defendant, which repudiation had been accepted by the plaintiff. Therefore the plaintiff has the right to recover the damages sustained. In what way has he been damaged? By the payment of monthly premiums to the defendant to maintain the insurance contract on his life. The plaintiff has the right to recover the amount of premiums paid to the defendant by him, with interest, as money had and received, and his rights in the premises "are not to be measured by any stipulation in the contract" which has been repudiated, and upon which he is not suing. See Supreme Council v. Jordan,117 Ga. 808, 812 (45 S.E. 33). The fact that the plaintiff was insured during the time he was paying his monthly premiums, and before repudiation or cancellation by the defendant of the contract of insurance, does not support the defendant's contention that the plaintiff would not be entitled to recover the amount of premiums paid, with interest, but that the plaintiff should be compelled to account for the insurance protection afforded to him by the defendant during the time the certificate was in force. The insurance protection that the plaintiff was purchasing from the defendant was protection until the time of his death. By the wrongful cancellation of the insurance contract the plaintiff was, by the act of the defendant itself, denied this protection. It has been held that in such circumstances the insured is entitled to recover the premiums with interest, without accounting for any protection received by him before the repudiation of the contract by the company. SeeAlabama Gold Life Ins. Co. v. Garmany, supra; Bankers Health Life Insurance Co. v. James, 117 Ga. 520 (3) (170 S.E. 357).

This brings up for consideration whether or not the plaintiff would be entitled to recover the amount of the premiums paid by him under the old certificate issued to him by the defendant, and which was surrendered by him in 1929 upon receipt by him in its place and stead of a new certificate which contains the automatic loan provision as to premium payments above referred to. The plaintiff alleges that the provisions in the old certificate were merged into the new certificate, and that the old contract was merged into the new contract. Both certificates are all part of the same contract, in so far as the plaintiff's damages are concerned. This is not a suit on the contract, but is a suit for damages caused by the wrongful cancellation of the contract, amounting to repudiation by the defendant, without justification, of the insurance contract. The action is for money of the plaintiff had and received by the defendant. The amount recoverable by the plaintiff depends upon the actual damages sustained by him as a result of the defendant's wrong. Under the principles of the cases cited, as applied to the facts alleged, the plaintiff's actual damages are the amount of premiums paid by him for something which he has not received, that is, life-insurance protection until his death, and something which the plaintiff presumably would have had by the continuation of the payment by the plaintiff of his monthly premiums until such time as he should die, but for the wrongful repudiation of the contract of insurance by the defendant. See generally, SupremeCouncil v. Jordan, Moore v. Prudential Ins. Co., supra.

The judge did not err in overruling the demurrers to the petition as amended.

Judgment affirmed. Sutton and Felton, JJ., concur.