Dibrell v. Citizens National Life Ins.

Opinion of the Court by

Chief Justice Hobson

Affirming.

The Citizens Life Insurance Company on June 26, 1905, issued to Jefferson L. Dibrell a policy, the material parts of which are as follows:

Citizens Life Insurance Company -of Louisville, Kentucky, in consideration of the application of this, policy,' which is hereby made a piar.t of this contract, .and of four hundred, sixty-four and 60-100 Dollars, and a like sum on the twenty-sixth day of June in every year during the continuance of said contract, insures the life of Jefferson L. Dibrell of Bonair in the County of White, State of Tennessee, (hereinafter called the insured) in the .sum of Ten Thousand Dollars, to be paid- at the home office of the company in the City of Louisville, less- any indebtedness of the insured or beneficiary to the company, immediately npon receipt and approval of proofs of the death of the insured, to his wife, Annie C. Dibrell, (or to such other beneficiary or beneficiaries as may be designated by the insured, as hereinafter provided), this policy being then in force. This policy is not rendered void by any change of occupation or residence, nor by any mode, time or place of death. If the premiums -are duly paid as required, -this policy, after it has been renewed beyond .the- first year shall be incontestable.

Table of Loan and Surrender Values.

Paid-Up Cash Surrender Loan Insurance Extended Ins. Values Values

1 year years 60 days______$ $ $'

2 years 1 year 150 days_______$420 $240.00 $480

3 years 2 years 241 days________$830 $483.30 $720

4 years 3 years- 269 days______$1240 . $729.60 $970

5 years 4 years 239 days-------$1630 $978.60 $1220

'Among the provisions printed on the following pago are these:

“Non-Forfeiture Provisions. If this policy should lapse through non-payment of premiums after it has been in force for one year, the company will, provided there is no- indebtedness against it, and subject to- other conditions of the policy, extend automatically without participation, the amount insured by this policy for the number of years and days named in the table of extended insurance. In lieu of the extended insurance,' on the second or any subsequent anniversary of this policy, or within thirty days thereafter, this policy being in force, and all premiums having been duly paid, the company will grant the following options: First, paid-up non-participating insurance payable at death for the sum named in the table of paid-up insurance, upon the legal surrender of all claims hereunder to the company at its Home Office; or* Second, will pay the cash surrender value provided for on surrender as aforesaid.

“Loans. Upon any anniversary of this policy, after the first, while in force-, all premiums- having been duly paid to the end of the next policy year, a cash loan, not exceeding the amount named in the table of loan values, will be granted upon the sole security of this policy, interest being at five per cent, per annum in advance. Applications for loans must be made in writing by the insured to the Home Office- of the company, and the loan will be -subject to the terms of the company’s loan agreement. The amount of loan available includes any previous loan unpaid.

“Premiums. * * * In- case any premium should not be paid when due, according to the terms of this contract, then, and in every such case, this policy shall cease and determine, except as otherwise herein expressly provided.”

The insured paid the first, second and third premiums upon the policy. On November 9, 1907, he borrowed $483 upon it, executing a loan agreement by which the policy was pledged for the loan. As dhown by the table the cash surrender value then was $483.30. He did not pay the premium due June 26, 1908 but executed his note to the company for it due in three months, less a dividend that was then due him. When the note fell due on September 26, 1908, the company at his request extended the time of payment until January 26, 1909, at ¡wibieb time he being still unable to pay, at his request the -time of payment was extended to February 12, 1909. He then wrote to the -company asking further time, saying he did not want his policy to lapse, but wished the company to suggest some plan by which he could keep it alive until he was able to make the necessary payment. The company did not reply to this letter. When the next payment fell due on June 26, 1909, the failed to pay the premium or to pay any attention to it. In this condition of things he died on May 20,1910. This suit was- brought by the beneficiary, Anne Dibrell, to recover on the policy. The circuit court refused her any relief and she -appeals.

It is earnestly insisted for her that the company did ¡not notify the insured that his policy was lapsed, and that'it treated the note .as a subsisting obligation, thus electing to treat the policy as subsisting. We are- referred to a number of decisions of this court in which this position has been sustained; and if the assured had died before June 26, 1909, and non-payment of the note was the only difficulty in the way of a recovery, those opinions would be applicable. But the difficulty here is that by the terms of the policy if any premium was not paid when due the policy ceased; and when the premium du-e June 26,1909 was not paid, Dibrell, who was evidently acquainted with the terms of his policy, took no steps to -secure an extension and the policy then ceased, unless it was saved by the non-forfeiture provision. In the non-forfeiture provision it was provided that if the policy should lapse through the non-payment of premiums after it had been in force for one year, the company, provided there was no. indebtedness against the policy, would extend automatically the insurance according to the tables printed in the policy. The necessary meaning of this -clause is that only the surplus after paying the indebtedness to the company, would ibe applicable to- the purchase of -extended insurance where -there was indebtedness against the policy. In this -case the' cash surrender value of the policy when the' premium was not paid on June 26, 1909, was $729.60. On that date the amount due the company by Dibrell on account of his loan and the balance due on the premium note executed June 26, 1908, was $768.13. In other words instead of there being -a balance left to purchase extended insurance,; he was indebted to the company $38.53, and he was there¡fore not entitled to extended insurance under the term» of the policy. It is said that there was no lien on the policy to secure the premium note and that therefore the -company had no right to deduct this from the cash surrender value; hut it was an indebtedness, to the company, and by the terms of the policy, the company was authorized to deduct the indebtedness from the cash surrender value under the non-forfeiture- clause.

There- is an -averment in the petition that under the laws- of Kentucky, there wa-s a sufficient surplus to have carried the policy beyond Dibrell’s. death, but this is a mere statement of a conclusion of law. No facts are stated warranting the conclusion. In the recent case of Jefferson v. New York Life Insurance Co., 151 Ky., 609, it was held that under the statute only paid-up insurance i-s provided for, and that the reserve for such paid-up insurance shall not be less than two-thirds -of the reserve of the original policy. There is nothing .alleged here to show that two-thirds of the reserve of the original policy, less the . outstanding indebtedness on account of the policy, would have entitled the assured to- any paid-up insurance under the statute. This in fact was. not sued for. The -suit was brought on the policy to- recover the full amount under the extended insurance clause.

It i-s insisted that as shown by the note the company accepted a payment on the premium note in October, 1909, and thus, treated that note as- a subsisting obligation. But by the terms of the note the company was entitled to collect the premiums so- far as it was earned, and the alleged payment is- less- than the -premium that was earned up to the time the note was marked -cancelled.

The note is- in these words:

“$367.76 Bon Air, Tenn., June 26, 1908. '

September 26, 1908, after date I promise to pay to Citizens Life Insurance Company, at its Home Office, for value received, the sum of Three Hundred Sixty-seven and 76-100 Dollars, with interest at -six per cent per annum from date, with attorney’s fees, and waiving relief from valuation -and appraisement laws. Same being all the amount of the premium due and payable this 26th day of June, 1908, on Policy No. 1777, of said Company.

“I understand and agree that in consideration hereof, said policy is- extended until default is made in payment of this- note, when -all rights and benefits secured thereby shall ee-a-se and determine without notice, and said policy ©ball be, ipso facto, null and void. I hereby agree that this note shall not be deemed a payment for Life Insurance, but only for an extension of time for the payment, of the same, and the non-payment of this note when due, and the termination of said insurance by reason thereof, shall not impair the validity of this note, but the same shall become due and payable for the proportion of its face and interest that the time the insurance has been extended for bears to the whole time covered by said premium.

J. L. Dibrell.”

Across -the face of the note are stamped these words: “Not paid Feb. 26, 1909, Policy lapsed.”

On the hack of the note are these words and figures:

$367.76

Int. to-10-26,_____ 7.35 Earned Premium.

June 26-Jan 26

Paid ___________$375.11 Paid 10-15_______$214.53

Int. 10-15 to 1-26— 73.28 Less Amn’t.----- 65.93

$30-1.83 Pd. 10-15-09______$148.60

4.53 Int. to 1-26________ 4.53

$306.36 $153.13

It will be -observed that the figures $367.76 are the amount of the note. The figures $7.35 it will be observed is the interest on the note from its date to October 26. It will also be observed that the credit of $73.28 is then deducted leaving a balance of $301.83. The -other statement is apparently a statement of the -earned premium from June 26, to January 26, $214.53. Under this are these words: “Paid 10-15, $65.93.” It will be observed that the amount, $65.93, is the same as the credit given above $73.28, less the interest $7.35, and' the day and month are the same. It is true there is just below this the figures 10-15-09, but the nine has an eight written over it, and we are satisfied from all the endorsements written on the note that the only credit paid was- $73.28 on October 5, 1908. But, hoiw-ever, this may be, as we have said, the company had a right to collect the earned premium under the terms of the note after the policy lapsed. We therefore conclude that the circuit court properly field tfiat (tfiere could fie xlo recovery on .tfie policy.

On October 13, 1905, tfie company issued to Dibrell a similar policy for $10^000. He paid tfie first three premiums.. He failed to pay tfie premium due October 13,1908, ¡and gave a note for it. Wfien this note fell due on April 13, 1909, time was extended to July 17, 1909, and fie not being able to pay, tfie time was extended to July 20, ¡and then at bis request, to August 13, 1909. Tfie premium which fell due on October 13, 1909 was not paid. On December 2, fie requested a further extension •of time to meet fits notes and tfie company did not answer ¡his letter. He borrowed of the company on November 9, 1907 on this policy $483. At tfie time fie failed to pay tfie premium on 'October 13, 1909, tfie cash surrender value of tfie policy was $729.60. The indebtedness to the company on .account of tbe policy was $932.12 leaving a balance against him of over $200. There was therefore nothing to apply to extended 'insurance, and for tfie reasons we have given as to tfie other policy, tfie circuit court properly refused a recovery on this .policy.

Judgment affirmed.