72 F.2d 519 (10th Cir. 1934), 966, Minnesota Mut. Life Ins. Co. v. Cost

Docket Nº:966.
Citation:72 F.2d 519
Case Date:July 27, 1934
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

Page 519

72 F.2d 519 (10th Cir. 1934)




No. 966.

United States Court of Appeals, Tenth Circuit.

July 27, 1934

Page 520

Henry I. Eager, of Kansas City, Mo., and Benjamin F. Hegler, of Wichita, Kan. (William C. Michaels and Meservey, Michaels, Blackmar, Newkirk & Eager, all of Kansas City, Mo., and Doherty, Rumble, Bunn & Butler, of St. Paul, Minn., on the brief), for appellant.

D. C. Martindell and C. M. Williams, both of Hutchinson, Kan. (W. D. P. Carey, of Hutchinson, Kan., on the brief), for appellee.

McDERMOTT, Circuit Judge.

Appellee recovered a judgment upon a life insurance policy which had lapsed for nonpayment of premiums before the insured's death, and upon which no reserve values had accrued. While a notice in conformity with section 40--411, R.S. Kan. 1931 Supp., was given less than thirty days before the premium was payable without grace, appellee successfully contended below, and renews the contention here, that the notice was ineffective because (1) the policy contained no provision for cancellation or forfeiture at the end of the grace period, and hence notice could not be grace period, and hence notice could not be given until the grace period expired, and (2) that the statute by implication requires a further notice, after the grace period has expired, that the policy had lapsed. A third contention is made by letter, after submission to this court, to the effect that the payment of a quarterly premium keeps the insurance alive for a year.

There is an agreed statement of the pertinent facts. The policy provides that it is based upon, and issued in consideration of, an annual premium paid in advance 'and of the further payment of a like sum on or before each anniversary of the date hereof during the lifetime of the insured or until the prior maturity of the policy as an endowment; but premiums may be paid in installments at the company's adopted rates for fractional premiums as stated in the margin hereof.'

Under the heading 'Premiums' the contract provides:

'Except as herein expressly provided, the payment of any premium or instalment thereof shall not maintain the policy in force beyond the date when the next premium or instalment thereof is payable.

'A grace of one month (not less than thirty days) and without interest therefor, will be allowed for the payment of every premium after the first, during which time the insurance shall continue in force. If death occurs during the period of grace the overdue premium will be deducted from the amount payable hereunder.'

There are other provisions to which reference might be made, but these are sufficient to put beyond the pale of argument the conclusion that, save for reserve values not present here, the insurance coverage stops when the premiums cease. The institution of life insurance is founded upon the principle that the risk is carried in consideration of premiums paid. The Supreme Court of Kansas has

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said that 'insurance companies can only survive by the prompt payment of premiums,' Wolford, Administratrix, v. Nat. Life Insurance Co., 114 Kan. 411, 414, 219 P. 263, 264, 32 A.L.R. 1248; the Supreme Court of the United States has said 'promptness of payment (of premiums) is essential in the business of life insurance,' New York Life Ins. Co. v. Statham, 93 U.S. 24, 30, 23 L.Ed. 789. To the same effect, see Mutual Life Insurance Co. v. Hill, 193 U.S. 551, 559, 24 S.Ct. 538, 48 L.Ed. 788; Bach v. Western States Life Ins. Co. (C.C.A. 10) 51 F.2d 191; Jackson v. Mutual Life Ins. Co. (C.C.A. 8) 186 F. 447. From the four corners of the contract here involved, the intention of the parties is clearly discernible: For the first premium paid, the company insured Cost's life for one year, and gave him an irrevocable option to continue that insurance from year to year, or from quarter to quarter, upon payment of the stipulated premium. Cost was not obligated to pay renewal premiums; if he did not, no agreement was canceled and no right forfeited; his option expired by his nonacceptance. When he failed to pay a premium due, his insurance automatically lapsed or expired, and, save for the statute to be hereinafter considered, no affirmative action on the part of the company was necessary. Iowa Life Ins. Co. v. Lewis, 187 U.S. 335, 23 S.Ct. 126, 47 L.Ed. 204; Wolford, Administratrix v. Insurance Co., 114 Kan. 411, 219 P. 263, 32 A.L.R. 1248; Lightner v. Insurance Co., 97 Kan. 97, 101, 154 P. 227; Lincoln Nat. Life Ins. Co. v. Hammer (C.C.A. 8) 41 F.2d 12, 18; Long v. Monarch Accident Ins. Co. (C.C.A. 4) 30 F.2d 929; Wastun v. Lincoln Nat. Life Ins. Co. of Ft. Wayne, Ind. (C.C.A. 8) 12 F.2d 422, 424; Mutual Reserve Fund L. Ass'n v. Cleveland Woolen Mills (C.C.A. 6) 82 F. 508; Brams v. N.Y. Life Ins. Co., 299 Ap. 11, 148 A. 855; Geha v. Baltimore Life Ins. Co., 110 Pa. Super. 236, 168 A. 525; Kukuruza v. John Hancock Mutual Life Ins. Co., 276 Mass. 146, 176 N.E. 788; Topinka v. Minn. Mut. Life Ins. Co., 189 Minn. 75, 248 N.W. 660; Williston on Contracts, Sec. 758; Couch on Insurance, Sec. 627; Cooley's...

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