MUTUAL BEN. HEALTH & ACCIDENT ASS'N v. Lyon

• Decision Date: 11 April 1938
• Docket Number: No. 10982.,10982.
• Parties: MUTUAL BEN. HEALTH & ACCIDENT ASS'N v. LYON.
• Court: U.S. Court of Appeals — Eighth Circuit

95 F.2d 528 (1938)

MUTUAL BEN. HEALTH & ACCIDENT ASS'N v. LYON.

No. 10982.

Circuit Court of Appeals, Eighth Circuit.

March 19, 1938.

Rehearing Denied April 11, 1938.

G. Byron Dobbs, of Fort Smith, Ark. (Thomas B. Pryor and Thomas B. Pryor, Jr., both of Fort Smith, Ark., on the brief), for appellant.

John W. Nance, of McAllen, Tex., for appellee.

Before STONE, GARDNER, and WOODROUGH, Circuit Judges.

WOODROUGH, Circuit Judge.

This appeal is to reverse a judgment for plaintiff in a suit upon an insurance policy.

It appears that on December 31, 1926, the Mutual Benefit Health & Accident Insurance Association issued its policy insuring the plaintiff's husband, William R. Lyon, against accidental death (and other hazards, including sickness) in pursuance to an application in writing signed by him and made part of the insurance contract. The application was in question and answer form, and in response to the question, "What is the premium?" the answer was: "$16.00 quarterly." It appears that premium payments of $16 were made each and every quarter after the issuance of the policy up to and including April 1, 1934, and it is not disputed that the insurance was thereby kept in force until July 1, 1934. But no further payment of premium was made on or before said first day of July, 1934. Mr. Lyon suffered death from bodily injuries sustained through purely accidental means within the meaning of the policy on July 19, 1934, and the association having refused payment after proof of loss, the widow, who is the beneficiary in the policy, brought this action at law, praying recovery upon the policy for the total amount therein provided for accidental death, increased as specified in the policy because it had been continued in force seven years. The jurisdictional amount was involved and diversity of citizenship existed.

It was alleged in the amended complaint upon which the case was tried that the insured had paid all premiums and had fully performed the conditions and requirements of the policy, and that it was in full force and effect at the time of the accidental death of the insured, and there were further allegations as follows:

"By the terms of provision `C' aforesaid, the defendant company attempted to provide that said premiums must be paid at the home office in Omaha, Nebraska, on the day same became due and payable, but plaintiff alleges that the defendant appointed an agent in the City of Rogers, Arkansas, designated by the defendant as its local treasurer to collect premiums from the insured and other policy holders, with apparent authority to waive the time for payment of premiums and that said local treasurer by long continued practice, without objection upon the part of the defendant company, established the custom of receiving premiums out of time, and it was for a long period of years customary for said local treasurer to receive payment of premiums from the insured at any time it was most convenient for the insured to make such payments, and the defendant thereby waived its right to declare a forfeiture of the rights of the insured under said policy, because of failure to pay said premiums at the home office in Omaha, Nebraska, on the day same became due and payable.

"That on and prior to the first day of January, 1934, one Roy E. Hamilton was the authorized and acting agent and local treasurer of the defendant company in the city of Rogers, Arkansas, duly authorized to collect premiums from the insured and other policy holders, and had been acting in such capacity for the defendant company for a period of more than five years; that the insured had been accustomed to pay his premiums to said agent during all of said time; that by the terms of said policy of insurance the defendant company was required to give the insured notice of the time said premiums were due and payable; that the defendant company, without any notice to the insured, changed its method of collecting premiums and required same to be paid in the city of Little Rock, Arkansas, and that said premiums be sent by mail to an agent of the defendant company in said city of Little Rock, instead of being paid to said local treasurer; that on the first day of July, 1934, the plaintiff, acting as agent for the insured, attempted to pay said premium to the said local treasurer of the defendant company; that said plaintiff was unable to locate said agent for several days, but finally on the 6th day of July, 1934, plaintiff located said agent and was by him informed that the custom of paying the premiums had been changed and that payment should be made to the defendant's agent in the city of Little Rock, Arkansas; that the plaintiff, acting as agent for the insured, went immediately to the United States Postoffice in said city of Rogers and purchased a postal money order for the sum of $16.00, made payable to the defendant, and deposted same in the post-office, properly addressed to the defendant, which was in due time received by the defendant; that the defendant refused to accept payment of said premium on the ground that it was not paid on the first day of July, 1934, and the defendant now claims a forfeiture of said policy of insurance on the ground that said premium was not paid on said first day of July. The plaintiff alleges that the defendant was without right to claim and declare a forfeiture of said policy for the non-payment of said premium on said first day of July for the following reasons, to-wit:

"First: That defendant had failed and neglected to give the insured notice of the time said premium was due and payable as required by the terms of said policy.

"Second: That the defendant, by its acts and conduct in establishing a custom of receiving payment of premiums out of time and of changing the method of payment from that provided in the policy had waived its right to declare a forfeiture for non-payment of said premium on said first day of July.

"Third: That said premium had been previously paid and therefore was not due and payable on said first day of July and the insured was not liable for payment of same at said time.

"That it is provided in part (C) of said policy of insurance as follows, to wit:

"`After the first year's premium has been paid, each year's renewal of this policy shall add $200.00 to the death benefit until the same amounts to $4000.00.'"

"That after the payment of the first year's premium said policy of insurance was renewed each year, beginning with the first day of January, 1928, and including renewals for each year thereafter to and including the year 1933, making six annual renewals, which entitled the plaintiff to the sum of $200.00 for each renewal, in the total sum of $1200.00.

"That in a rider attached to said policy it is provided as follows:

"`In event of the accidental death of the insured under the provisions of this policy, providing this policy has been in force for one year, the company agrees to pay in addition to the amount otherwise payable, an amount equal to all of the premiums paid by the insured on this policy, plus compound interest at the rate of 4% per annum from the date of the payment of each of said premiums to the date of death of the insured.'"

"That the insured paid all premiums due thereon in the sum of $464.00, and an additional sum of $48.00; that under said clause plaintiff is entitled to recover the sum of $478.00, including interest at the rate of 4% annually.

"That the plaintiff is entitled to recover of and from the defendant company benefits in the total sum of $3678.00."

A true copy of the policy sued on was attached to the amended complaint.

The answer of the association contained specific denials, but admitted the execution and delivery of the policy and that the insured lost his life from accidental causes on July 19, 1934. It was alleged that the 1st day of July, 1934, was the last day to which premium had been paid in advance and that the policy expired by its own terms on that date, and that under the provisions of the insurance contract the association had the right to refuse to extend the insurance for any period of time beyond the period for which the premium had been paid in advance, and that it did refuse to insure for any additional period of time beyond the 1st day of July, 1934. The association "denies that the defendant by its acts and conduct established a custom of receiving payments of premiums out of time; denies that it changed the method of payment from that provided in the policy, and denies that it waived its right to declare a forfeiture for the nonpayment of said premium on the 1st day of July, and specifically denies that said premium had been previously paid and, therefore, was not due and payable on said 1st day of July."

It was further pleaded that the following provisions of the policy presented a bar to recovery by the plaintiff:

"The term of this policy begins at twelve o'clock noon, standard time, on date of issue * * * and ends at twelve o'clock noon on date renewal is due."

"* * * The acceptance of any premium on this policy shall be optional with the Association, * * *" On the trial of the case the plaintiff testified that she was present with her husband when the insurance was obtained and a liberal interpretation of part of her testimony made by her counsel was:

"During the negotiations with the local agent, in which both insured and the plaintiff participated, it was discovered that the premiums were to be paid upon a specific date and that no days of grace were allowed; that if premiums were not paid on the date specified, the policy would lapse and insured would forfeit the insurance. They objected to that feature for the reason stated, that there might be times when insured would be out of employment and consequently be unable to meet premium payments on time. To obviate this objection, the agent recommended that they pay a full year's premium in advance and then go on with quarterly premiums in the...