Aetna Life Ins. Co. v. Meyn

• Decision Date: 05 March 1943
• Docket Number: No. 12441.,12441.
• Citation: 134 F.2d 246
• Parties: ?TNA LIFE INS. CO. v. MEYN et al.
• Court: U.S. Court of Appeals — Eighth Circuit

134 F.2d 246 (1943)

?TNA LIFE INS. CO. v. MEYN et al.

No. 12441.

Circuit Court of Appeals, Eighth Circuit.

March 5, 1943.

E. R. Morrison, of Kansas City, Mo. (R. L. Hecker and Morrison, Nugent, Berger, Byers & Johns, all of Kansas City, Mo., on the brief), for appellant.

Walter R. Barnes, of Kansas City, Mo., for appellees.

Before GARDNER, JOHNSEN, and RIDDICK, Circuit Judges.

RIDDICK, Circuit Judge.

This suit was brought by the appellees, beneficiaries in a policy of insurance upon the life of William F. Meyn, to recover the sum insured by the policy. From a judgment in their favor at a trial without a jury the insurance company appeals.

There is no dispute concerning the material facts. William F. Meyn was insured by the appellant insurance company under a policy of life insurance expiring on the 5th day of March 1935. The policy was a seven-year term, nonparticipating, convertible contract of insurance, under which the insured acquired the right, at any time before its expiration, to exchange it for a level premium whole life or endowment policy for an amount not in excess of the amount insured. Under the conversion privilege of the policy, the insured had the right to have the new policy bear the date of the exchange of the policies or the date of the convertible policy. In the latter event insured was required to pay the difference between the premiums already paid on the convertible policy, for an amount of insurance equal to that of the new policy, and those that would have been required under the new policy, with interest at six per cent per annum. The premiums under the policy were payable quarterly upon the 5th days of March, June, September, and December. On January 5, 1935 the insured made application to the appellant company for the exchange of his term policy for a nonparticipating, modified life policy in the sum of $2,500, with provisions for waiver of the payment of premiums in case of the insured's total and permanent disability, and for the payment of double the amount insured in the event of the policyholder's death from accident. The application for conversion to the new policy was in writing signed by the insured, and contained a request that the new policy be dated September 5, 1934 and the following agreement: "I agree that the acceptance by me of any policy issued on this application is to be regarded as an acknowledgment that the same is satisfactory and shall constitute a ratification of the manner in which the policy is written and of any corrections, additions, or changes in this application made by the Company, and that all insurance under said Term policy, or portion thereof converted as herein requested, shall thereupon cease." Typed on the application were the words "Automatic Premium Loan Provision."

The appellant insurance company accepted the application and issued the policy of insurance involved in this suit. The application for the exchange of policies was made on the last day remaining for the payment by insured of the quarterly premium of $16.40 due on the original policy as of December 5, 1934. The amount of the quarterly premium on the new policy was $14.25, to be paid to the company on or before the 5th days of September, December, March, and June of each year for the first five years of the policy, and $27.55 thereafter during the lifetime of the assured. Since the new policy, by agreement of the parties, was dated on the 5th day of September 1934, two quarterly premiums were due at the time of the application for the new policy and at the time of its delivery to the insured, one being due on September 5, 1934 and one on December 5, 1934. The payment of these premiums was arranged by payment of the quarterly premium due on the old policy at the time of the application for conversion, amounting to $16.40, plus $10, and by the payment of the balance of $2.10 on January 21, 1935, the delivery date of the new policy. The effect of this arrangement was that the premium due December 5, 1934 on the original policy was applied to the payment of the premium due on the new policy.

The new policy contained the following provisions on the questions presented here:

"Request having been made in the application for this policy for the operation of the automatic premium loan provision herein, this endorsement shall be deemed to make said provision effective until revoked.

* * * * *

"If due written request for the operation of this provision has been filed at the Home Office of the Company before default in payment of premium, thereafter until a written revocation of said request has been filed with the Company, the amount of any premium not paid before the end of the grace period will automatically be loaned by the Company in payment of such premium and charged as an indebtedness secured by this policy, subject to interest at the rate of six per cent per annum as prescribed for loans, provided that the total indebtedness hereunder will then be within the loan value described in Section 6.

"While this policy is continued in force as above, the whole or any part of the indebtedness may be repaid and payment of premiums in cash resumed without further evidence of the good health of the insured.

* * * * *

"This policy shall not become effective until the first premium upon it is paid."

Meyn paid the quarterly premiums due on this policy through its first five years. On September 5, 1939, the quarterly premium rate changed from $14.25 to $27.55. Meyn did not pay this premium. In accordance with the automatic premium loan provision, the company paid it and charged it as a debt against the policy. Upon this payment the company mailed to Meyn its official receipt, reciting that the quarterly premium then due had been paid by the company under the automatic loan provision in force in the policy, and that the amount due had been charged as a debt secured by the policy. On the back of this official receipt under the heading "Warning", the policyholder was advised not to rely on the automatic premium loan provision to prevent lapse of the policy without making sure that there was sufficient loan value in the policy to pay the premium. Meyn also failed to pay the quarterly premiums due on December 5, 1939 and March 5, 1940. Upon each default the company paid the premiums under the automatic premium loan provision, and mailed to Meyn its official receipt and warning notice. The company's official receipt for the premium due on March 5, 1939, was inclosed in a letter to the insured, advising him that while the automatic premium loan provision contained in his policy was a valuable one, inasmuch as it prevented the lapse of the policy, it could not be relied on forever nor after the loan value of the policy had been exhausted by its application. The insured was urged to repay the loan charged against his policy by reason of the operation of the automatic premium loan provision.

The same letter accompanied the company's official receipt for the premium due on March 5, 1940, and paid under the automatic premium loan provision of the policy. And to this letter there was appended a postscript advising the insured that the loan value under the policy would not be sufficient to pay the quarterly premium due on the 5th of June 1940 and, for this reason, some other method must be used to meet the payment then becoming due. It is admitted that Meyn received all of the premium notices advising him of the payment of his premium by the application of the automatic premium loan provision contained in his policy, and that he received the letters just discussed. Nevertheless, he failed to pay the premium due on June 5, 1940 and the policy, which at that time had a net value of only ninety cents, lapsed within a few days after the premium became due. Meyn died on July 14, 1940, after the lapse of his policy for nonpayment of premiums.

Appellees, to sustain a recovery upon the policy, insisted in the court below, as they do here, that the automatic premium loan provision was placed in the policy without the knowledge or the consent of the insured; that the company, therefore, had no right to apply this provision to the payment of premiums in default, but should have applied the reserve value of the policy at the time of Meyn's default in the payment of premium due September 5, 1939 to the purchase of extended insurance. They also contend that the policy by its terms did not take effect as of its date on September 5, 1940, but upon the date when the payment of the first two quarterly premiums thereon was completed by the insured, which occurred on January 21, 1935. The first of these contentions was sustained by the court below and judgment against the insurer was entered for the face of the policy, with interest, plus the penalty provided by...